<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 1999
REGISTRATION NO. 333- [ ]
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ENTERTAINMENT BOULEVARD, INC.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
NEVADA 7375 98-0182797
(State or other jurisdiction (Primary Standard (IRS Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
--------------------------
12910 CULVER BOULEVARD, SUITE I
LOS ANGELES, CALIFORNIA 90066
(310) 578-5404
(Address and telephone number of principal executive offices)
--------------------------
STEPHEN BROWN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
ENTERTAINMENT BOULEVARD, INC.
12910 CULVER BOULEVARD, SUITE I
LOS ANGELES, CALIFORNIA 90066
(310) 578-5404
(Name, address and telephone number of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT
FOR SERVICE, SHOULD BE SENT TO:
GERALD M. CHIZEVER, ESQ.
DAVID S. HAMILTON, ESQ.
RICHMAN, LAWRENCE, MANN, CHIZEVER & PHILLIPS
9601 WILSHIRE BOULEVARD, PENTHOUSE SUITE
BEVERLY HILLS, CALIFORNIA 90210-5270
TELEPHONE NO.: (310) 274-8300
FACSIMILE NO.: (310) 274-2831
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement until such
time that all of the shares registered hereunder have been sold.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value.......... 9,897,500 $2.2495 $22,264,427 $5,878
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such indeterminate
number of shares as may become issuable as a result of stock splits, stock
dividends or similar events.
(2) Based upon the average of the bid and asked price of the Registrant's common
stock as reported on the Over-the-Counter Bulletin Board on November 26,
1999 and estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL, NOR DOES IT SEEK AN OFFER TO BUY, THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION. DATED [ ], 1999.
[LOGO]
ENTERTAINMENT BOULEVARD, INC.
BETWEEN 7,797,133 AND 9,897,500 SHARES OF COMMON STOCK
ABOUT ENTERTAINMENT BOULEVARD, INC.:
- Through our site on the World Wide Web at www.entertainmentblvd.com, we
provide entertainment and information services, including music videos,
movie trailers, sports programming and infomercials. We also provide video
encoding services for other companies doing business on the Internet.
- Our Common Stock is traded on the Over-the-Counter Bulletin Board under
the symbol "EBLD."
ABOUT THIS OFFERING:
- This Prospectus has been prepared in connection with the sale to the
public of shares of our Common Stock by certain stockholders listed on
pages 50 and 51 (the "Selling Stockholders"). The Selling Stockholders are
offering all of the shares of Common Stock covered by this Prospectus. The
total number of shares in this offering is not fixed and is subject to
change based on changes in the conversion rate of our outstanding 8.0%
Mandatorily Convertible Series A Preferred Stock. As a result, the maximum
number of shares being offered could increase upon the occurrence of
certain events. See "Description of Our Securities--Preferred Stock" on
page 47.
- There is no underwriter or coordinating broker acting in connection with
this offering.
- Entertainment Boulevard, Inc. will not receive any proceeds from the sale
of shares by the Selling Stockholders.
- ------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 8 IN DETERMINING WHETHER
TO PURCHASE SHARES OF OUR COMMON STOCK.
------------------------
THE DATE OF THIS PROSPECTUS IS [ ], 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.......................................... 4
RISK FACTORS................................................ 8
ABOUT THIS PROSPECTUS....................................... 22
USE OF PROCEEDS............................................. 22
TRADING INFORMATION......................................... 22
DIVIDEND POLICY............................................. 23
SELECTED FINANCIAL DATA..................................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 24
RECENT DEVELOPMENTS......................................... 27
ENTERTAINMENT BOULEVARD'S BUSINESS.......................... 29
MANAGEMENT.................................................. 41
PRINCIPAL STOCKHOLDERS...................................... 45
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 46
DESCRIPTION OF OUR SECURITIES............................... 47
SHARES ELIGIBLE FOR FUTURE SALE............................. 49
SELLING STOCKHOLDERS........................................ 50
PLAN OF DISTRIBUTION........................................ 52
LEGAL MATTERS............................................... 53
EXPERTS..................................................... 53
WHERE YOU CAN FIND MORE INFORMATION......................... 53
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. BEFORE MAKING AN INVESTMENT
DECISION, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK
FACTORS" SECTION AND THE FINANCIAL STATEMENTS.
OUR BUSINESS
We are a corporation organized under the laws of the State of Nevada in
December 1997. We were initially formed under the name "Sedmet Exploration Inc."
In January 1999, we acquired International Net Broadcasting, LLC ("INB"), a
predecessor of which was founded in April 1997. Through INB and its site on the
World Wide Web at WWW.ENTERTAINMENTBLVD.COM, we are primarily engaged in the
development and licensing of entertainment-related video programming for
broadcast over the Internet, using advanced data transmission technologies. To
date, we have launched the following four programming categories at
ENTERTAINMENTBLVD.COM:
- ENTERTAINMENT BOULEVARD MUSIC--Award-winning music video programming,
offering music videos from all genres, as well as music news and reviews.
- ENTERTAINMENT BOULEVARD MOVIES--Movie trailers from upcoming films, new
releases, and films on video, as well as movie news and reviews.
- ENTERTAINMENT BOULEVARD SPORTS--Sports programming from across the country
and sports news.
- ENTERTAINMENT BOULEVARD NETFOMERCIALS--Video programming offering a broad
range of product infomercials.
Through our Web site, we offer an entertainment experience for consumers and
provide a marketing platform for music, movie and sports production companies,
advertisers and merchants. The content we offer is designed to attract the
valuable 12 to 40 year-old audience. We work closely with many record labels,
movie studios, sports radio production facilities and electronic commerce
outlets, providing them an opportunity to target an audience more effectively
than through traditional media. We average approximately 150,000 visitors daily
to our Web site.
In an effort to increase visitor traffic and brand awareness, we have
entered into strategic relationships with key electronic commerce and
entertainment sources. As a result of those relationships, we have created
co-branded pop-up players (i.e., screens within screens) that allow other sites'
users to select and view an assortment of our extensive catalogue of content
while browsing the other sites.
Through our Web site, we expect to generate revenue from advertising and
sponsorships, as well as revenue-sharing arrangements with respect to products
sold through referrals from our Web site. In addition, as a result of our work
on the Internet, we have perfected the video encoding process to an extent that
we are now encoding other companies' content as an added revenue source.
OUR OPPORTUNITY
According to the estimates of International Data Corporation, a provider of
information technology data, there are approximately 196 million computers
currently connected to the Internet worldwide. That number is projected to reach
over 500 million by the year 2003. A 1998 study by Forrester Research, Inc.
("Forrester") found that 51 million North Americans over the age of 12 currently
use the Internet and projected that this number would almost double by 2003. The
growth in the Internet population suggests that the Internet is now an accepted
business and entertainment tool. Forrester also expects revenues from electronic
commerce ("e-commerce") to grow from $7.8 billion in 1998 to approximately
$108 billion in 2003.
4
<PAGE>
Growth in the entertainment sector of the Internet industry has been
substantial, particularly with respect to video programming, music sales,
memorabilia sales and music news. The interactive media business alone is
projected to reach $60 billion in revenues within 10 years. Advertisers are
beginning to realize that traditional brand marketing and advertising techniques
may be less effective in reaching consumers in the important 12 to 40 year-old
age group, and are increasingly exploring new ways to attract this demographic.
As an example, the music industry and music consumers have historically looked
to media such as MTV and radio to serve as outlets for programming and
marketing. With digital media such as the Internet quickly becoming the media of
choice, we have begun inserting commercials into our video programming in order
to offer advertisers an option from the traditional "banner" advertisement.
Forrester predicts that Internet advertising revenues in the U.S. will exceed
$10 billion by the year 2003.
OUR STRATEGY
Our objective is to establish Entertainment Boulevard as the premier
destination for video entertainment and information. Our strategy to achieve
that objective is to attract and retain viewers, thereby creating a valuable
environment for advertisers, merchants and production companies to market their
products to their target audience. In addition, our growing encoding services
department has begun an aggressive campaign to increase its client base.
RECENT DEVELOPMENTS
On September 3, 1999, H.A.A. Inc., Lowen Holdings and Beestons Investment
Ltd. purchased a total of 2,000 shares of our 8.0% Mandatorily Convertible
Series A Preferred Stock (the "Series A Preferred Stock") for $2,000,000 in
cash. At the same time, the purchasers agreed to purchase an additional
2,000 shares of Series A Preferred Stock for another $2,000,000 within ten days
after the date of this Prospectus, subject to the satisfaction of certain other
conditions. The parties expect to complete the purchase and sale of the
additional 2,000 shares of Series A Preferred Stock in February 2000. On
November 12, 1999, H.A.A. Inc. and Beestons Investment Ltd. loaned us an
aggregate of $500,000, with the loan bearing interest at 10% per year and
payable in full on or before February 15, 2000. The loan is secured by all of
our assets and, prior to repayment, is convertible into 250,000 shares of our
Common Stock at the lenders' election. In connection with the loan, we also
issued an aggregate of 140,000 shares of our Common Stock to the lenders.
------------------------
Our headquarters are located at 12910 Culver Boulevard, Suite I, Los
Angeles, California 90066, and our telephone number is (310) 578-5404. Our Web
site address is WWW.ENTERTAINMENTBLVD.COM. The information contained on our Web
site does not constitute part of this Prospectus.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................................. Between 7,797,133 and 9,897,500 shares (see
explanation below)
Common Stock outstanding after this offering......... Between 19,997,133 and 22,097,500 shares
Use of proceeds...................................... We will not receive any proceeds from the
shares sold by the Selling Stockholders;
however, a portion of those shares will be
obtained by the exercise of outstanding
warrants. Any money we receive upon the
exercise of warrants will be used for general
corporate purposes, including working capital.
See "Use of Proceeds."
Risk factors......................................... You should read the "Risk Factors" section
beginning on page 8, as well as other
cautionary statements throughout the entire
Prospectus, to ensure that you understand the
risks associated with an investment in our
stock.
Over-the-Counter Bulletin Board symbol............... EBLD (formerly SDMT)
</TABLE>
The number of shares of Common Stock outstanding after this offering
includes: (i) 5,075,000 shares of Common Stock issuable upon the exercise of
outstanding warrants; (ii) between 2,219,633 and 4,320,000 shares of Common
Stock issuable upon the conversion of our Series A Preferred Stock based on
assumed minimum and maximum conversion rates of 554.91 and 1,080 shares of
Common Stock, respectively, for each share of Series A Preferred Stock and
assuming the issuance of an additional 2,000 shares of Series A Preferred Stock
as described in "Recent Developments"; and (iii) 250,000 shares of Common Stock
issuable upon the conversion of certain outstanding promissory notes. It does
not include up to 1,050,000 shares of Common Stock that could be issued under
our stock option plan or pursuant to other outstanding options.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -----------------------
1999 1998 1998 1997
----------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues..................................... $ 12,715 -- -- --
Costs and expenses........................... 4,251,928 $ 905,095 $ 1,431,398 $ 649,626
---------- ----------- ---------
Operating loss............................... (4,239,213) (905,095) (1,431,398) (649,626)
Interest expense............................. (5,334,490) -- (3,755) --
Income taxes................................. -- -- -- --
----------- ---------- ----------- ---------
Net loss..................................... $(9,573,703) $ (905,095) $(1,435,153) $(649,626)
=========== ========== =========== =========
Net loss per share........................... $ (0.82) $ (0.19) $ (0.30) $ (0.59)
=========== ========== =========== =========
Shares used in computing net loss per
share...................................... 11,687,086 4,750,000 4,814,286 1,109,124
=========== ========== =========== =========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets............................... $ 641,388 $ 200,072
Working capital (deficiency)................. (962,954) (432,609)
Total assets................................. 1,389,626 267,178
Total liabilities............................ 1,604,342 1,484,949
Stockholders' equity (deficiency)............ (214,716) (267,178)
</TABLE>
7
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE
TRADING PRICE OF OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF
YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THOSE STATEMENTS RELATE TO OUR FUTURE PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THOSE STATEMENTS MAY BE IDENTIFIED BY THE USE OF
WORDS LIKE "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," "SEEK" OR
"ANTICIPATES" AND SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THOSE STATEMENTS. FACTORS THAT COULD
CONTRIBUTE TO THOSE DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN
THIS PROSPECTUS.
PLEASE NOTE THAT THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING ENTERTAINMENT BOULEVARD. ADDITIONAL RISKS THAT GENERALLY APPLY
TO ALL PUBLICLY TRADED COMPANIES, THAT ARE NOT YET IDENTIFIED OR THAT WE
CURRENTLY THINK ARE IMMATERIAL, MAY ALSO IMPAIR OUR BUSINESS OPERATIONS AND
ADVERSELY AFFECT OUR BUSINESS.
RISKS ASSOCIATED WITH OUR BUSINESS GENERALLY
OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS HAVE GIVEN A "GOING CONCERN"
OPINION. Our financial statements for the year ended December 31, 1998 and for
the periods from April 1, 1997 (date of inception) through December 31, 1997 and
1998 were audited by our independent certified public accountants, whose report
includes an explanatory paragraph stating that the financial statements have
been prepared assuming we will continue as a going concern and that we have
incurred significant net losses and have working capital deficiencies that raise
substantial doubt about our ability to continue as a going concern. See "Index
to Financial Statements."
WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT TO EVALUATE OUR
BUSINESS AND PROSPECTS. We incorporated in December 1997 and International Net
Broadcasting, LLC ("INB"), which we acquired in January 1999, began operating
through a predecessor in April 1997. Entertainmentblvd.com, our flagship site on
the World Wide Web (the "Web" or the "Internet"), first became available in
March 1998. Because we have a limited operating history, you must consider the
risks and difficulties frequently encountered by development stage companies
such as Entertainment Boulevard in new and rapidly evolving markets, including
the market for advertising on the Internet and other digital media. Those risks
include our ability to do the following:
- attract a larger audience to entertainmentblvd.com;
- increase advertising revenues;
- increase awareness of the "Entertainment Boulevard" brand;
- strengthen user loyalty;
- offer appealing music, entertainment, sports and infomercial content;
- maintain our current, and develop new, strategic relationships;
- maintain and secure new encoding accounts;
- respond effectively to competitive pressures;
- continue to utilize technology effectively; and
- attract, retain and motivate qualified personnel.
8
<PAGE>
We may not be successful in addressing some or all of those risks, which
could materially harm our business. In that case, the value of your investment
may decline.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES. We incurred net
losses of approximately $650,000 during the period from inception to December
31, 1997, followed by net losses of approximately $1,435,000 during the year
ended December 31, 1998 and another approximately $9,574,000 in net losses
during the nine month period ended September 30, 1999. As of September 30, 1999,
our accumulated deficit was approximately $11,658,000. We have not yet achieved
profitability and expect that our operating losses will continue for at least
the next year. We will need to generate significant revenues to achieve and
maintain profitability, and there can be no assurance that we will be able to do
so. Even if we do achieve profitability, we cannot assure you that we can
sustain or increase profitability on a quarterly or an annual basis in the
future. If our revenues grow more slowly than we anticipate, or if our operating
expenses exceed our expectations, our financial performance will likely be
adversely affected. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OUR ABILITY TO OBTAIN ADDITIONAL FINANCING IS UNCERTAIN. Our capital
requirements have been and will continue to be significant. We anticipate that
our cash reserves, including the proceeds from the sale of Series A Preferred
Stock, together with projected cash flow from our operations, will be sufficient
to fund our operations for at least the next 13 months. At this time, we expect
that we must raise approximately $2,600,000 in additional funds to meet our
anticipated working capital and capital expenditure requirements for the
foreseeable future. If our capital requirements or cash flow vary materially
from our current projections, or if unforeseen circumstances occur, we may
require additional financing sooner than we anticipate. We may also need to
raise additional funds in order to do the following:
- fund more rapid expansion;
- develop new, or enhance existing, services or products;
- fund distribution relationships;
- respond to competitive pressures; or
- acquire complementary products, businesses or technologies.
If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our then current stockholders will be
reduced, and such securities may have rights, preferences or privileges senior
to those of such stockholders. There can be no assurance that additional
financing will be available on terms favorable to us, if at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
meet our working capital and capital expenditure needs and take advantage of
unanticipated opportunities, develop or enhance services or products or
otherwise respond to competitive pressures, will be significantly limited. That
would, in turn, adversely affect our business.
OUR QUARTERLY OPERATING RESULTS MAY VARY. Our future revenues and operating
results are unpredictable and are likely to vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control.
Those factors include the following:
- our ability to attract and retain advertisers and sponsors;
- our ability to attract and retain our audience;
- new Web sites, services or products introduced by us or by our
competitors;
- the timing and uncertainty of sales cycles;
9
<PAGE>
- our ability to maintain existing and secure new encoding accounts;
- the mix of advertisements sold;
- seasonal declines in advertising sales, which typically occur in the first
and third calendar quarters;
- the level of Internet services usage;
- our ability to attract, integrate and retain qualified personnel;
- our ability to successfully integrate operations and technologies from
acquisitions or other business combinations;
- technical difficulties or system downtime affecting the Internet generally
or the operation of entertainmentblvd.com in particular; and
- general economic conditions, as well as economic conditions specific to
digital media and the entertainment industry.
Our revenues for the foreseeable future will be substantially dependent on
providing advertising and obtaining sponsorships, as well as revenues from
electronic commerce ("e-commerce") and our encoding service. Advertising and
sponsorship revenues are difficult to forecast, especially because the market
for advertising on digital media has emerged relatively recently. Further,
advertising orders are typically short term and subject to cancellation without
penalty until shortly before the advertisement appears. It is also difficult to
anticipate service revenues because of competition and variations in the
availability of clients and the amount of media that clients need encoded at any
given time.
To attract and retain a larger audience, we plan to significantly increase
our expenditures for sales and marketing, content development, and technology
and infrastructure development. Many of those expenditures are planned or
committed in advance in anticipation of future revenues. If our revenues in a
particular quarter are lower than we anticipate, we may be unable to reduce
spending in that quarter. As a result, any shortfall in revenues would likely
adversely affect our quarterly operating results.
Due to the factors noted above and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is likely that our
operating results in some quarters will be below the expectations of public
market analysts and investors. In that event, the price of our Common Stock is
likely to decline.
WE DEPEND ON ADVERTISING REVENUES. Our revenues for the foreseeable future
will depend substantially on sales of advertising and commercial sponsorships.
Internet advertising rates are based on the size of the audience at the Web site
where the advertising is displayed. To the extent that the audience at
entertainmentblvd.com is smaller than that at other Web sites, our advertising
rates could be reduced. Web-based advertising is relatively new and it is
difficult to predict the extent of further growth, if any, in Web advertising
expenditures. The Internet may not prove to be a viable commercial marketplace
for a number of reasons, including the lack of acceptable security technologies,
potentially inadequate development of the necessary infrastructure or the lack
of timely development or commercialization of performance improvements. If we do
not generate sufficient advertising and/or sponsorship revenues, our business
may not grow or survive. Increasing those revenues depends upon many factors,
including our ability to do the following:
- conduct successful selling and marketing efforts aimed at advertisers;
- increase the size of the entertainmentblvd.com audience;
- increase the amount of revenues per advertisement;
10
<PAGE>
- increase the amount of revenues per advertisement by making available
video ads before the actual video programming, thus increasing visibility;
- take advantage of new and developing Internet advertising technology;
- aggregate our target demographic group of 12 to 40 year-old consumers;
- increase awareness of the "Entertainment Boulevard" brand among
advertisers;
- target advertisements to appropriate segments of our audience;
- make Entertainment Boulevard's content available through evolving
broadband distribution channels; and
- accurately measure the size and demographic characteristics of our
audience.
Our failure to achieve one or more of those objectives could adversely
affect our business.
WE DEPEND ON A LIMITED NUMBER OF ADVERTISERS. We anticipate that our
results of operations in any given period will depend to a significant degree
upon revenues from a small number of advertisers. In addition, because few
advertisers are contractually obligated to purchase any advertising in the
future, we anticipate that the mix of advertisers in each fiscal period will
continue to vary. In order to increase our revenues, we will need to attract
additional significant advertisers on an ongoing basis. Our failure to sell a
sufficient number of advertisements or to engage a sufficient number of
advertisers during a particular period could adversely affect our results of
operations.
OUR SALES CYCLES VARY FOR ADVERTISING. Our dependence on advertising
subjects us to additional risks because the cycles for those sales vary
significantly. The time between the date of initial contact with a potential
advertiser and receipt of a purchase order from the advertiser may range from as
little as six weeks to up to nine months. Advertising sales are also subject to
factors over which we have little or no control, including the following:
- advertisers' budgetary constraints;
- internal acceptance reviews by advertisers and their agencies;
- the timing of completion of advertisements by advertisers; and
- the possibility of cancellation or delay of projects by advertisers.
During our sales cycles, we may expend substantial funds and management
resources but not obtain advertising revenues. If sales are delayed or do not
otherwise occur, our operating results for a particular period may be adversely
affected.
WE MUST INCREASE THE SIZE OF OUR AUDIENCE. Increasing the size of our
audience at entertainmentblvd.com is critical to selling advertising and to
increasing our revenues. To attract and retain our audience, we must do the
following:
- continue to offer appealing entertainment content;
- conduct effective marketing campaigns to attract new viewers;
- develop new, and maintain existing, distribution relationships with other
Web sites;
- update and enhance the features of entertainmentblvd.com;
- increase awareness of the "Entertainment Boulevard" brand;
- make our media properties available through broadband distribution
channels as they achieve widespread consumer acceptance; and
11
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- offer targeted, relevant products and services.
Our failure to achieve one or more of those objectives could adversely
affect our business.
We depend on establishing and maintaining distribution relationships with
high traffic Web sites to increase our audience. There is intense competition
for placements on those sites, and we may not be able to enter into such
relationships on commercially reasonable terms or at all. Even if we enter into
distribution relationships with those Web sites, they themselves may not attract
significant numbers of users. Therefore, entertainmentblvd.com may not obtain
additional users from those relationships. Moreover, we have paid in the past,
and may pay in the future, significant fees to establish those relationships.
We also intend to increase our financial expenditures on marketing the
"Entertainment Boulevard" brand because we believe that brand awareness will be
critical to increasing our audience, especially because there are few barriers
to entry for Internet businesses. If we do not increase our revenues as a result
of our branding and other marketing efforts, or if we otherwise fail to promote
our brand successfully, our business could be adversely affected.
WE NEED TO CONTINUE TO PROVIDE APPEALING CONTENT. Our future success
depends on our ability to continue to provide content that is interesting and
engaging to our target audience. Our ability to provide appealing content
depends on several factors, including the following:
- the quality of our editorial staff;
- the technical expertise of our production staff; and
- access to content controlled by record labels, movie studios, production
companies and other sources.
Also, as consumer tastes change, we may be unable to react to those changes
effectively or in a timely manner. If our audience determines that our content
does not reflect their tastes, then our audience size could decrease or the
demographic characteristics of our audience could change. Either of these
results would adversely affect our ability to obtain revenue from advertisers
and other sources.
WE DEPEND ON THE MUSIC AND MOVIE INDUSTRIES FOR MUCH OF OUR
CONTENT. Because much of our musical content, including audio and video
performances, is provided to us by record labels at minimal or no charge, we
depend on our good relations with record labels and artists to obtain that
content. Also, motion picture companies are presently not charging for the use
of their movie trailers. However, we have no long-term contracts with any of the
record labels or motion picture companies, and we cannot be sure that they will
continue to make their content available to us on reasonable terms or at all. If
record labels, music publishers, artists or movie studios charge significant
fees for their content or discontinue their relationships with us, then our
content offering could be adversely affected.
POSSIBLE FUTURE ACQUISITIONS MAY HAVE A VARIETY OF NEGATIVE EFFECTS. As
part of our business strategy, we expect to review acquisition prospects that
would complement our current content offerings, increase our market share or
otherwise offer growth opportunities. To date, we have had limited experience in
those types of transactions. While we have no current agreements or commitments
with respect to any such acquisitions, we may acquire businesses, products or
technologies in the future. Because business acquisitions typically involve
significant amounts of intangible assets, future operating results may be
adversely affected by amortization of intangible assets acquired. In the event
of such future acquisitions or business combinations, we could do the following:
- issue equity securities that would dilute current stockholders' percentage
ownership in us;
- incur substantial debt; or
- assume contingent liabilities.
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Such actions could cause our operating results or the price of our Common
Stock to decline.
Acquisitions and business combinations also entail numerous operational
risks, including the following:
- difficulties in the assimilation of acquired operations, technologies or
products;
- diversion of management's attention from other business concerns;
- risks of entering markets in which we have little or no experience; and
- potential loss of key employees of acquired organizations.
Any of those risks could have a negative impact on our business, operating
results and financial condition.
WE MUST DEVELOP AND RENEW STRATEGIC RELATIONSHIPS. In an attempt to
increase audience, build brand recognition and enhance content, distribution and
e-commerce opportunities, we have entered into strategic alliances with various
media and Internet-related companies such as CheckOut.com and the GO Network.
Our future success depends to a significant extent upon the success of such
alliances. Occasionally, we enter into agreements with strategic partners that
may prohibit us from entering into similar arrangements with competitors of
those partners. Such exclusivity provisions may limit our ability to enter into
favorable arrangements with complementary businesses and thereby limit our
growth. There is no guarantee that we will achieve the strategic objectives of
those alliances, that any party to a strategic alliance agreement with
Entertainment Boulevard will perform its obligations as agreed upon or that such
agreements will be specifically enforceable by us. In addition, most of our
strategic alliances are short term in nature and may be terminated by either
party on short notice. Our failure to maintain or renew our existing strategic
alliances or to establish and capitalize on new strategic alliances could have a
negative impact on our business, operating results and financial condition. See
"Entertainment Boulevard's Business--Strategic Business Alliances and
Technology."
WE FACE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES. Competition
among media companies seeking to attract the active entertainment consumer is
intense. Traditional media companies, such as television broadcasters, magazine
publishers and radio stations, are constantly refining their content and
strategies to increase their audiences and advertising revenues. Further, the
number of Web sites competing for the attention and spending of consumers and
advertisers has increased, and we expect it to continue to increase,
particularly because there are so few barriers to entry on the Web. We compete
for consumers and advertisers with the following types of companies:
- publishers and distributors of traditional media, such as television,
radio and print, including MTV, Country Music Television, Rolling Stone
and Spin, and their Internet affiliates;
- Internet services and Web sites, including those targeted at music
consumers, such as SonicNet and UBL;
- Web retrieval and other Web "portal" companies, such as Lycos, Inc. and
Yahoo! Inc.; and
- online music retailers, such as CDNow, Inc. and Amazon.com, Inc.
Increased competition could result in advertising price reductions, reduced
margins or loss of market share, any of which could adversely affect our
business. Because we compete for advertisers with traditional advertising media,
our business could also be adversely affected if advertisers do not view the
Internet and other digital media as an effective medium for advertising.
Competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. Many of those potential
competitors are likely to enjoy substantial competitive advantages, including
the following:
- larger audiences;
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- larger technical, production and editorial staffs;
- greater name recognition;
- better access to content;
- more established Internet presence;
- larger advertiser bases; and
- substantially greater financial, marketing, technical and other resources.
We expect competition in our business to remain at high levels. If we do not
compete effectively, or if we experience any pricing pressures, reduced margins
or loss of market share resulting from increased competition, our business will
be adversely affected.
WE DEPEND ON KEY PERSONNEL TO OPERATE OUR BUSINESS. Our future success
depends to a significant extent on the continued services of our senior
management and other key personnel, particularly Stephen Brown, Entertainment
Boulevard's President and Chief Executive Officer. While we have entered into a
two year employment agreement with Mr. Brown, we do not carry "key person"
insurance on him or any other employees. As a result, the loss of Mr. Brown or
certain other key employees would likely have an adverse effect on our business.
We also expect that we will need to hire additional personnel in all areas
during the next twelve months. Competition for personnel throughout our industry
is intense. As a result, we may be unable to retain our current key employees or
attract or retain other highly qualified employees in the future. We have in the
past experienced, and we expect to continue to experience, difficulty in hiring
and retaining highly skilled employees with appropriate qualifications. If we do
not succeed in attracting new personnel or retaining and motivating our current
personnel, our business could be adversely affected.
WE NEED TO PROPERLY MANAGE OUR POTENTIAL GROWTH. We have experienced, and
are currently experiencing, a period of significant growth in our operations.
That growth has placed, and anticipated future growth in our operations will
continue to place, a significant strain on our resources. As part of that
growth, we will have to implement new operational systems, procedures and
controls in order to expand, train and manage our employee base and to maintain
close coordination among our technical, accounting, finance, marketing, sales
and production staffs. We will also need to continue to attract, retain and
integrate personnel in all aspects of our operations. To the extent we acquire
new businesses, we will also need to integrate new operations, technologies and
personnel. Failure to manage our growth effectively could adversely affect our
business, operating results and financial condition.
RISKS ASSOCIATED WITH OUR WEB SITE
THE ACCEPTANCE AND EFFECTIVENESS OF DIGITAL MEDIA FOR ADVERTISING ARE
UNPROVEN. Our future is highly dependent on an increase in the use of the
Internet and other forms of digital media for advertising. The Internet
advertising market is new and rapidly evolving, and we cannot yet gauge the
effectiveness of advertising on the Internet as compared to traditional media.
As a result, demand for Internet advertising is uncertain.
Many advertisers have little or no experience using the Internet for
advertising purposes. The adoption of Internet advertising, particularly by
companies that have historically relied upon traditional media for advertising,
requires the acceptance of a new way of conducting business, exchanging
information and advertising products and services. Such companies may find
advertising on the Internet to be undesirable or less effective for promoting
their products and services relative to traditional advertising media. If the
Internet advertising market fails to develop, or develops more slowly than we
expect, then our business could be adversely affected. Moreover, the market for
advertising on other forms of digital media, such as "broadband" distribution (a
type of data transmission in which a single medium can carry signals from
multiple independent network carriers on a single coaxial or fiberoptic
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cable, by establishing different bandwidth channels), is even less developed
than Internet advertising, and if that market does not develop, then our growth
may be limited.
At this time, different pricing models are used to sell Internet
advertising. It is difficult to predict which, if any, will emerge as the
industry standard. This uncertainty makes it difficult to project our future
advertising rates and revenues. Any failure to adapt to pricing models that
develop could adversely affect our advertising revenues. Moreover, "filter"
software programs that limit or prevent advertising from being delivered to an
Internet user's computer are available. Widespread adoption of that software
could adversely affect the commercial viability of Internet advertising.
TRACKING AND MEASUREMENT STANDARDS FOR INTERNET ADVERTISING ARE STILL
EVOLVING. There are currently no standards for measuring the effectiveness of
advertising on the Internet and other digital media. Although the industry may
need to develop standard measurements, it is uncertain when or if that will
occur. In addition, currently available software programs that track Internet
usage and other tracking methodologies are rapidly evolving. However, the
development of such software or other methodologies may not keep pace with our
information needs, particularly to support the growing needs of our internal
business requirements and advertising clients. The absence or insufficiency of
that information could adversely impact our ability to attract and retain
advertisers and sponsors.
It is important to our advertisers and sponsors that we accurately measure
the demographics of our user base and the delivery of advertisements on our Web
site. We currently depend on third parties to provide certain of those
measurement services. If they are unable to provide those services in the
future, we would need to perform them ourselves or obtain them from another
provider, if available. This could, in turn, cause us to incur additional costs
or cause interruptions in our business during the time we are replacing those
services. Companies may choose to not advertise on entertainmentblvd.com or may
pay less for advertising, if they do not believe that our measurements or
measurements made by third parties are reliable.
WE MAY HAVE LIABILITY FOR PRODUCTS OR INFORMATION PROVIDED AT OR THROUGH OUR
WEB SITE. Third parties could sue us for the content that is accessible from
our Web site, either directly or through links to other Web sites. Such claims
might include, among others, that by directly or indirectly hosting the Web
sites of third parties, we are liable for copyright or trademark infringement or
other wrongful actions occurring at such Web sites. It is also possible that if
any third-party content information provided on entertainmentblvd.com contains
errors, third parties could make claims against us for losses incurred in
reliance on such information.
We have entered into agreements that entitle us to receive a share of
revenue from the purchase of goods and services by consumers who are referred to
other Web sites through direct links from entertainmentblvd.com. Such
arrangements may subject us to additional claims, including potential
liabilities to consumers of such products and services based on the links we
provide to such products or services, even if we do not provide such products or
services ourselves. While our agreements may provide that we will be indemnified
against such liabilities, such indemnification, if available, may not be
adequate. In addition, our insurance may not adequately protect us against those
types of claims and, even to the extent that such claims do not result in
liability, we could incur significant costs in investigating and defending
against those claims.
WE NEED NEW DISTRIBUTION TECHNOLOGIES TO INCREASE ACCESSIBILITY OF OUR
CONTENT. To experience the full extent of our high-quality audio and
full-motion video content, consumers must access that content over a
high-bandwidth connection, such as cable or direct subscriber line ("DSL") modem
or satellite data broadcast. If such distribution networks do not achieve
widespread consumer acceptance, we may be unable to effectively distribute our
audio and video content in its most compelling format. There is no assurance
that broadband distribution networks will ever achieve consumer acceptance, and
if they do not, our growth may be limited.
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WE DEPEND ON CONTINUED GROWTH IN USE OF DIGITAL MEDIA, PARTICULARLY THE
INTERNET. Our market is new and rapidly evolving. If usage of digital media,
and in particular the Internet, does not continue to grow, our business will be
adversely affected. A number of factors may inhibit such usage, including, but
not limited to the following:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service; and
- limited availability of cost-effective, high-speed access.
Even if digital media usage grows, the infrastructure necessary for such
growth may not be able to support the demands placed on it by that growth, and
its performance and reliability may decline. In addition, Web sites have
experienced interruptions in their service as a result of outages and other
delays occurring throughout the Internet network infrastructure. If those
outages or delays frequently occur in the future, digital media and Internet
usage, in particular, as well as the usage of entertainmentblvd.com, could grow
more slowly than we expect or even decline.
WE NEED TO ADAPT TO RAPID CHANGE. Our business is characterized by rapidly
changing technologies, frequent new product and service introductions and
evolving industry standards that could render our existing Web site and
technology obsolete. The recent growth of digital media, and in particular the
Internet, and intense competition in our industry exacerbate these market
characteristics. To keep pace with those changes, we need to effectively
integrate the various software programs and tools required to enhance and
improve our product offerings and manage our business. Our future success will
depend on our ability to adapt to rapidly changing technologies by continually
improving the performance features and reliability of our products and services.
We may experience difficulties that could delay or prevent the successful
development, introduction or marketing of new products and services. In
addition, new technologies must meet the requirements of our current and
prospective users and must achieve significant market acceptance. We could also
incur substantial costs if we need to modify our services or infrastructures to
respond to technological changes. We may not be successful in using new
technologies effectively or adapting our Web site or other technology to
consumer tastes or to emerging industry standards. If we are unable to adapt to
changing technologies, our business, results of operations and financial
condition could be negatively impacted.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTY MAY RESTRICT OUR
BUSINESS. There are currently few laws or regulations that specifically
regulate communications or commerce on the Web. Laws and regulations may be
adopted in the future, however, that address issues such as user privacy,
pricing and the characteristics and quality of products and services. For
example, recently proposed federal legislation sought to prohibit transmitting
certain types of information and content over the Internet. In addition, several
telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online service providers
in a manner similar to long distance telephone carriers and to impose access
fees on those companies. Any imposition of access fees could increase the cost
of transmitting data over the Internet. Moreover, it may take years to determine
the extent to which existing laws relating to issues such as property ownership,
libel and personal privacy are applicable to the Web. Any new laws or
regulations relating to the Web could adversely affect our business.
OUR SYSTEMS MAY FAIL OR LIMIT USER TRAFFIC. Substantially all of our
Internet communications equipment and computer hardware operations are located
at a third party facility in Los Angeles, California. Fire, storms, earthquakes,
power loss, telecommunications failures, security breaches and similar events
could damage those systems and cause interruptions in our services. Computer
viruses, electronic break-ins or other similar disruptive problems could also
result in reductions or termination
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of our services or otherwise adversely affect our Web site. Our business could
be adversely affected if our systems are affected by any of those occurrences.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems. We do not presently
have any backup systems or a formal disaster recovery plan.
Our Web site must be able to accommodate a high volume of traffic and
deliver frequently updated information. Our Web site has experienced in the past
(and may continue to experience) slower response times or decreased traffic for
a variety of reasons. In addition, our users depend on Internet service
providers, online service providers and other Web site operators for access to
our Web site. Many of those providers and operators have experienced significant
outages in the past, and could continue to experience outages, delays and other
difficulties due to system failures unrelated to our systems. Moreover, the
Internet network infrastructure may not be able to support continued growth. Any
of those problems could adversely affect our business, operating results and
financial condition.
WE MAY BE SUBJECT TO LIABILITY FOR MISUSE OF USERS' PRIVATE
INFORMATION. Our privacy policy provides that we will not willfully disclose
any individually identifiable information about any user to a third party
without the user's consent unless required by law. This policy is easily
accessible on entertainmentblvd.com. Despite this policy, however, if third
persons are able to penetrate our network security or otherwise misappropriate
our users' personal data, we could be subject to liability. Those liabilities
could include claims for impersonation or other similar fraud claims. They could
also include claims for other misuses of personal information, such as for
unauthorized marketing purposes. In addition, the Federal Trade Commission and
certain state and local authorities have been investigating certain Internet
companies regarding their use of personal information. We could incur additional
expenses if new regulations regarding the use of personal information are
introduced or if those authorities choose to investigate our privacy practices.
INTERNET SECURITY CONCERNS COULD HINDER OUR BUSINESS. A significant barrier
to commerce and communications over the Internet is the need for secure
transmission of confidential information. Internet usage may not increase at the
rate we expect unless that need is adequately addressed in a manner acceptable
to vendors and users. Internet usage could also decline if a well-publicized
compromise of security occurs. We may incur significant costs to protect against
the threat of security breaches or to alleviate problems caused by such
breaches. Such protection may not be available at a reasonable price or at all.
WE DEPEND UPON INTELLECTUAL PROPERTY RIGHTS AND LICENSED MATERIAL. A
significant portion of the music content available on entertainmentblvd.com is
licensed from publishers, record labels and artists. We frequently either do not
have written contracts or have short-term contracts with copyright owners, and,
accordingly, our access to copyrighted content depends upon the willingness of
such parties to continue to make their content available. If the fees for music
content increase substantially or if significant music content becomes
unavailable, our ability to offer music content could be materially limited. Any
limit on our content offering could adversely affect our business.
Copyrighted material that we develop internally, as well as trademarks
relating to the "Entertainment Boulevard" brand and other proprietary rights,
are important to our success and our competitive position. We will seek to
protect our copyrights, trademarks, service marks and other proprietary rights,
but those actions may be inadequate. We generally enter into confidentiality or
license agreements with our employees, consultants and business partners, and
generally control access to and distribution of our proprietary information. We
cannot, however, be certain that the steps we take will prevent misappropriation
of our proprietary rights, particularly in foreign countries where laws or law
enforcement practices may not protect our proprietary rights as fully as in the
United States. If third parties were to use or otherwise misappropriate our
copyrighted materials, trademarks or other proprietary rights without our
consent or approval, our competitive position could be harmed, or we could
become involved in litigation to enforce our rights. We could also become
subject to infringement
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actions based upon material licensed from third parties. Any such claims or
disputes could subject us to costly litigation and the diversion of our
financial resources and technical and management personnel. Further, if our
efforts to enforce our intellectual property rights are unsuccessful or if
claims by third parties against us are successful, we may be required to change
our trademarks, alter our content and/or pay damages. Any changes of trademarks,
alteration of content or payment of damages could adversely affect our business,
operating results and financial condition.
THE IMPOSITION OF SALES AND OTHER TAXES COULD HINDER OUR BUSINESS. We do
not collect sales or other taxes in respect of goods sold to consumers through
links from entertainmentblvd.com. However, one or more states may seek to impose
sales tax collection obligations on companies, such as Entertainment Boulevard,
which engage in or facilitate e-commerce. A number of proposals have been made
at the state and local level that would impose additional taxes on the sale of
goods and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of e-commerce and could adversely affect our
opportunity to derive financial benefit from e-commerce. Moreover, if any state
or foreign country were to successfully assert that we are required to collect
sales or other taxes on the sale of merchandise through our Web site, our
results of operations could be adversely affected.
Legislation limiting the ability of states to impose taxes on Internet-based
transactions has been proposed in the U.S. Congress. There can be no assurance
that such legislation will ultimately become law or that the tax moratorium in
the final version of that legislation will be ongoing. Failure to enact or renew
this legislation, once enacted, could allow various states to impose taxes on
Internet-based commerce, which could adversely affect our business.
YEAR 2000 PROBLEMS MAY HARM OUR BUSINESS. Many currently installed computer
systems and software products are coded to accept or recognize only the last two
digits in a date entry. Those systems and software products now need to accept
and recognize four digit entries to distinguish the year 1900 from the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with such "Year 2000"
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
We have made a preliminary assessment of the Year 2000 readiness of our
operating, financial and administrative systems, including the hardware and
software that support those systems. At this time, we have developed an
assessment plan consisting of (i) quality assurance testing of our internally
developed proprietary software; (ii) contacting vendors and licensors of
material hardware, software and services that are both directly and indirectly
related to the delivery of services to our users; (iii) contacting vendors of
third-party systems; (iv) assessing repair or replacement requirements;
(v) implementing repair or replacement, as needed; and (vi) creating contingency
plans in the event of Year 2000 failures. Many vendors and licensors of material
hardware and software components of our systems have indicated that the products
we use are currently Year 2000 compliant. We intend to require vendors and
licensors of our other material hardware and software components to provide
assurances of their Year 2000 compliance. Until such testing is completed and
such vendors and licensors are contacted, we are unable to completely evaluate
whether our systems will need to be revised or replaced.
We are not currently aware of any Year 2000 compliance problems relating to
our systems that would have a material adverse effect on our business, results
of operations or financial condition. There can, however, be no assurance that
we will not discover Year 2000 compliance problems in our systems that will
require substantial revision or replacement. In addition, there can be no
assurance that third-party software, hardware or services incorporated into our
systems will not need to be revised or replaced, all of which could be
time-consuming and expensive. Our failure to fix or replace internally developed
systems or third-party software, hardware or services on a timely basis could
result in lost revenues, increased operating costs, the loss of customers and
other business interruptions, any of
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which could have a material adverse effect on our business, results of
operations and financial condition. Moreover, the failure to adequately address
Year 2000 compliance issues in our internally developed systems could result in
claims of mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend.
There can be no assurance that governmental agencies, utility companies,
Internet access companies, third-party service providers and others outside of
our control will be Year 2000 compliant. The failure by such entities to be Year
2000 compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from operating our Web site, decrease the use of the Internet or
prevent users from accessing entertainmentblvd.com, any of which could have a
material adverse effect on our business, results of operations and financial
condition. The failure by our actual or potential advertisers to be Year 2000
compliant could cause them to defer or cancel advertisements scheduled to appear
on our Web site, which could also adversely affect our operating results.
RISKS ASSOCIATED WITH OUR COMMON STOCK
FAILURE TO COMPLY WITH OVER-THE-COUNTER BULLETIN BOARD LISTING
QUALIFICATIONS MAY AFFECT THE TRADING OF OUR COMMON STOCK. NASD Regulation,
Inc. ("NASD") has enacted rules to limit quotations on the Over-the-Counter
Bulletin Board (the "OTCBB") to the securities of issuers that make current
filings pursuant to the Securities Exchange Act of 1934. Furthermore, NASD has
enacted rules which require members to review current issuer financial
statements prior to recommending a transaction to a customer in an OTCBB
security and to deliver a disclosure statement to a customer prior to an initial
purchase of an OTCBB security. If we are unable to satisfy those reporting
requirements, our Common Stock may cease to be quoted on the OTCBB and/or the
trading activity of our securities may be severely limited.
SHARES OF OUR COMMON STOCK THAT ARE ELIGIBLE FOR FUTURE SALE COULD ADVERSELY
AFFECT ITS MARKET PRICE. The price of our Common Stock is presently quoted on
the OTCBB. Sales of substantial amounts of our Common Stock in the public
market, or even the prospect of such sales by existing stockholders, as well as
persons exercising warrants or options or converting our 8.0% Mandatorily
Convertible Series A Preferred Stock (the "Series A Preferred Stock") or certain
outstanding promissory notes, could materially reduce the market price of our
Common Stock. As of the date of this Prospectus, we had outstanding
12,452,500 shares of Common Stock. That number does not take into account shares
of Common Stock issuable upon conversion of Series A Preferred Stock or certain
outstanding promissory notes or the exercise of outstanding warrants or options.
Of our outstanding shares of Common Stock, 9,852,500 are freely tradable and
another 2,600,000 shares may be transferred pursuant to Rule 144 under the
Securities Act of 1933 (the "Securities Act") beginning 90 days after the date
of this Prospectus. Upon the exercise of all of our outstanding warrants and
options and conversion of our Series A Preferred Stock and certain promissory
notes, additional shares of Common Stock are issuable in an amount that is not
yet determinable. See "Variation in Series A Preferred Stock Conversion Rate."
Of those shares, up to 9,897,500 are covered by this Prospectus and so will be
freely tradeable, with the exception of 1,500,000 shares obtainable by Stephen
Brown upon the exercise of warrants, which he has agreed not to sell or
otherwise transfer prior to May 30, 2000, without the prior written consent of
the purchasers of the Series A Preferred Stock. In addition to their inclusion
in this offering, certain Selling Stockholders have other registration rights
which may be exercised if they do not sell all of their shares pursuant to this
offering.
VARIATION IN SERIES A PREFERRED STOCK CONVERSION RATE. Under our Articles
of Incorporation, each share of Series A Preferred Stock has a "Stated Value,"
which is presently $1,000 per share, and is convertible into our Common Stock at
a "Conversion Ratio" which is (i) the sum of the "Stated Value" plus any
accumulated but unpaid Series A Preferred Stock dividends (ii) divided by the
"Conversion Price" then in effect. At the present time, the "Conversion Price"
for each share of Series A Preferred
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Stock is the lesser of (i) $2.00 or (ii) an amount equal to the average "Per
Share Market Value" (as defined in the Articles of Incorporation) for the three
"Trading Days" (also defined) having the lowest "Per Share Market Value" during
the 30 "Trading Days" immediately before the conversion rate is determined. In
the event that the Registration Statement of which this Prospectus is a part is
allowed to lapse for a period of more than 30 consecutive days, the "Conversion
Price" then in effect is subject to decrease by a specified percentage per day,
subject to a maximum decrease of no more than either $1.00 or 50% of the "Per
Share Market Value." As of the date of this Prospectus, the "Conversion Price"
is [$ ], resulting in a conversion rate of [ ] shares of Common
Stock for each share of Series A Preferred Stock. However, such conversion rate
could substantially increase, or decrease, due to one or more of the following:
- penalties for lapse of the Registration Statement, as described above;
- accumulation of unpaid dividends on the Series A Preferred Stock; and
- increase or decrease in the "Per Share Market Value" of our Common Stock.
The maximum number of shares of Common Stock offered by this Prospectus has
been determined by assuming a Series A Preferred Stock "Conversion Price" of
$1.00 and $80 per share of accumulated but unpaid Series A Preferred Stock
dividends. See "Selling Stockholders." While we believe that such assumptions
most likely overstate the number of shares issuable upon conversion of the
Series A Preferred Stock, it is impossible to predict the "Conversion Price"
which will be in effect at the time that some or all of the Series A Preferred
Stock is converted into Common Stock. Should the "Conversion Price" be below
$1.00 at the time of any such conversion, this Prospectus may be amended to
increase the maximum number of shares being offered hereby. Such increase in
offered shares could, in turn, materially reduce the market price of our Common
Stock.
OUR COMMON STOCK IS CURRENTLY SUBJECT TO "PENNY STOCK" RULES, WHICH MAY
AFFECT ITS MARKETABILITY. Trading in the OTCBB allows market makers to enter
quotes and trade securities that do not meet listing requirements of The Nasdaq
Stock Market or any regional exchange. As a result, sales of our Common Stock
are subject to the "penny stock" regulations issued by the Securities and
Exchange Commission (the "SEC"). The SEC's regulations generally define a "penny
stock" as any equity security that has a market price (as defined by the SEC) of
less than $5.00 per share. The regulations impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and certain accredited investors. For those types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The regulations further require the delivery by the
broker-dealer of a disclosure schedule prescribed by the SEC relating to the
penny stock market. Disclosure must also be made about all commissions and about
current quotations for the securities. Finally, monthly statements must be
furnished disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
Although the SEC regulations provide several exceptions to, or exemptions
from, the penny stock rules based on, for example, specified minimum revenues or
asset-value, at this time Entertainment Boulevard does not fall within any of
the stated exceptions. Thus, a transaction in our securities would subject the
broker-dealer to the above sales practice and disclosure requirements which, in
turn, makes trading of our Common Stock more cumbersome and could materially
adversely affect its marketability.
OUR COMMON STOCK PRICE IS VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR INVESTORS. The price of our Common Stock has been highly volatile. We
expect that volatility to continue in the future due to a variety of factors,
including:
- quarterly variations in actual or anticipated results of our operations;
- analysts' earnings estimates;
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- announcements of technological innovations or new products or services by
us or our competitors;
- general conditions in the Internet or other high technology industries;
and
- general economic conditions.
In addition, the securities markets frequently experience extreme price and
volume fluctuations which affect market prices for securities of companies
generally, and Internet companies in particular. Those fluctuations are often
unrelated to the operating performance of the affected companies. Broad market
fluctuations may adversely affect the market price of our Common Stock.
The trading prices of many technology and Internet-related companies' stocks
have reached historical highs within the last 52 weeks and have reflected
relative valuations substantially above historical levels. During the same
period, those companies' stocks have also been highly volatile and have recorded
prices well below those historical highs. There is no guarantee that our Common
Stock will trade at the same levels as other Internet stocks, or that Internet
stocks in general will sustain their current market prices.
In the past, following periods of high volatility in a particular company's
securities, securities class action litigation has sometimes been brought
against the company. We may become involved in this type of litigation in the
future. Litigation is often expensive and diverts management's attention and
resources, which could have a material adverse effect on our business, operating
results and financial condition.
INVESTORS MAY EXPERIENCE DILUTION. Persons purchasing our Common Stock in
this offering may experience substantial dilution based on net tangible book
value.
LESS THAN A MAJORITY REQUIRED FOR A QUORUM ON STOCKHOLDER ACTIONS. Under
Article XII of our Articles of Incorporation, only one-third of the votes
entitled to be cast on any matter by a stockholder voting group are needed to
constitute a quorum for voting purposes. As a result, even if holders of up to
two-thirds of the shares entitled to vote on a matter decline to do so, that
action may still be approved if it is voted for by a majority of the remaining
eligible votes cast.
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ABOUT THIS PROSPECTUS
In making an investment decision, you should only rely on the information
contained in this Prospectus. We have not authorized anyone to provide you with
information which is different from that contained in this Prospectus. The
shares of our Common Stock offered in this Prospectus are to be offered and sold
only in jurisdictions where those offers and sales are permitted.
Except as otherwise provided, in this Prospectus, "Entertainment Boulevard,"
the "Company," "we," "us," and "our" refer to Entertainment Boulevard, Inc., a
Nevada corporation, and INB, its sole subsidiary. We use entertainmentblvd.com
as the registered domain name of our Web site and have applied for registration
of the marks "Entertainment Boulevard," "EntertainmentBlvd.com Music,"
"EntertainmentBlvd.com Movies," "EntertainmentBlvd.com Sports" and
"EntertainmentBlvd.com NetFomercials" as our service marks. All other tradenames
and trademarks appearing in this Prospectus are the property of their respective
holders.
USE OF PROCEEDS
The only proceeds we expect to receive will be from the exercise of warrants
held by some of the Selling Stockholders. However, pursuant to the terms of some
of those warrants, the holders have a cashless exercise option which permits
them to exercise the warrants without paying the exercise price in cash.
Instead, the holders of warrants would receive an amount of Common Stock with a
dollar value that is equal to the the market price of the Common Stock less the
exercise price of the warrants multiplied by the number of warrants exercised by
the holder. In such a case, we would not receive any funds. In the event the
Selling Stockholders elect to exercise their warrants by paying the exercise
price in cash, we will receive a maximum of $5,325,000. Any net proceeds
received by Entertainment Boulevard will be used for general corporate purposes,
including working capital for our business. We intend to invest any net proceeds
in short-term, interest-bearing, investment-grade securities pending our use of
those proceeds.
TRADING INFORMATION
Our Common Stock is publicly traded on the OTCBB, a regulated quotation
service that captures and displays real-time quotes and/or indications of
interest in securities not listed on The Nasdaq Stock Market or any U.S.
exchange. Our Common Stock began trading publicly on November 20, 1998 under the
symbol "SDMT"; however, since February 5, 1999, it has traded under the symbol
"EBLD." As of November 17, 1999, the closing price bid for our Common Stock was
$2.0625 and the 52-week high and low bid prices were $1.00 and $8.00,
respectively. Information as to trading volumes, and bid and asked prices, for
our Common Stock may be obtained directly from the OTCBB.
The following table sets forth the high and low bid prices (i.e., the price
which a market maker was willing to pay) for our Common Stock as reported to us
by the OTCBB. Those quotations are between dealers, do not include retail
mark-ups, markdowns or other fees and commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
QUARTER ENDED LOW BID HIGH BID
- ------------- -------- --------
<S> <C> <C>
December 31, 1998......................................... $1.00 $2.50
March 31, 1999............................................ $1.50 $4.1562
June 30, 1999............................................. $1.68 $8.00
September 30, 1999........................................ $1.875 $4.0625
</TABLE>
As of November 17, 1999, there were 83 holders of record of our Common
Stock.
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DIVIDEND POLICY
To date, we have paid no dividends on our Common Stock. Under the terms of
the instrument creating our Series A Preferred Stock, so long as any shares of
Series A Preferred Stock remain outstanding, we are prohibited from paying
dividends on our Common Stock (other than dividends payable only in additional
shares of Common Stock). In addition, we anticipate that future agreements, if
any, with institutional lenders or others may also limit our ability to pay
dividends. Our Board of Directors has no present intention to pay cash dividends
on the Common Stock in the foreseeable future. The payment of dividends in the
future, if any, rests solely within the determination of the Board of Directors.
Our future cash dividend policy will depend upon, among other things, our
earnings, capital requirements and financial condition, as well as other factors
deemed relevant by our Board of Directors.
SELECTED FINANCIAL DATA
The selected historical financial data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and the related notes
thereto included with this Prospectus. The statement of operations data for the
periods from April 1, 1997 (inception) to December 31, 1997 and 1998, and the
balance sheet data at December 31, 1998, are derived from financial statements
of Entertainment Boulevard which have been audited by Singer Lewak Greenbaum and
Goldstein LLP, independent certified public accountants. The selected financial
data for the nine month periods ended September 30, 1998 and 1999 are derived
from unaudited financial statements of the Company and, in the opinion of
management, include all necessary adjustments to present fairly the results of
operations and financial position for those periods.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -----------------------
1999 1998 1998 1997
----------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues..................................... $ 12,715 -- -- --
Costs and expenses........................... 4,251,928 $ 905,095 $ 1,431,398 $ 649,626
---------- ----------- ---------
Operating loss............................... (4,239,213) (905,095) (1,431,398) (649,626)
Interest expense............................. (5,334,490) -- (3,755) --
Income taxes................................. -- -- -- --
----------- ---------- ----------- ---------
Net loss..................................... $(9,573,703) $ (905,095) $(1,435,153) $(649,626)
=========== ========== =========== =========
Net loss per share........................... $ (0.82) $ (0.19) $ (0.30) $ (0.59)
=========== ========== =========== =========
Shares used in computing net loss per
share...................................... 11,687,086 4,750,000 4,814,286 1,109,124
=========== ========== =========== =========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets............................... $ 641,388 $ 200,072
Working capital (deficiency)................. (962,954) (432,609)
Total assets................................. 1,389,626 267,178
Total liabilities............................ 1,604,342 1,484,949
Stockholders' equity (deficiency)............ (214,716) (267,178)
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED AT THE END OF THIS PROSPECTUS,
BEGINNING ON PAGE F-1. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS MADE IN THIS SECTION.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO DIFFERENCES INCLUDE THOSE DISCUSSED IN
"RISK FACTORS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. WE URGE
PROSPECTIVE INVESTORS TO EXERCISE CAUTION AND NOT TO PLACE UNDUE RELIANCE ON ANY
SUCH FORWARD-LOOKING STATEMENTS.
OVERVIEW. Entertainment Boulevard is a development stage company which
provides Internet entertainment and information services, including music
videos, movie trailers, sports programming and infomercials. We also provide
video encoding services for other companies. Our content is delivered on the
Internet at www.entertainmentblvd.com.
We anticipate that our business will incur significant operating losses for
the foreseeable future. At this time, we believe that our survival and success
will depend primarily upon our ability to obtain advertising and sponsorship
revenue and to achieve sales through our Web site, which cannot be assured. Our
ability to generate revenue is subject to substantial uncertainty. Our prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as Internet commerce. Such
risks include, but are not limited to, an evolving and unpredictable business
environment and the management of growth. To address those risks, we must, among
other things, grow and maintain our audience, implement and successfully execute
our business and marketing strategy, continue to develop and upgrade our
technology, improve our Web site, respond to competitive developments, and
attract, retain and motivate qualified personnel. There can be no assurance that
we will be successful in addressing those risks, and the failure to do so could
have a material adverse effect on our business, prospects, financial condition
and results of operations. Furthermore, our lack of an operating history makes
predictions of future operating results difficult to ascertain. To date,
Entertainment Boulevard has not generated any significant revenue. There can be
no assurance that we will be able to generate significant revenue, or that we
will be able to achieve or maintain profitability.
Our current arrangements with advertisers call for compensation based on the
number of "impressions" recorded as viewers call up a screen on which the
advertising is located. As a result, we believe that future Internet commerce
and advertising revenue, if any, will largely depend upon increasing the
entertainmentblvd.com audience. Revenues from Internet-generated transactions
are recorded at the time the vendor ships the product to the customer. Revenues
from advertisements for entertainmentblvd.com are recognized ratably in the
period in which the advertisement is displayed, provided that no significant
Entertainment Boulevard obligations remain.
Future advertising revenues may include barter revenues, which represent an
exchange of advertising space on our Web site for reciprocal advertising space
on third parties' Web sites or for rights under Internet distribution
agreements. Revenues from barter transactions are recorded as advertising
revenues at the lower of estimated fair value of the advertisements received or
delivered and are recognized upon publication of the advertisements on our Web
site. Barter expenses are also recorded at the lower of estimated fair value of
the advertisements received or delivered and are recognized when Entertainment
Boulevard's advertisements run on the reciprocal media property, which is
typically in the same period in which the advertisements run on our Web site.
We have recently started to derive revenues by encoding audio and video
media into a digital format that allows distribution of the encoded media over
the Internet. Revenues from encoding services are recognized upon delivery of
the encoded media, provided that we have no significant obligations remaining
and collection of the related receivable is deemed probable.
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We have entered into various license arrangements and strategic alliances in
order to build our audience, provide music-specific content, generate additional
online traffic, and establish additional potential sources of revenue. We expect
that we will continue to enter into such arrangements. Those arrangements and
alliances often involve significant amounts of intangible assets (non-cash
charges) that may affect our operating results over the next several fiscal
periods. Therefore, future operating results may be adversely affected by
amortization of any intangible assets acquired.
Entertainment Boulevard has incurred significant net losses and negative
cash flows from operations since its inception, and as of September 30, 1999,
had an accumulated deficit of approximately $11,658,000. We intend to continue
to make significant financial investments in marketing and promotion, and
content, technology and infrastructure development. As a result, we believe that
we will continue to incur operating losses and negative cash flows from
operations for the foreseeable future, and that such losses and negative cash
flows will increase for at least the next year. In order to move from losses to
profitability, we will need to increase the size of our audience and our
revenues from advertising, e-commerce sales and encoding services.
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
As described above, we are still in the early stages of development. As a
result, the following comparisons may not be meaningful.
REVENUE. Revenue increased to $12,715 for the nine months ended
September 30, 1999, from $0 for the same period in 1998. Such increase is due to
advertising revenues.
COMPENSATION EXPENSE. Compensation expense increased 314% to $2,201,000 for
the nine months ended September 30, 1999, from $531,000 for the same period in
1998. This increase was due primarily to non-cash charges related to stock-based
compensation of $1,884,000 and an increase in our staff to twenty employees at
September 30, 1999 from seven employees at September 30, 1998, partially offset
by the elimination of an officer's salary.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 422%
to approximately $39,700 for the nine months ended September 30, 1999, from
approximately $7,600 for the same period in 1998, primarily as a result of
increased capital expenditures.
CONSULTING EXPENSE. Consulting expense increased to approximately $196,000
for the nine months ended September 30, 1999, from $0 for the same period in
1998. This non-cash expense relates to stock option grants for services
rendered.
OTHER OPERATING EXPENSE. This category increased 396% to $1,814,000 for the
nine months ended September 30, 1999, from $366,000 for the same period in 1998
due to costs to support the growth of the business, including office supplies
and minor equipment, insurance, training and trade shows. In addition, we
incurred expenses for advisors, legal fees and auditors in connection with our
preparation of the Registration Statement of which this Prospectus is a part.
INTEREST EXPENSE. Interest expense increased to approximately $38,000 for
the nine months ended September 30, 1999, from $0 for the same period in 1998.
This change was a result of increased short-term and long-term borrowings.
FINANCING COSTS. Financing costs increased to $5,297,000 for the nine
months ended September 30, 1999, from $0 for the same period in 1998. This
non-cash expense relates to the January 1999 conversion of long-term debt owed
by INB into shares of our Common Stock at a below market price.
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<PAGE>
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM
APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997
COMPENSATION EXPENSE. Compensation expense increased 71% to $708,000 for
the year ended December 31, 1998, from $415,000 for the period from April 1,
1997 (inception) to December 31, 1997. This change was due to an increase in the
number of employees to nine at December 31, 1998 from five at December 31, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 569%
to approximately $20,000 for the year ended December 31, 1998, from
approximately $3,000 for the period from April 1, 1997 to December 31, 1997, as
a result of increased capital expenditures and leasehold expansions.
OTHER OPERATING EXPENSE. This category increased 304% to $703,000 for the
year ended December 31, 1998, from $231,000 for the period from April 1, 1997,
to December 31, 1997. This change was due to costs related to the growth of our
business, including office supplies and minor equipment, insurance, training and
trade shows.
INTEREST EXPENSE. Interest expense increased to $4,000 for the year ended
December 31, 1998 from $0 for the the period from April 1, 1997, to
December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES. Since its inception, Entertainment
Boulevard has financed its operations primarily through loans totaling
$2,380,175 and private sales of its equity securities totaling $3,621,025. As of
September 30, 1999, we had on hand approximately $554,000 in cash, cash
equivalents and short-term investments. We do not have access to a line of
credit. However, upon the occurrence of certain conditions, the Company expects
to raise $2,000,000 through the sale of additional shares of Series A Preferred
Stock shortly after the date of this Prospectus. For the nine months ended
September 30, 1999, Entertainment Boulevard had revenues of approximately
$12,700 derived primarily from the sale of advertising. Although there can be no
assurance that this will occur, Entertainment Boulevard anticipates that it will
continue to generate revenue from advertising in the future, as well as from its
video encoding service. See "Recent Developments--Sale of Series A Preferred
Stock."
For the nine months ended September 30, 1999, operating activities used net
cash of approximately $2,031,000, primarily from a net loss from operations of
approximately $9,574,000 which was partially offset by non-cash stock-based
compensation and financing charges of $7,377,000. In addition, financing
activities provided net cash of approximately $2,602,000, primarily from the
proceeds from the placement of short-term debt and the sale of the Company's
equity which aggregated $3,801,000 which was partially offset by payments on the
short-term debt and offering costs which totaled approximately $1,199,000. For
the nine months ended September 30, 1999, the Company's investing activities
used net cash of approximately $217,000, primarily to purchase equipment.
For the period from inception to December 31, 1998, operating activities
used net cash of approximately $1,888,000, primarily from a net loss from
operations of approximately $2,085,000 which was partially offset by an increase
in accounts payable and accrued liabilities of approximately $174,000. In
addition, financing activities provided net cash of approximately $2,178,000,
primarily from the proceeds from the placement of debt and the sale of the
Company's equity which aggregated $2,201,000 and was partially offset by
offering costs of approximately $23,000. For the period from inception to
December 31, 1998, the Company's investing activities used net cash of
approximately $90,000, primarily to purchase equipment.
Entertainment Boulevard has experienced a substantial increase in its
compensation expenses, capital expenditures and operating lease costs since its
inception, consistent with the growth in its operations and staffing, and
anticipates that this trend will continue for the foreseeable future.
Additionally, Entertainment Boulevard plans to expand its sales and marketing
programs and conduct
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<PAGE>
more aggressive brand promotions. Based on our anticipated operating expenses of
approximately $200,000 per month, we expect that our present cash balance, plus
net proceeds from the anticipated sale of the additional shares of Series A
Preferred Stock, and revenues from operations, will be sufficient to meet our
anticipated needs for working capital and capital expenditures for at least the
next 13 months. Thereafter, the Company will need to raise approximately
$2,600,000 in additional funds in order to stay in business for the foreseeable
future. Our ability to grow will depend in part on our ability to expand and
improve our Web site content material. In connection therewith, we may need to
raise additional funds in order to avail Entertainment Boulevard of
unanticipated opportunities (such as more rapid expansion, acquisition of
complementary businesses or the development of new products or services), to
react to unforeseen difficulties (such as the loss of key personnel or the
rejection by Internet users of our Web site content) or to otherwise respond to
unanticipated competitive pressures. If additional funds are raised through the
issuance of equity securities, the percentage ownership of our then existing
stockholders will be reduced. Moreover, stockholders may experience additional
and significant dilution, and such equity securities may have rights,
preferences or privileges senior to those of our Common Stock. There can be no
assurance that additional financing will be available on terms acceptable to
Entertainment Boulevard, if at all. If we are unable to obtain sufficient funds
on a timely basis, we may be unable to implement our business plans, which
inability could have a material adverse effect on our business, prospects,
financial condition and results of operations. See "Risk Factors--Our Ability to
Obtain Additional Financing is Uncertain."
YEAR 2000 COMPLIANCE. To date, we have not incurred any material
expenditures in connection with identifying, evaluating or addressing Year 2000
compliance issues. Most of our expenses have related to, and are expected to
continue to relate to, the operating costs associated with time spent by
employees in the evaluation process and Year 2000 compliance matters generally.
At this time, Entertainment Boulevard does not possess the information necessary
to estimate the potential costs of revisions to its systems should such
revisions be required or of the replacement of third-party software, hardware or
services that are determined not to be Year 2000 compliant. Although we do not
anticipate that such expenses will be material, such expenses, if higher than
anticipated, could adversely affect our financial performance. For further
discussion of this topic, see "Risk Factors--Year 2000 Problems May Harm Our
Business."
RECENT ACCOUNTING PRONOUNCEMENTS. In March 1998, the American Institute of
Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") No.
981, "Software for Internal Use," which provides guidance on accounting for the
cost of computer software developed or obtained for internal use. SOP No. 981 is
effective for financial statements for fiscal years beginning after
December 15, 1998. We do not anticipate that the adoption of SOP No. 981 will
have a material impact on Entertainment Boulevard's financial statements.
In April 1998, the AICPA issued SOP No. 985, "Reporting on the Costs of
Startup Activities." SOP 985, which is effective for fiscal years beginning
after December 15, 1998, provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. As Entertainment Boulevard
has expensed those costs historically, the adoption of that standard will not
have a significant impact on its financial statements.
RECENT DEVELOPMENTS
SALE OF SERIES A PREFERRED STOCK. On September 3, 1999, we entered into an
agreement with H.A.A. Inc., Lowen Holdings and Beestons Investment Ltd. which
(i) sold a total of 2,000 shares of Series A Preferred Stock to those entities
for $2 million and (ii) provided for the sale of another 2,000 shares of
Series A Preferred Stock to those entities for an additional $2 million within
ten days after the date of this Prospectus (subject to the satisfaction by
Entertainment Boulevard of various other conditions, including the appointment
of a designee director). Under the agreement, the purchasers have been
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granted certain registration rights with respect to the shares of Common Stock
underlying their Series A Preferred Stock. As a result, those purchasers are
included as "Selling Stockholders" in this Prospectus. In addition, among other
things, the purchasers have a two-year right to approve the appointment of any
new or replacement member to our Board of Directors, as well as a two-year right
to have Robb Peck McCooey Clearing Corporation ("Robb Peck") appoint a designee
to serve on our Board of Directors. Pursuant to the agreement, until 180 days
after the date of this Prospectus, with certain exceptions, we can not, directly
or indirectly, without the prior written consent of the purchasers, offer, sell,
grant any option to purchase, or otherwise dispose (or announce any offer, sale,
grant of option to purchase or other disposition) of any of our equity or
equity-equivalent securities or any instrument that permits the holder thereof
to acquire our Common Stock at a price that is less than the market price of the
Common Stock at the time of issuance of such security or instrument and, if such
security or instrument contains a conversion feature, at a conversion price that
is less than the market price of the Common Stock at the time of issuance of
such security or instrument. In addition, with certain exceptions, for a period
of not less than 90 Trading Days (as defined in the agreement) after the date of
this Prospectus, we cannot, without the prior written consent of the purchasers,
(i) file with the SEC to register for resale any of our securities or
(ii) issue or sell any of our equity or equity-equivalent securities.
The shares of Series A Preferred Stock have the rights, preferences and
privileges described in "Description of Our Securities--Preferred Stock,"
including the right to convert into shares of Common Stock at a specified
conversion rate which is subject to adjustment in favor of the stockholders if
we fail to meet certain conditions as to the registration of their underlying
Common Stock.
In connection with the sale of the Series A Preferred Stock, we entered into
a Placement Agency Agreement with Robb Peck for placement agent services as well
as investment-banking services. For acting as placement agent with respect to
the Series A Preferred Stock, Robb Peck was granted warrants to purchase 250,000
shares of our Common Stock for $2.00 per share any time until September 2, 2004.
To the extent that Robb Peck provides investment banking services, it will be
paid additional fees as specified in the agreement. The shares underlying Robb
Peck's warrants have the benefit of certain registration rights. As a result,
Robb Peck is included as a "Selling Stockholder" in this Prospectus. In
connection with the sale of the Series A Preferred Stock, Stephen Brown, our
Chief Executive Officer, has agreed to a 270 day "lock-up" as to the sale of
1,500,000 shares obtainable by him through the exercise of warrants. See "Shares
Eligible for Future Sale" and "Certain Transactions and Relationships".
SHORT-TERM LOAN. On November 12, 1999, H.A.A. Inc. and Beestons Investment
Ltd. loaned us an aggregate of $500,000, with the loan bearing interest at 10%
per year and payable in full on or before February 15, 2000. The loan is secured
by all of our assets and, prior to repayment, is convertible into 250,000 shares
of our Common Stock at the lenders' election. In connection with the loan, we
also issued an aggregate of 140,000 shares of our Common Stock to the lenders
and granted certain stock registration rights. Pursuant to those registration
rights, the 140,000 shares issued to the lenders, as well as the 250,000 shares
obtainable upon conversion of the $500,000 loan, have been included in the
shares being registered for H.A.A. Inc. and Beestons Investment Ltd. as "Selling
Stockholders" in this Prospectus.
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<PAGE>
ENTERTAINMENT BOULEVARD'S BUSINESS
OVERVIEW. Entertainment Boulevard is a digital media company focused on
creating the premier destination for "streaming" Internet entertainment and
information video (i.e., video that is transmitted in such a way that it can be
processed as a steady and continuous data stream which can be viewed by the user
without having to wait for the entire data file to be transmitted). Taking
advantage of the unique benefits of digital media, Entertainment Boulevard
offers appealing content for viewers while providing a marketing platform for
record labels, movie studios, sports programmers, advertisers and merchants.
Because our content is designed to attract and retain an audience composed
principally of consumers who are 12 to 40 years old, advertisers on
Entertainment Boulevard can target a valuable and elusive group of consumers.
Persons using our Web site are not confined to receiving content in the
programmed, linear sequences broadcast by radio and television. Instead, we
deliver content on-demand to our users in an interactive format. Broadband
access to the Internet is achieving greater consumer acceptance and enables us
to add our richest audio and video content to entertainmentblvd.com. We have
also perfected the video encoding process to allow for superior quality of
Internet video content, enabling us to provide encoding services to third
parties as an added source of revenue. Unlike other encoding "job shops,"
Entertainment Boulevard is the only streaming media encoder on the Internet to
provide in-house content for its own established network.
COMPANY BACKGROUND. Entertainment Boulevard was formed in December 1997 in
the State of Nevada to acquire and develop mining properties. Prior to February
2, 1999, we operated under the name Sedmet Exploration Inc. Presently, our only
operating subsidiary is INB, which we acquired in January 1999 and in which we
hold a 100% interest. See "Certain Transactions and Relationships." Our present
operations, assets and employees are primarily those of INB, the predecessor of
which was founded in April 1997. Prior to introducing the entertainmentblvd.com
Web site in March 1998, Entertainment Boulevard and/or INB operated several
predecessor Web sites, including www.vidnet.com, www.vidnetusa.com and
www.screenclips.com.
INDUSTRY BACKGROUND.
THE MUSIC INDUSTRY. According to the Recording Industry Association of
America ("RIAA"), the dollar value of recorded music shipments in the U.S.
reached $13.7 billion in 1998. In 1997, worldwide shipments were valued at $38.1
billion. Music videos experienced a significant increase in demand, with unit
shipments valued at $508 million in 1998, a 56.8% increase from 1997. Unit
shipments of CDs increased from 763.1 million in 1997 to 847 million in 1998, or
12.5%, with a dollar value of $11.4 billion in 1998. The RIAA reported sales of
DVDs for the first time in 1998, with unit shipments totalling 485,000 valued at
$12.2 million.
We believe that the growth in CD and DVD sales indicates a shift in the
music industry towards the primary form of music distribution occurring on a
digital platform, allowing it to be played and disseminated on a computer.
Further, we believe that the greatest challenge facing the industry is to
effectively market new material to the increasing number of computer users. The
proportion of purchases made by 15 to 24 year-olds, once considered the
stronghold of the industry, decreased from 32.2% in 1996 to 28% in 1998. We
believe such evidence points to the music industry's need for new music media
brands, distributors and mediums that focus on consumers in the 12 to 40
year-old age bracket.
THE ROLE OF ENTERTAINMENT MEDIA. Increasingly, traditional music media have
de-emphasized the introduction of new music in favor of programming strategies
designed to aggregate the largest possible audience. Because active music
consumers are inclined to change the channel when they hear a song that they
dislike, traditional media programmers are compelled to limit the amount and
range of music or videos they broadcast in order to keep consumers tuned in and
attract advertisers. Music television brands such as MTV have adopted half-hour
programming strategies to avoid the symptomatic channel-changing associated with
programmed music videos. Similarly, radio formats have become more
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segmented in an effort to target particular segments of listeners for
advertisers. As a result, fewer new music videos and songs receive airplay,
making it more difficult for record labels to market, and for consumers to
discover, new music. Compounding the challenge for traditional media, a number
of marketers believe young consumers respond to advertisements differently from
their older counterparts and prefer to encounter those advertisements through a
more interactive and diverse medium such as the Internet. Similarly, sports
broadcasting companies and movie studios can take advantage of the opportunity
to reach a large and diverse audience by expanding their reach to the Internet
to promote their products.
GROWTH OF DIGITAL MEDIA. Significant growth in consumer use of personal
computers ("PCs") and other interactive devices has created new opportunities
for digital media, such as the Internet. According to International Data
Corporation ("IDC"), U.S. home PC penetration grew from 44.5% in 1998 to 48% in
1999 and is projected to reach 60% by 2003. Almost all new PCs include modems
for Internet access and a high speed CD-ROM or DVD-ROM drive. In addition, IDC
projects that worldwide Internet usage will grow from approximately 196 million
users in 1999 to over 500 million in 2003. As a new mass medium, the Internet is
already attracting significant advertising spending. Forrester Research
("Forrester") estimates that worldwide Internet advertising revenues will be
approximately $15 billion by 2002.
The Internet has emerged as a significant mass medium by providing features
and functions that are unavailable in traditional media. For example, consumers
can quickly access personalized information, and advertisers can target specific
demographic groups based on customer tastes and buying patterns. Digital media
such as the Internet are quickly becoming the media of choice for individuals in
the 12 to 40 year-old age group. According to Jupiter Communications, the number
of teens who regularly access the Internet will double to more than 16 million
by 2002.
Despite the popularity of the Internet, most consumers cannot experience
high quality audio and video over their relatively low bandwidth Internet
connections. As bandwidth increases, consumers are likely to demand richer
content in the form of CD-quality audio and full-motion video, particularly in
the entertainment context where consumers are accustomed to such audio and video
quality from traditional media. New platforms, such as cable and DSL modem and
satellite data broadcast, are already being created to deliver high speed access
to digital media. High speed Internet access provider Excite@Home reported that
it had approximately 840,000 cable modem subscribers at September 30, 1999 and
Road Runner reported that the subscriber base for its cable-delivered online
service exceeded 420,000 at the end of the same period.
THE OPPORTUNITY FOR A MEDIA BRAND IN DIGITAL MEDIA. We believe that the
core group of active 12 to 40 year-old consumers constitutes a valuable
demographic segment for advertisers because they tend to be early adopters of
new trends and significant spenders. However, despite their common affinity for
music and movies, those consumers have diverse tastes and interests, and
advertisers typically find it difficult to cost-effectively target them as a
group. As traditional media brands have moved to address the changing viewing
and listening habits of that audience for the benefit of advertisers, such
traditional vehicles have become less effective as outlets for marketing new
music and movies. As a result, the limitations of traditional media have
encouraged (i) active music consumers to seek new ways to discover music,
(ii) music and movie industry participants to pursue alternative methods of
promoting their new releases and (iii) advertisers to use new media vehicles to
promote and sell their products to an increasingly important demographic group.
The rapid growth in home PC penetration, Internet usage and highspeed Internet
services presents the opportunity to exploit the advantages of digital media to
better promote new music and movies to the valuable demographic group seeking to
discover them. Aggregating this elusive audience in an interactive environment
provides advertisers and merchants the opportunity to target their most valuable
consumer. As a result, we believe a significant opportunity exists to create a
brand in digital media that serves as a single destination for the consumer
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to discover new music and movies, the entertainment industry to promote new
releases and the advertising community to target a highly attractive
demographic.
THE ENTERTAINMENT BOULEVARD MEDIA PROPERTIES. All of our media properties
are accessed through our Web site at entertainmentblvd.com. Those properties are
as follows:
ENTERTAINMENT BOULEVARD MUSIC. Entertainment Boulevard Music is one of the
most complete interactive music video channels on the Web. Since its launch in
March 1998, traffic to the site has risen dramatically, and the viewer base has
expanded to include fans from over 115 countries. There are approximately 2,000
videos available on Entertainment Boulevard Music, and more are added each week.
The site has received numerous awards and favorable reviews. Entertainment
Boulevard Music's video selection features a wide variety of musical formats,
including Rock/Metal, Pop/Dance, Urban, Country, Reggae, Christian, Jazz/Swing,
and Latin. Videos are presented with video technology that requires only a few
seconds of download time via the free RealNetworks RealPlayer G2 or Microsoft
Windows Media Player. The RealPlayer G2 and Microsoft Windows Media Player allow
videos to be viewed at speeds up to 300kbps. After watching the videos, viewers
can then immediately purchase related products from CheckOut.com.
In addition to music videos, viewers can read news and reviews through
Entertainment Boulevard's recent alliance with GO Network's WALL OF SOUND.
Viewers can also watch their favorite artists in the recently launched
"Backstage" segment, which features interviews and behind-the-scenes looks at
how videos are made.
ENTERTAINMENT BOULEVARD MOVIES. Entertainment Boulevard Movies provides a
service to movie-goers around the world. Movie trailers are culled from the
motion picture studios to be broadcast over the Web site and are separated into
the categories of "Coming Soon," "Now Playing," and "On Video." Users are also
able to search for films by title, actor, director, screenwriter, producer,
studio, MPAA rating, or genre. Viewers can also view the Top 20 trailers, as
determined by the number of times each trailer is played. Each trailer is
accompanied by still photos from the film as well as screen credits, including
cast, and a brief outline of the film's plot. Entertainment Boulevard Movies
currently features 375 movie trailers and offers new ones each week. Our recent
alliance with GO Network's MR. SHOWBIZ also adds reviews, movie news and box
office statistics to Entertainment Boulevard Movies. After watching the movie
trailers, our viewers are then able to purchase videos and DVDs through
Entertainment Boulevard's arrangement with CheckOut.com.
ENTERTAINMENT BOULEVARD NETFOMERCIALS. Entertainment Boulevard has recently
launched a unique and cost-effective way for infomercial companies to expose
their products to millions of worldwide viewers. The "netfomercials" are
separated into such categories as beauty, auto and home, and they can be viewed
via the RealPlayer G2 and Microsoft Windows Media Player. Included on each
netfomercial page is a detailed description of the individual product as well as
ordering information and product and shipping costs. Entertainment Boulevard
does not produce any of the infomercials. Instead, the companies selling the
products provide us with the finished infomercials and handle their own product
fulfillment as well. Entertainment Boulevard earns a percentage from the sale of
the products.
ENTERTAINMENT BOULEVARD SPORTS. Entertainment Boulevard intends to erase
the traditional geographic boundaries of sports in order to introduce worldwide
computer users to various sports broadcasts. All of the sports shows broadcast
on our Web site are available on demand so that users may enjoy the shows of
their choice at their convenience. Entertainment Boulevard Sports is the on-
line home of the following programs:
- MCCARVER ONE ON ONE. "McCarver One on One" entertains listeners with Tim
McCarver's incisive interviews with the most illustrious stars in sports
through audio broadcasts. Interviews include such sports figures as
Katarina Witt, Tony Gwynn, Marcus Allen, Yogi Berra, Serena Williams, and
many others.
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- TALKING BASEBALL. "Talking Baseball" is a weekly Internet radio show
focusing on fantasy and rotisserie baseball. Listeners of the show and
visitors to the Web site range from casual baseball fans to hard core
baseball enthusiasts. The show's hosts bring a wealth of fantasy and
rotisserie experience to their listeners. The show begins with the picks
of the week, followed by fantasy and rotisserie news covering key player
movement and injuries for the week. Additional content includes interviews
and baseball statistics and trends with fantasy and rotisserie
implications.
- BEARS-PACKERS SHOWDOWN. This entertaining weekly football show is loaded
with great locker room audio from around the NFL. Every show features
timely interviews, lively discussion, and clever parodies highlighting the
most storied rivalries in pro sports and football games of national
interest in the NFL. The Bears-Packers Showdown includes locker room
interviews with the biggest names in pro football such as John Elway,
Randy Moss, Terrell Davis, Deion Sanders, and more.
- SPORTSNETWORK. This all-inclusive site provides Internet users with
complete news and scores from around the world of sports.
- LISTEN TO THE EAGLE. Soon to launch, "Listen to the Eagle" is believed to
be one of the nation's leading outdoor recreation shows.
THE ROLE OF ENTERTAINMENT BOULEVARD. We believe that Entertainment
Boulevard offers the active entertainment consumer access to a greater selection
of music, movie trailers and sports programming than is typically available
through traditional media. In doing so, Entertainment Boulevard allows record
labels, movie studios and sports programmers to promote their content to a broad
market that can be difficult to reach through traditional media. Since its
introduction in March 1998, visits to our Web site have grown by more than
approximately 20% per quarter, and presently total about 150,000 visitors per
day.
Key elements of Entertainment Boulevard's programming include:
COMPELLING CONTENT. Entertainment Boulevard broadcasts exclusive and
original content, including sports radio shows and audio and video interviews.
Entertainment Boulevard also offers on-demand music videos and movie trailers,
news, and album and movie reviews. Our musical coverage spans all genres,
including Rock/Metal, Pop/Dance, Urban, Country, Reggae, Christian, Jazz/Swing,
and Latin. We work closely with almost every independent and major record label
and movie studio and believe that our relationships with the entertainment
industry, as well as our expertise in digital media production, provide us a
strategic advantage in offering appealing broadband content to our users.
POWERFUL PROMOTIONAL OUTLET FOR RECORD LABELS AND MOVIE STUDIOS. Record
labels and movie studios can work with Entertainment Boulevard to promote their
new releases to the large group of active music buyers and movie fans who make
up the Entertainment Boulevard user community. Because consumers can avoid music
they dislike and still remain in the Entertainment Boulevard environment,
Entertainment Boulevard can cover a broad spectrum of musical genres and expose
users to a greater number of artists. Record companies use Entertainment
Boulevard to introduce users to a variety of new artists and to inform them of
new releases from established artists. Movie studios have an additional outlet
to broadcast their trailers, thus informing the movie-going public of new
releases in theaters or on video or DVD.
ATTRACTIVE, TARGETED DEMOGRAPHIC GROUP. Entertainment Boulevard focuses on
the valuable 12 to 40 year-old audience. Research conducted by Mediamark
Research Inc. demonstrates that our audience members generally:
- invest substantial amounts of time and money in music and music-related
merchandise;
- adopt technological advancements early; and
- watch less television than they used to.
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Advertisers who have difficulty reaching this audience can turn to
Entertainment Boulevard for targeted advertising and direct marketing to this
valuable, yet elusive group.
EFFECTIVE ENVIRONMENT FOR ADVERTISING AND COMMERCE. Entertainment Boulevard
provides advertisers with access to a highly desirable group of consumers in an
active entertainment environment. The Entertainment Boulevard environment
captures consumers for long periods of time, and advertisements can be targeted
to specific users. Among other things, Entertainment Boulevard's access to a
large audience of active music consumers provides us with a strategic advantage
in selling digitally downloaded music. In addition, the content on
entertainmentblvd.com acts as a promotional incentive to purchase CDs, DVDs, and
videos.
OUR OBJECTIVE AND STRATEGY. Our objective is to establish Entertainment
Boulevard as the premier destination for streaming video entertainment and
information. Our strategy to achieve that objective is to attract and retain
active viewers with appealing content, thereby creating a valuable environment
for record labels, movie studios, sports programmers, advertisers and merchants
to market their products. Key elements of Entertainment Boulevard's strategy
are:
CONTINUE TO DEVELOP AND AMASS APPEALING CONTENT. Entertainment Boulevard
believes that continuing to develop appealing new audio, visual and text content
is critical to expanding its audience. We plan to continue to increase our
offering of music videos, movie trailers, and sports programming to attract and
retain new consumers. In addition, our expertise in digital media production has
positioned Entertainment Boulevard for broadband distribution. We are also
committed to adding new features and services.
AGGRESSIVELY GROW USER BASE. Entertainment Boulevard believes that
increasing the size and loyalty of its audience is critical to its success. In
addition to continuing to provide compelling content, we believe that we can
continue to build our audience through distribution agreements with high-traffic
Web sites and through a variety of marketing techniques designed to increase
awareness. Use of our "pop-up" video players on other Web sites has been a
valuable source of increased traffic. Other marketing techniques include trade
advertising and contests.
BUILD BRAND AWARENESS. Increasing awareness of the Entertainment Boulevard
brand is essential to our ability to increase our audience and attract
advertisers. We have already begun and will continue to build brand awareness
through online advertising and strategic alliances with high traffic Web sites
and through off-line advertising such as print, radio, television and billboard
advertising. We believe that increased awareness of the Entertainment Boulevard
brand will enable us to increase our attractiveness to advertisers who target
the Entertainment Boulevard audience.
INCREASE ADVERTISING REVENUE BY CAPITALIZING ON ATTRACTIVE AUDIENCE
DEMOGRAPHICS. Entertainment Boulevard seeks to increase its advertising
revenues by offering advertisers access to targeted consumer groups. Our
strategy is to focus on large consumer and direct marketers who seek to target
music, movies, or sports fans in relevant environments. We believe that
Entertainment Boulevard offers an engaging interactive environment where leading
brand marketers can target their messages to an elusive audience that is making
its early brand decisions.
TAKE ADVANTAGE OF NEW DISTRIBUTION TECHNOLOGIES. The increased commercial
availability of new technologies enabling broadband access to the Internet will
allow Entertainment Boulevard to increase distribution of the rich content
already available on entertainmentblvd.com. We believe that our extensive
experience in developing high quality, rich media content will provide a
competitive advantage over other content providers as technologies permitting
high-speed access to the Internet become more widely available.
GENERATE E-COMMERCE REVENUES. We are aggressively pursuing strategic and
marketing relationships with retailers focused on Web distribution to enable us
to exploit e-commerce opportunities.
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Entertainment Boulevard is well positioned to sell music through digital
downloads through its alliance with Liquid Audio. Entertainment Boulevard also
offers our users the ability to easily and economically purchase CDs, DVDs,
videos and games through our relationship with CheckOut.com and our
"netfomercial" programming provides infomercial producers an Internet outlet for
their products. Entertainment Boulevard shares in the profits from all of those
on-line sales. Other future e-commerce opportunities include the sales of
athletic equipment through Entertainment Boulevard Sports.
INCREASE ENCODING SERVICES. Entertainment Boulevard intends to expand its
new encoding services department in order to increase revenues and further
augment its brand awareness as a premiere encoding company. We have already
begun the push to build awareness through trade shows and a press announcement.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. We believe that our strategic
relationships with Infoseek (the GO Network), Bolt.com, CheckOut.com and
Scour.Net will help attract users and facilitate advertising sales. As
opportunities arise, we may also seek to increase our Web site traffic, market
share and revenues through strategic acquisitions.
CONTENT DEVELOPMENT. We have developed strong working relationships with
most of the major and independent record labels and movie studios, as well as
several sports broadcasting companies and infomercial distribution companies.
Our content acquisition team is in regular contact with record labels and movie
studios to keep the entertainmentblvd.com site up to date with the latest music
videos and movie trailers. Our strategy is to engage core groups of editors,
artists, video producers and other content creators on a full time basis.
However, we have no long-term contracts with any record labels or motion picture
studios, and have no assurance that those labels or studios will continue to
make their content available to us on reasonable terms, or at all. See "Risk
Factors--We Need to Continue to Provide Appealing Content" and "--We Depend on
the Entertainment Industry for Our Content."
REVENUE SOURCES
ADVERTISING AND SPONSORSHIPS. We sell advertising and sponsorships against
the cumulative audience viewing content on entertainmentblvd.com. Our strategy
is to focus on advertisers who seek to reach the active music, movies or sports
consumer in a corresponding environment. Entertainment Boulevard offers
advertisers the opportunity to make connections with their potential consumers
by delivering engaging advertising to a targeted audience or sponsoring a
relevant content area. Advertisers can derive significant value from targeted
users who spend time interacting with the content and the advertisement.
Entertainment Boulevard derives a portion of its advertising revenues from
banner advertisements that are prominently displayed at the top of
pages throughout entertainmentblvd.com. From each banner advertisement, viewers
can hyperlink directly to the advertiser's own Web site, thus providing the
advertiser the opportunity to directly interact with an interested customer.
Advertisers have the opportunity to purchase either run-of-site banners or
banners specifically targeted to a subset of Entertainment Boulevard. An example
of this would be to target baseball fans or Country music fans by placing banner
ads only in the "Talking Baseball" section of the sports programming or the
Country music genre page of Entertainment Boulevard Music, respectively.
Advertisers can also purchase banners that will be viewed by users of other
sites by advertising on the Entertainment Boulevard "pop-up" video players. For
instance, advertisers seeking teenagers could target ads on the Bolt.com music
video player. Entertainment Boulevard seeks to charge premium advertising rates
for any level of targeting. See, however, "Risk Factors--We Depend on
Advertising Revenues."
In addition to traditional banner ads, Entertainment Boulevard has also
begun selling streaming video ads. These fifteen to thirty second advertisements
stream prior to videos playing on Entertainment Boulevard Music. Companies
already taking advantage of this new advertising opportunity include Arizona
Jeans.
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Advertising orders are short term and subject to cancellation without
penalty until shortly before the advertisement runs. Entertainment Boulevard
outsources its advertising to multiple sources, including The Virtual Music
Vault ("TVMV"). TVMV targets exclusively music-oriented Web sites, so
advertisers know their products will be relevant for Entertainment Boulevard
Music users. Such advertisers include Firstlook.com and BMG Music Service.
However, we are dependent upon a limited number of advertisers in any quarterly
period. The loss of a key relationship with an advertising source or the
cancellation or deferral of even a limited number of orders could adversely
affect our quarterly financial performance.
Our revenues for the foreseeable future will depend substantially on sales
of advertising and sponsorships, and that dependence subjects us to certain
risks. See "Risk Factors--We Depend on Advertising Revenues," "--We Must
Increase the Size of Our Audience," "--Our Sales Cycles Vary for Advertising,"
"--We Depend on a Limited Number of Advertisers" and "--The Acceptance and
Effectiveness of Digital Media for Advertising are Unproven."
OPPORTUNITIES IN E-COMMERCE. Entertainment Boulevard currently facilitates
the sale of pre-recorded music to consumers through its relationship with
CheckOut.com and through digital downloads. We also make on-line product sales
available through the Entertainment Boulevard Netfomercial site.
CheckOut.com is the exclusive commerce provider for music, videos and games
for the Entertainment Boulevard Web site. CheckOut.com is the highly anticipated
entertainment and e-commerce destination brought to the Web by Mike Ovitz and
the Yucaipa Companies. We expect the two-year alignment with CheckOut.com to
generate significant revenues as time progresses because the companies have a
50/50 split on all net proceeds of products sold to Entertainment Boulevard
users. In addition, CheckOut.com will make a one-time payment to Entertainment
Boulevard for all new referral customers making purchases on CheckOut.com.
Entertainment Boulevard has integrated CheckOut.com commerce links
throughout entertainmentblvd.com and on the "pop-up" video players that it
licenses to third parties. CheckOut.com is responsible for all aspects of order
processing and fulfillment and will offer special promotions to Entertainment
Boulevard users.
Liquid Audio is a leading provider of software and services for the Internet
delivery of music. Through a recent agreement, Entertainment Boulevard has
become an affiliate in the Liquid-TM- Music Network, providing its users with
access to Liquid Audio's entire catalog of secure digital music downloads.
Liquid Audio distributes one of the Internet's largest catalogs of secure
downloadable music, with music from approximately 600 record labels.
Entertainment Boulevard Netfomercials broadcasts infomercials on demand in
such categories as beauty, auto and home. Each infomercial company handles its
own product fulfillment, and Entertainment Boulevard earns a percentage of
product sales.
Entertainment Boulevard intends to continue to pursue opportunities to sell
other lifestyle products relevant to its audience.
VIDEO ENCODING SERVICES. As an additional source of income, we provide
digital encoding services for various third parties, including the Health
Channel/Discovery Channel and DVD Express. Typically, the client provides us
with video "content" in the form of a finished master videotape. We then convert
that content into a digital medium which is then compressed and encoded for
viewing at designated delivery speeds on the RealPlayer G2 and/or Microsoft
Windows Media Player format. When the process is completed, we deliver to the
client a disk which contains Internet-ready content in the required speeds and
formats. For these services, we currently charge $15 per minute of delivered
content for each designated format and delivery speed.
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STRATEGIC BUSINESS ALLIANCES AND TECHNOLOGY. Entertainment Boulevard
pursues strategic relationships to increase audience, build brand recognition
and enhance content and distribution opportunities. We currently have strategic
relationships in two principal areas: distribution and technology. Our future
success depends to a significant extent upon the execution and success of those
strategic relationships. See "Risk Factors--We Must Develop and Renew Strategic
Relationships."
CERTAIN DISTRIBUTION AGREEMENTS
In February 1999, Entertainment Boulevard entered into an agreement with
Dimension Music, Inc. whereby Entertainment Boulevard is the exclusive online
music video provider to the Dimension Music Web site. Links on the Dimension
Music site take the user to a co-branded music video "pop-up" player with player
pages and streaming content hosted by Entertainment Boulevard. Both parties will
sell and serve ad banners on the player and any co-branded pages and will split
equally the advertising revenue. Dimension Music is a site dedicated to
promoting music through the MP3 standard, a file format enabling near CD-quality
music download in minutes. Subject to earlier termination on 30 days notice and
certain other events, the initial term of the agreement expires in February 2000
and will continue for additional one-year terms unless either party cancels the
agreement thirty days prior to the end of the term then in effect.
In February 1999, Entertainment Boulevard also entered into an agreement
with Scour, Inc., whereby Entertainment Boulevard is a provider of music videos
and movie trailers for Scour.Net, a broadband entertainment portal and search
engine. Links on the Scour.Net site take the user to a co-branded music video or
movie trailer "pop-up" player with player pages and streaming content hosted by
Entertainment Boulevard. Scour.Net will serve ad banners on the player and any
co-branded pages and will equally split the advertising revenue with
Entertainment Boulevard. Scour.Net will also reimburse Entertainment Boulevard
for all bandwidth costs in relation to the player. The term of this agreement
continues on a month-to-month basis until March 2000.
In June 1999, Entertainment Boulevard entered into an exclusive distribution
agreement with Synge.com, a premier online destination for young adults. Links
on the Synge.com site take the user to a co-branded music video "pop-up" player
with player pages and streaming content hosted by Entertainment Boulevard. Both
parties will sell and serve ad banners on the player and any co-branded
pages and will equally split the advertising revenue. Subject to earlier
termination on 30 days notice and certain other events, the initial term of the
agreement expires in June 2000, and will continue for additional one-year terms
unless either party cancels the agreement thirty days prior to the end of the
term then in effect.
In July 1999, Entertainment Boulevard entered into a distribution agreement
with CheckOut.com. Links on the CheckOut.com site take the user to a co-branded
music video or movie trailer "pop-up" player, with player pages and streaming
content hosted by Entertainment Boulevard. CheckOut.com is Entertainment
Boulevard's exclusive e-commerce provider for music, videos and games, and
Entertainment Boulevard is CheckOut.com's exclusive provider for music videos
and movie trailers through its "pop-up" players. In addition to product
fulfillment, CheckOut.com has over 350,000 artist pages, featuring a complete
listing of current CDs, biographies, news features, product reviews, chats, and
links to other sites pertaining to the artists. Pursuant to the agreement,
CheckOut.com pays Entertainment Boulevard a commission on sales that originate
from ENTERTAINMENTBLVD.COM, as well as a referral fee for each new customer who
originated from our Web site. Subject to earlier termination for breach and
certain other events, the initial term of the agreement expires in July 2001,
and will continue for additional one-year terms thereafter unless either party
cancels the agreement thirty days prior to the end of the term then in effect.
Also in July 1999, Entertainment Boulevard entered into a distribution
agreement with Bolt Media, Inc., which operates Bolt.com, a pop-culture site.
Links on the Bolt.com site take the user to a co-branded music video "pop-up"
player with player pages and streaming content hosted by
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Entertainment Boulevard. Bolt.com will serve ad banners on the player and any
co-branded pages and will equally split the advertising revenue with
Entertainment Boulevard. Subject to earlier termination due to breach and
certain other events, the initial term of the agreement expires in January 2000,
and will continue for three additional six-month terms unless either party
cancels the agreement thirty days prior to the end of any of those terms.
In August 1999, Entertainment Boulevard entered into a distribution
agreement with College Broadcast, Inc., whereby Entertainment Boulevard provides
movie trailers to the community of members at "College Club". College Club is a
free service that gives college students across the country free universal
messaging, instant messaging, Web-based e-mail, voicemail, paging, chats and
access to over 25,000 student groups. Links on the College Club site take the
user to a co-branded movie trailer "pop-up" player with player pages and
streaming content hosted by Entertainment Boulevard. College Club will serve ad
banners on the player and any co-branded pages and will equally split the
advertising revenue with Entertainment Boulevard. Subject to earlier termination
due to breach and certain other events, the term of the agreement expires in
August 2000, subject to continuation for additional one-year terms unless either
party cancels the agreement thirty days prior to the end of the term then in
effect.
In August 1999, Entertainment Boulevard also entered into an exclusive
distribution agreement with Infoseek Corporation, home of the GO Network. The GO
Network is one of the top five digital media and Web properties according to
Media Metrix, Inc. Links on the WALL OF SOUND, MR. SHOWBIZ and GO Broadcast
sites take the user to a co-branded music video or movie trailer "pop-up" player
with player pages and streaming content hosted by Entertainment Boulevard. The
term of the agreement expires in August 2000, although Infoseek reserves the
right to cancel the agreement upon thirty days notice at any time.
TECHNOLOGY
Entertainment Boulevard houses its Web page servers in a collocation
facility at Level 3 Communications, Inc. ("Level 3"), and all of Entertainment
Boulevard's Web pages are hosted by Level 3. Entertainment Boulevard has also
entered into a content management and delivery contract with InterVU Inc. The
InterVU network utilizes nine Internet "backbones" to deliver media in the
optimal manner.
In April 1999, Entertainment Boulevard entered into an agreement with ICTV,
Inc. to make broadband versions of Entertainment Boulevard's music and
infomercial sites available as channels on ICTV, one of the nation's leading
cable set-top box companies. At speeds of up to 10Mbps, ICTV's broadband
Internet access is up to 100 times faster than ordinary dial-up services like
WebTV.
In July 1999, Entertainment Boulevard entered into an agreement with Digital
Bitcasting Corp. to become the exclusive broadcaster of MP3 music videos and
movie trailers over the Internet. This will offer a substantial increase in
audio and video quality. The exclusive portion of this agreement is for six
months.
In August 1999, Entertainment Boulevard entered into an agreement with iBEAM
Broadcasting Corporation ("iBEAM") to transmit Entertainment Boulevard's content
through iBEAM's satellite-based network. This new content delivery model
provides subscribers to iBEAM-powered Internet service providers with guaranteed
access to high-demand streaming content, without related network congestion or
overload. This technology allows Entertainment Boulevard to offer a higher
quality of streaming video and reduce the cost while increasing the quality of
distribution, thereby enhancing the user experience.
Most recently, Entertainment Boulevard has entered into an agreement with
Microsoft Corp. ("Microsoft") under which Entertainment Boulevard has become a
participant in Microsoft's Network Credits Program. Under that program,
participants are allowed to use "network credits" to obtain third
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parties' services to deliver content to customers of Network Credits Program
participants through the use of Windows media technologies. In addition,
Entertainment Boulevard has entered into an agreement with ServiceCo, LLC, a
joint venture among affiliates of Time Warner Inc., MediaOne Group, Inc.,
Microsoft, Compaq Corp. and Advance/Newhouse, which operates "Road Runner," a
high speed online service delivered to PCs over the cable television
infrastructure. Under that agreement, Entertainment Boulevard's content will be
included in co-branded, online broadband programming provided by Road Runner to
its subscribers. Road Runner is currently available to about 12.5 million homes
in several areas, and will eventually be able to reach more than 30 million
cable homes nationwide.
MARKETING AND BRAND AWARENESS. Entertainment Boulevard employs a variety of
methods to increase its audience and build brand recognition and loyalty. We
believe that the most effective means of consumer marketing is creating programs
that allow a potential user the opportunity to sample the product. As a result,
Entertainment Boulevard has developed its "pop-up" player. These co-branded
"pop-up" players allow other sites' users to select and view an assortment of
Entertainment Boulevard's extensive catalogue of content while browsing the
other sites. This gives Entertainment Boulevard exposure on other sites and
helps to draw viewers to Entertainment Boulevard for access to our entire
library. We license our "pop-up" players to sites whose demographics are similar
to ours, and we have also made an effort to license the players to larger sites,
such as the GO Network's WALL OF SOUND, MR. SHOWBIZ and GO Broadcast, as well as
the multimedia search engine Scour.Net.
In addition to direct marketing, certain of our marketing staff focuses on
other forms of brand awareness, including traditional media advertising such as
print, radio and outdoor. Entertainment Boulevard also has an experienced public
relations team focused on generating press coverage in both trade and consumer
media.
Entertainment Boulevard continues to be actively involved in trade shows
that focus on entertainment, streaming media, and Internet technology. Those
shows allow Entertainment Boulevard to showcase its Web site and content to
potential advertisers, potential alliances, and the media.
OPERATIONS AND INFRASTRUCTURE. Entertainment Boulevard's operating
infrastructure has been designed and implemented to support the reliable and
swift delivery of millions of Web page views a day. Key attributes of our
infrastructure include scalability, performance and service availability.
Web pages are generated and delivered, in response to end-users requests, by
any one of three front-end Web applications and database servers. Entertainment
Boulevard's servers run on the Debian/ GNU Linux operating system and Apache Web
server software.
Entertainment Boulevard maintains all of its entertainmentblvd.com
production servers at the Los Angeles, California, Data Center of Level 3.
Entertainment Boulevard's operations are dependent upon Level 3's ability to
protect its systems against damage from fire, storms, power loss,
telecommunications failure, break-ins and other events. Level 3 provides
comprehensive facilities management services, including human and technical
monitoring of all production servers 24 hours per day, seven days per week.
Level 3 also provides the means of connectivity for Entertainment Boulevard's
servers to end-users via the Internet through multiple DS-3 and OC-12
connections. The Level 3 facility is connected to two independent power grids,
has multiple independent uninterruptible power supplies ("UPS") which are
battery-powered, as well as multiple independent diesel generators designed to
provide power to the UPS systems within seconds of a power outage.
All of Entertainment Boulevard's Web production data are copied to backup
tapes each night. Entertainment Boulevard keeps all of its production servers
behind firewalls for security purposes and does not allow outside access at the
operating systems level, except via special secure channels. Strict password
management and physical security measures are followed.
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<PAGE>
A Computer Security Response Team composed of members of Level 3 and
Entertainment Boulevard provides security alerts, and, where appropriate,
recommended action is taken to address security risks and vulnerabilities. See
"Risk Factors--Our Systems May Fail or Limit User Traffic."
COMPETITION. Competition among media companies seeking to attract the
active music consumer is intense. See "Risk Factors--We Face Significant
Competition from a Variety of Sources" for additional information on this topic.
REGULATORY UNCERTAINTIES AND GOVERNMENTAL REGULATION. Laws and regulations
directly applicable to Internet communications, commerce and advertising are
becoming more prevalent. Such legislation could dampen the growth in use of the
Internet generally and decrease the acceptance of the Internet as a
communications, commercial and advertising medium. Although our transmissions
originate in California, the governments of other states or foreign countries
might attempt to regulate our transmissions or levy sales or other taxes
relating to our activities. The European Union recently enacted its own privacy
regulations that may result in limits on the collection and use of certain user
information. The laws governing the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws, such as those governing intellectual
property, privacy, libel and taxation, apply to the Internet and Internet
advertising. In addition, the growth and development of the market for Internet
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, that may impose additional burdens on companies
conducting business over the Internet. Furthermore, the Federal Trade Commission
has recently investigated the disclosure of personal identifying information
obtained from individuals by Internet companies. In the event the Federal Trade
Commission or other governmental authorities adopt or modify laws or regulations
relating to the Internet, our business, results of operations and financial
condition could be adversely affected. See "Risk Factors--Governmental
Regulation and Legal Uncertainty May Restrict Our Business."
Entertainment Boulevard does not collect sales or other taxes on goods sold
to users through referrals from entertainmentblvd.com. However, one or more
states may seek to impose sales tax collection obligations on companies such as
Entertainment Boulevard which engage in or facilitate Internet-based commerce. A
number of proposals have been made at the state and local level that would
impose additional taxes on the sale of goods and services through the Internet.
Such proposals, if adopted, could substantially impair the growth of e-commerce
and could adversely affect our opportunity to derive financial benefit from
e-commerce. See "Risk Factors--The Imposition of Sales and Other Taxes Could
Hinder Our Business."
INTELLECTUAL PROPERTY. The music videos, movie trailers, sports programming
and infomercials featured on ENTERTAINMENTBLVD.COM are copyrighted works of
third parties, including record labels, movie studios, artists and songwriters.
Each piece of music or music video may have multiple copyright owners, some with
rights in the sound recording (the particular performance) and others with
rights in the musical composition (the lyrics and music). Entertainment
Boulevard has various licensing arrangements with those parties, ranging from
formal contracts to informal agreements based on the promotional nature of the
content. In some cases, Entertainment Boulevard pays a fee to the licensor for
use of the content, and in other cases the use is free. Entertainment Boulevard
also uses other content, including images, that are copyrighted works of others.
We rely on our positive working relationships with copyright owners to obtain
licenses on favorable terms. Any changes in the nature or terms of these
arrangements, including any requirement for Entertainment Boulevard to pay
significant fees for the use of the content, could have a negative impact on the
availability of content or our business.
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<PAGE>
Copyrighted material that Entertainment Boulevard develops internally, as
well as trademarks relating to the Entertainment Boulevard brand and other
proprietary rights are important to our success and our competitive position. We
generally enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and generally control access to and
distribution of our proprietary information. We cannot assure you that the steps
we have taken will prevent misappropriation of our proprietary rights,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States. If third
parties were to use or otherwise misappropriate our copyrighted materials,
trademarks or other proprietary rights without our consent or approval, our
competitive position could be harmed, or we could become involved in litigation
to enforce our rights. It is also possible that we could become subject to
infringement actions based upon the content licensed from third parties. Any
such claims or disputes could subject us to costly litigation and the diversion
of our financial resources and technical and management personnel. Further, if
our efforts to enforce our intellectual property rights are unsuccessful or if
claims by third parties against Entertainment Boulevard are successful, we may
be required to change our trademarks, alter the content and/or pay financial
damages, all of which could adversely affect our business. See "Risk Factors--We
Depend on the Music and Movie Industries for Much of Our Content" and "--We
Depend Upon Intellectual Property Rights and Licensed Material."
PERSONNEL. As of September 30, 1999, we employed 23 full-time employees, of
which 15 were engaged in technical activities, four in general administration
and executive activities and four in business development. From time to time, we
also engage independent contractors to support our research and development,
marketing, sales and administrative activities. We are not a party to any
collective bargaining agreement and consider our relationships with our
personnel to be good.
FACILITIES. We lease our approximately 12,000 square foot headquarters in
Los Angeles, California, for a monthly base rent of $26,700 plus annual 3.5%
escalations and our share of building operating expenses. The lease expires on
December 31, 2004 and is subject to one five-year renewal option. We believe
that this space will be sufficient for our needs for the foreseeable future.
LEGAL PROCEEDINGS. In October 1999, we received a summons and complaint
naming us as defendants in a suit by Arthur Brown (who is one of our directors)
and Rizman Alikahn in the Superior Court of the State of California,
Los Angeles County. The complaint alleged breach of contract for failure to
repay a short-term loan made by Messrs. Brown and Alikhan to us and sought
damages in the amount of approximately $556,000, plus interest and attorney
fees. On October 13, 1999, we entered into a settlement agreement with
Messrs. Brown and Alikhan, pursuant to which we: (i) made payments in the amount
of $300,000 against the outstanding loan and $10,000 in attorney fees and cost;
(ii) agreed to pay the remaining principal amount of approximately $256,000,
plus interest, out of 50% of any future income, with final payment to occur no
later than January 31, 2000; and (iii) agreed that Stephen Brown (our President
and Chief Executive Officer) would not be a signatory on any of our bank
accounts until the remaining principal and interest is repaid in full. Stephen
Brown also agreed to personally guarantee repayment of the remaining principal
and interest. No judgment will be entered with the court unless the remaining
principal amount and interest are not repaid by January 31, 2000.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS. The following table sets forth certain
information regarding our executive officers and directors. Our directors (of
which there are presently two) serve until the next annual meeting of
stockholders or until their successors are elected and qualified, while officers
serve at the discretion of the Board of Directors. There are no family
relationships among our directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------------------- -----------------------
<S> <C> <C>
Stephen Brown 43 Director, President,
Chief Executive Officer
and Treasurer
Arthur Brown 49 Director
Debbi Gilson 30 Secretary
</TABLE>
STEPHEN BROWN, the founder of INB, has held his positions with Entertainment
Boulevard since May 1999. A pioneer in bringing entertainment to the Web, he is
responsible for all aspects of programming for our Web site, as well as
orchestrating cooperative ventures and creative alliances to ensure variety and
the highest possible quality of entertainment content available on
entertainmentblvd.com. Prior to establishing INB's predecessor in April 1997,
Mr. Brown was a co-founder and executive officer of a Los Angeles-based
independent record company. That company, which was founded in 1988, was a force
in the independent record industry for eight years before Mr. Brown's focus
turned toward the Internet. Born in England, Brown graduated from Easingwold
Technical Institute in 1971 with honors and a degree in commercial design.
ARTHUR BROWN has been a director since May 6, 1999. Since 1984, Mr. Brown
has been active in raising capital for various public companies, most recently
through 766077 Alberta, Inc.
DEBBI GILSON became our corporate Secretary in October 1999 and has been
with INB and its predecessors since inception in April 1997. Ms. Gilson oversees
the daily operations of Entertainment Boulevard, and coordinates all human
resources. She is also responsible for all editorial features on our Web site
and aids in promoting name recognition of Entertainment Boulevard through press
releases and bi-weekly newsletters to ENTERTAINMENTBLVD.COM viewers. Ms. Gilson
has a seven year background in the music industry in the areas of contractual
negotiations, marketing and business development. Prior to joining INB and
Entertainment Boulevard, Ms. Gilson worked at Sony Music as an executive
assistant from March 1994 until March 1997. Ms. Gilson has a Bachelor of Arts
degree in Film Studies from the University of California at Santa Barbara.
EXECUTIVE COMPENSATION. The following table sets forth summary information
with respect to the compensation paid to Stephen Brown, our current President,
Chief Executive Officer and Treasurer, for services rendered in all capacities
to us through September 30, 1999. In addition, because Dr. Colin Leech-Porter
was our Chief Executive Officer on December 31, 1998, the table also provides
summary information as to the compensation paid to him for services rendered in
all capacities during fiscal 1998. We had no executive officer whose total cash
compensation exceeded $100,000 for fiscal 1998, and, other than Stephen Brown,
none of our present executive officers have compensation at that level.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
FISCAL ALL OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS
- --------------------------- -------- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Stephen Brown,
Chief Executive Officer(2)............ 1999 $320,000 $ -0- $-0- 50,000
Colin Leech-Porter,
Chief Executive Officer(3)............ 1998 -0- -0- -0- -0-
</TABLE>
- ------------------------
(1) In the interest of attracting and retaining qualified personnel,
Entertainment Boulevard currently provides its executive officers with
certain perquisites. These include the cost of group medical insurance. As
to Mr. Brown, the incremental cost to us of providing such perquisites is
not expected to exceed 10% of the annual salary and bonus to be paid to him
in fiscal 1999.
(2) Mr. Brown was appointed President, Chief Executive Officer and Treasurer of
Entertainment Boulevard on May 6, 1999. The amounts shown reflect
compensation to Mr. Brown in all capacities through September 30, 1999.
(3) Dr. Leech-Porter resigned as Entertainment Boulevard's Chief Executive
Officer on January 13, 1999 and is no longer an officer of the Company.
The following table provides information concerning stock options granted to
Mr. Brown and Dr. Leech-Porter during the years indicated.
OPTION GRANTS
<TABLE>
<CAPTION>
% OF
TOTAL OPTIONS
NUMBER OF GRANTED TO
FISCAL SECURITIES UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION
YEAR OPTIONS GRANTED FISCAL YEAR PER SHARE DATE
-------- --------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Stephen Brown(1) .......... 1999 50,000 11.2% $1.00 March 26, 2004
Colin Leech-Porter(2)...... 1998 -0- N/A N/A N/A
</TABLE>
- ------------------------
(1) Mr. Brown became Chief Executive Officer on May 6, 1999. The table reflects
option grants through September 30, 1999.
(2) Dr. Leech-Porter resigned as Entertainment Boulevard's Chief Executive
Officer on January 13, 1999.
No options have ever been exercised by Dr. Leech-Porter or Mr. Brown. As to
each of them, the following table sets forth the number and value of vested and
unvested options held as of September 30, 1999.
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<PAGE>
OPTION VALUE AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT SEPTEMBER 30 OPTIONS AT SEPTEMBER 30
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen Brown................................. 50,000 -0- $ 53,124 N/A
Colin Leech-Porter............................ -0- -0- N/A N/A
</TABLE>
DIRECTOR COMPENSATION. At this time, we do not contemplate paying fees to
our directors for their services as directors, although they are eligible for
options under our stock option plan. See "Stock Option Plan" below. It is,
however, our policy to reimburse directors for reasonable travel and lodging
expenses incurred in attending meetings of the Board of Directors.
STOCK OPTION PLAN. In January 1999, Entertainment Boulevard adopted the 1999
Stock Option Plan (the "Option Plan"), covering 1,000,000 shares of
Entertainment Boulevard Common Stock that may be granted to officers, directors,
employees, consultants and other individuals providing significant contributions
to Entertainment Boulevard. The purpose of the Option Plan is to provide
participants with an incentive to become stockholders in Entertainment Boulevard
and share in its success.
The Option Plan is currently administered by our Board of Directors. Options
granted under the Option Plan are priced at no less than 85% of the fair market
value of Entertainment Boulevard's Common Stock on the date of grant.
As of September 30, 1999, there were 447,000 options outstanding under the
Option Plan at a weighted average price of $1.14 per share.
EMPLOYMENT ARRANGEMENTS. Presently, none of our officers or directors are
employed pursuant to an employment agreement except Stephen Brown. On November
1, 1999, we entered into a two-year employment agreement with Mr. Brown. During
the first year, annual compensation pursuant to the employment agreement is
$240,000 per year, payable monthly, subject to a minimum annual increase of 15%
for the second year. Mr. Brown is also eligible to receive an annual bonus as
determined by our Board of Directors, as well as a $1,500 per month car
allowance and payment of automobile operating expenses. In addition, at the end
of each twelve-month period of employment, Mr. Brown will be granted options
under the Option Plan for a minimum of 50,000 shares. During the two-year term,
the employment agreement is terminable only upon Mr. Brown's death or disability
(as defined in the agreement) or by either party for "cause," also as defined in
the agreement.
LIMITATION ON LIABILITY AND INDEMNIFICATION ARRANGEMENTS. As permitted under
Nevada law, our Articles of Incorporation, as amended, provide that no director
or officer shall be personally liable to Entertainment Boulevard or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except with respect to (i) acts or omissions that involve intentional
misconduct, fraud or a knowing violation of law or (ii) the payment of improper
distributions. The limitation of liability provision does not eliminate a
stockholder's right to seek non-monetary, equitable remedies such as injunction
or rescission to redress an action taken by directors or officers. However, as a
practical matter, equitable remedies may not be available in all situations and
there may be instances in which no effective remedy is available.
Our Articles of Incorporation, as amended, and Bylaws provide for the
indemnification of our directors, officers, employees and agents to the full
extent permitted by Nevada law. Under Nevada law, directors, officers, employees
and other individuals may be indemnified against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement that are actually and
reasonably incurred in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than a
"derivative action" by or in the right of Entertainment
43
<PAGE>
Boulevard) if they acted in good faith and in a manner they reasonably believed
to be in the best interests of Entertainment Boulevard and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such an action. Nevada law further provides that
the indemnification and advancement of expenses provided by, or granted pursuant
to, provisions of Nevada law is not to be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement or otherwise.
We have entered into, or intend to enter into, indemnification agreements
(the "Indemnification Agreements") with our directors and executive officers
providing indemnity consistent with the foregoing. The Indemnification
Agreements will constitute binding agreements between us and each of the other
parties thereto, thus preventing us from modifying our indemnification policy in
a way that is adverse to any person who is a party to an Indemnification
Agreement. We have also obtained officer and director liability insurance with
respect to liabilities arising out of certain matters, including matters arising
under the Securities Act.
In connection with the sale of Series A Preferred Stock, we entered into
indemnification arrangements with the purchasers of that stock and Robb Peck.
Such indemnification covers various matters, including liabilities arising out
of or relating to statements made in, or omitted from, the Registration
Statement of which this Prospectus is a part.
We have been advised that insofar as any of the foregoing provisions or
agreements may be invoked to disclaim liability for damages under the Securities
Act, it is the opinion of the SEC that such provision or agreement is against
public policy as expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving any
director or officer, employee or agent of Entertainment Boulevard where
indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our outstanding voting securities (Common Stock and Series A
Preferred Stock) known by us as of November 17, 1999, after giving effect to the
anticipated sale of another 2,000 shares of Series A Preferred Stock as
described in "Recent Developments." The table sets forth such information as to:
- each person or entity known by us to be the beneficial owner of more than
5% of our Common Stock or Series A Preferred Stock;
- each of our directors;
- our current Chief Executive Officer, as named in the Summary Compensation
Table above (i.e., Stephen Brown); and
- all of our directors and executive officers as a group (three persons).
"Beneficial ownership" includes those shares which a stockholder has the
power to vote or transfer and Common Stock that could be issued upon the
exercise of outstanding warrants or stock options that are exercisable within 60
days of the date of this Prospectus, as well as shares of Common Stock
obtainable upon conversion of Series A Preferred Stock and certain outstanding
promissory notes. The persons listed below have sole voting and investment power
with respect to all shares owned by them, except to the extent such power may be
shared with a spouse.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TITLE OF CLASS BENEFICIALLY OWNED PERCENTAGE OF CLASS(1)
- ---- -------------- ------------------ ----------------------
<S> <C> <C> <C>
Stephen Brown(2).............................. Common 2,050,000(3) 14.6%
Arthur Brown(2)............................... Common -0- N/A
H.A.A. Inc.(4)................................ Common 971,872(5)(6) 7.3%
Series A 1,400 35%
Lowen Holdings(7)............................. Common 332,944(5) 2.6%
Series A 600 15%
Beestons Investment Ltd.(8)................... Common 1,379,817(5)(6) 10.1%
Series A 2,000 50%
All executive officers and directors as a
group (three persons)(9).................... Common 2,150,000 15.2%
</TABLE>
- ------------------------
(1) Based on 12,452,500 outstanding shares of Common Stock and 4,000 outstanding
shares of Series A Preferred Stock. Each share of Series A Preferred Stock
is currently convertible into 554.91 shares of Common Stock. "Percentage of
Class" for Common Stock (i) assumes conversion of Series A Preferred Stock
and promissory notes of the holder only and (ii) assumes exercise of options
and warrants of the holder only (see footnotes (3), (5), (6) and (9) below).
(2) Address is c/o Entertainment Boulevard, Inc., 12910 Culver Boulevard, Suite
I, Los Angeles, California 90066.
(3) Includes 1,550,000 shares obtainable through the exercise of warrants and
options.
(4) Address is 1601 42nd St., Brooklyn, NY 11204.
(5) Includes shares obtainable through the conversion of Series A Preferred
Stock in the following amounts: H.A.A., Inc.--776,872; Lowen
Holdings--332,944; and Beestons Investment Ltd.--1,109,817.
(6) Includes shares obtainable through the conversion of certain promissory
notes in the following amounts: H.A.A. Inc.--125,000; and Beestons
Investment Ltd.--125,000.
(7) Address is West Street 51, Zurich, Switzerland.
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<PAGE>
(8) Address is P. O. Box 65, Duke Street, Gretton House, Grand Turks, Caicos.
(9) Includes 1,650,000 shares obtainable through the exercise of warrants and
options.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company was founded in December 1997 by Dr. Colin Leech-Porter, a
Canadian resident who was its sole officer and director from formation until
January 1999. On March 8, 1998, Dr. Porter purchased 365,000 shares of the
Company's Common Stock for $3,650. In conjunction with the Company's formation,
Dr. Porter advanced $8,500 to the Company, which amount has since been repaid.
Dr. Porter no longer provides services to the Company in any capacity.
In December 1998, the Company issued 2,925,000 units of its securities in a
private offering, with each "unit" consisting of one share of Common Stock, a
warrant to purchase a share of Common Stock for $0.25 and a warrant to purchase
an additional share of Common Stock for $1.00 during a one year period beginning
with the date of this Prospectus. At an offering price of $0.08 per unit, the
offering raised $234,000 from eleven persons, each of whom is a Selling
Stockholder and some of whom are relatives or affiliates of Akbar Alikhan, who
was an officer and director of the Company from January 1999 until May 1999. The
$0.25 warrants have since been exercised in full, resulting in the issuance of
2,925,000 shares for aggregate consideration of $731,250. The $1.00 warrants
have not yet been exercised, and the shares underlying those warrants are
included in the Registration Statement of which this Prospectus is a part.
In January 1999, the Company acquired all of the equity interests in INB
from two persons, one of whom was Stephen Brown, the founder of INB and a
director and executive officer of Entertainment Boulevard (the "INB
Acquisition"). In connection with the INB Acquisition, the Company issued
1,000,000 shares of Common Stock to the two equity owners (500,000 of which went
to Stephen Brown) and the Company and the owners of INB entered into a written
agreement in which they provided various representations, warranties and
covenants to each other. In addition, the Company issued 1,600,000 shares of
Common Stock to 44 persons in cancellation of INB's indebtedness to them (the
"INB Debtholders"). The predecessor of INB was founded by Stephen Brown in April
1997.
Stephen Brown has entered into an employment agreement with the Company, as
described under "Management--Employment Arrangements." In addition, Mr. Brown
has previously been granted options to acquire 50,000 shares of Common Stock
under the Option Plan.
In July 1999, in order to resolve certain disputes between them (including
disputes arising in connection with the INB Acquisition), the Company, Akbar
Alikhan (a former officer and director of the Company), Stephen Brown, Arthur
Brown (a director of the Company) and Rizman Alikhan (the son of Akbar Alikhan)
entered into a settlement agreement pursuant to which, among other things,
(i) Arthur Brown and Akbar Alikhan made an unsecured loan of $400,000 to the
Company at 8.0% annual interest, (ii) the Company loaned $400,000 to Stephen
Brown for five years, payable without interest, (iii) the Company issued
warrants to Stephen Brown and the INB Debtholders allowing them to purchase up
to 1,900,000 shares of Common Stock for $1.00 per share until August 1, 2004
(with warrants for 1,500,000 of those shares allocated to Mr. Brown) and
(iv) the parties granted mutual releases to each other. All of the shares
underlying the foregoing warrants are included in the Registration Statement
filed in connection with this Prospectus.
From time to time, Arthur Brown and Rizman Alikhan have made unsecured loans
to the Company. Such loans have been the subject of litigation, as described in
"Entertainment Boulevard's Business--Legal Proceedings." The outstanding balance
of those loans is currently approximately $260,000 and bears interest at 8% per
year and is due January 31, 2000.
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<PAGE>
Debbi Gilson, Entertainment Boulevard's Secretary, has been granted options
under the Option Plan to purchase up to 100,000 shares of Common Stock at $1.00
per share. Those options are fully vested and are exercisable over a five-year
term.
On September 3, 1999, H.A.A. Inc., Lowen Holdings and Beestons Investment
Ltd. purchased all of the Company's outstanding Series A Preferred Stock in a
transaction described in "Recent Developments--Sale of Series A Preferred
Stock." Prior to that purchase, Beestons Investment Ltd. loaned $250,000 to the
Company at an interest rate of 10% per year. In connection with that loan,
Beestons Investment Ltd. was issued 75,000 shares of Common Stock. The loan has
since been repaid.
On November 12, 1999, H.A.A. Inc. and Beestons Investment Ltd. loaned an
aggregate of $500,000 to the Company in a transaction described in "Recent
Developments--Short Term Loan."
DESCRIPTION OF OUR SECURITIES
The following description is a summary of our securities and selected
provisions of our Articles of Incorporation and Bylaws and is qualified in its
entirety by reference to such documents and Nevada law.
COMMON STOCK. Our Articles of Incorporation authorize the issuance of up to
50,000,000 shares of Common Stock, $0.001 par value per share. As of the date of
this Prospectus, 12,452,500 shares of our Common Stock are issued and
outstanding. On all matters submitted to a vote of the stockholders, each holder
of Common Stock which was designated at issuance as having voting rights has the
right to one vote for each share held of record. Subject to preferences that
apply to our Series A Preferred Stock and may be applicable to any other
Preferred Stock that may be outstanding in the future, holders of our Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of Entertainment Boulevard, holders of
our Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preferences of any outstanding shares
of Preferred Stock. Holders of our Common Stock have no preemptive rights and no
right to convert their Common Stock into any other securities, and there are no
redemption or sinking fund provisions applicable to our Common Stock. Pursuant
to our Articles of Incorporation, one-third of the votes cast on any matter by a
stockholder voting group will constitute a quorum of that voting group for
action on that matter by the stockholders.
Nevada law does not require stockholder approval for the issuance of
authorized but unissued shares of common stock. Such issuances may be for a
variety of corporate purposes, including future private and public offerings to
raise additional capital or to facilitate corporate acquisitions.
PREFERRED STOCK. Our Articles of Incorporation also authorize the issuance
of up to 1,000,000 shares of Preferred Stock. As of the date of this Prospectus,
we have authorized the issuance of up to 10,000 shares of Series A Preferred
Stock, of which 2,000 shares are presently issued and outstanding and 2,000 more
are expected to be issued in the near future. See "Recent Developments." Each
share of Series A Preferred Stock bears cumulative annual dividends equal to
8.0% of its "Stated Value" (presently $1,000 per share), payable on the last day
of February and August of each year, commencing on February 29, 2000. Dividends
are payable in cash or by a specified increase in the Stated Value. Each share
of Series A Preferred Stock also has a liquidation preference equal to its
Stated Value and ranks senior to our Common Stock with respect to dividend and
liquidation payments. As described above in "Dividend Policy," we are restricted
in the payment of dividends so long as any Series A Preferred Stock is
outstanding. Except as otherwise required by Nevada law, holders of Series A
Preferred Stock have the right to vote with the Common Stock on all matters in
which holders of Common Stock have the right to vote. In addition, approval of
66 2/3% of the outstanding Series A Preferred Stock is required before we can
take certain actions which could affect the Series A Preferred Stock. Subject to
certain limitations, all shares of Series A Preferred Stock are convertible, at
47
<PAGE>
the holder's option, into shares of Common Stock at a specified Conversion Price
(presently yielding 554.91 shares of Common Stock for each share of Series A
Preferred Stock). In addition, beginning September 3, 2002, or earlier if the
Series A Preferred Stock maintains a value of $6.00 per share or greater for a
specified time period, we have the right to cause all outstanding shares of
Series A Preferred Stock to be converted at the Conversion Price then in effect.
In the event that the effectiveness of the Registration Statement filed in
connection with this Prospectus is not maintained as agreed upon, the applicable
Conversion Price for each share of Series A Preferred Stock is subject to
decrease pursuant to an agreed upon formula, up to a specified limit. See "Risk
Factors--Variation in Series A Preferred Stock Conversion Rate." All of the
outstanding shares of Series A Preferred Stock are fully paid and
non-assessable, and the shares of Common Stock to be issued upon conversion of
the Series A Preferred Stock will be, when so issued, fully paid and
non-assessable. All of the shares of Common Stock into which the outstanding
shares of Series A Preferred are convertible are being registered pursuant to
the Registration Statement filed in connection with this Prospectus.
Except as described in "Recent Developments," we currently have no plans to
issue any additional shares of Preferred Stock. The Board of Directors does,
however, have the authority, without action by the stockholders, to issue all or
any portion of the authorized but unissued Preferred Stock in one or more series
and to determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series. Such Preferred Stock, if and
when issued, may carry rights superior to those of the Common Stock.
We consider it desirable to have Preferred Stock available to provide
increased flexibility in structuring possible future financings and in meeting
corporate needs which may arise. If opportunities arise that would make it
desirable to issue Preferred Stock through either public offerings or private
placements, the provision for Preferred Stock in our Articles of Incorporation
would avoid the possible delay and expense of a stockholders' meeting, except as
may be required by law or regulatory authorities. Issuance of the Preferred
Stock could result, however, in a series of securities outstanding that would
have certain preferences with respect to dividends and liquidation over our
Common Stock which would result in dilution of the income per share and net book
value of the Common Stock. Issuance of additional Common Stock pursuant to any
conversion right which may be attached to the terms of any series of Preferred
Stock may also result in the dilution of the net income per share and the net
book value of the Common Stock. The specific terms of any series of Preferred
Stock will depend primarily on market conditions, terms of a proposed
acquisition or financing, and other factors existing at the time of issuance.
Furthermore, it is not possible at this time to determine in what respect a
particular series of Preferred Stock will be superior to our Common Stock or any
other series of Preferred Stock which we may issue. The Board of Directors does
not intend to issue any additional Preferred Stock except on terms which it
deems to be in the best interest of Entertainment Boulevard and its
stockholders.
WARRANTS AND OPTIONS. To date, we have issued warrants representing the
right to purchase up to 5,075,000 shares of our Common Stock at exercise prices
of $1.00 or $2.00 per share. The expiration dates of those warrants range from
one year after the date of this Prospectus to September 2, 2004. All of the
shares of Common Stock underlying those warrants are being registered pursuant
to the Registration Statement filed in connection with this Prospectus.
In addition to options granted under the Option Plan, we have also granted
an option to purchase 50,000 shares of Common Stock for $6.00 per share through
August 2, 2002.
The exercise price of our warrants and options was determined by negotiation
and should not be construed to imply that any price increases in our securities
will occur. We have reserved from Entertainment Boulevard's authorized but
unissued shares a sufficient number of shares of Common Stock for issuance upon
the exercise of those warrants and options.
48
<PAGE>
The warrants and options do not confer upon the holder any voting or other
rights of a stockholder of the Company. Among other things, the warrants and
options provide for customary anti-dilution provisions in the event of certain
events, which may include mergers, consolidations, reorganizations,
recapitalizations, stock dividends, stock splits and other changes in our
capital structure.
The foregoing is a summary of the terms generally applicable to the warrants
and options outstanding as of the date of this Prospectus. The terms of the
individual warrants and options may vary according to negotiations between us
and the various holders.
REGISTRATION RIGHTS GRANTED BY THE COMPANY. The holders of outstanding
warrants, options and shares of Series A Preferred Stock and certain convertible
promissory notes have various registration rights with respect to the underlying
Common Stock. The Selling Stockholders are participating in this offering as a
result of those registration rights.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for our
Common Stock is American Securities Transfer & Trust, Inc., located in Denver,
Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
If the maximum number of shares offered under this Prospectus are issued,
22,097,500 shares of our Common Stock will be outstanding. Of that number, all
but 2,600,000 shares will be freely tradable without restriction or further
registration under the Securities Act, unless purchased or held by our
"affiliates," as defined in Rule 144 of the Securities Act ("Rule 144"). The
remaining 2,600,000 shares will be restricted as to resale (the "Restricted
Shares"). In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least one year
(including the holding period of any prior owner except an affiliate of
Entertainment Boulevard) will be entitled to sell within any three-month period
a number of shares that does not exceed the greater of: (i) one percent of the
number of shares of Common Stock then outstanding (which equals approximately
123,000 shares as of the date of this Prospectus); or (ii) the average weekly
trading volume of the Common Stock on the OTCBB during the four calendar weeks
preceding the filing of a notice on Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about
Entertainment Boulevard. Under Rule 144(k), a person who is not deemed to have
been an affiliate of Entertainment Boulevard at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owner except
an affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of
Rule 144. The 1,500,000 shares of Common Stock obtainable by Stephen Brown upon
the exercise of warrants are subject to a "lock-up agreement." Pursuant to that
agreement, Mr. Brown has agreed that he will not sell or otherwise transfer his
shares until after May 30, 2000 without the prior consent of the purchasers of
the Series A Preferred Stock.
49
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the persons or entities which are offering
their shares of Common Stock pursuant to this Prospectus, and the number of
shares of Common Stock being offered by such Selling Stockholder:
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE SHARES OWNED AFTER THE
OFFERING OFFERING
NUMBER OF ------------------------- ------------------------
SELLING STOCKHOLDER SHARES OFFERED NUMBER(1) PERCENT(2) NUMBER(1) PERCENT(2)
- ------------------- -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Stephen Brown(3).................. 1,500,000 2,050,000 14.6% 550,000 3.9%
Farida Alikhan(4)................. 312,500 312,500 2.4% -0- N/A
Rochford Young.................... 50,000 110,000 (5) 60,000 (5)
Rohail Alikhan.................... 312,500 325,000 2.5% 12,500 (5)
Loretta Harty..................... 312,500 325,000 2.5% 12,500 (5)
Ray Longstaff..................... 312,500 312,500 2.4% -0- N/A
531287 BC Ltd..................... 187,500 187,500 1.5% -0- N/A
RAK Enterprises................... 187,500 187,500 1.5% -0- N/A
Oughton York Holdings............. 312,500 312,500 2.4% -0- N/A
Brunswick Ltd..................... 312,500 312,500 2.4% -0- N/A
Ray Alikhan....................... 312,500 380,000 3.0% 67,500 (5)
Raaheen Alikhan................... 312,500 325,000 2.5% 12,500 (5)
Latymer Investments Limited....... 146,640 581,978 4.6% 435,338 3.5%
Simon Ford........................ 50,000 166,059 1.3% 116,059 (5)
Elizabeth Bradley................. 69,610 259,610 2.1% 190,000 1.5%
Marionette Limited................ 34,000 296,529 2.4% 262,529 2.1%
David Ruellan..................... 12,000 84,533 (5) 72,533 (5)
Pauline Phillips.................. 12,000 77,225 (5) 65,225 (5)
Anthony Phillips.................. 12,000 51,857 (5) 39,857 (5)
Michael Clinton................... 8,000 47,826 (5) 39,826 (5)
Christopher Wilkinson............. 5,000 18,470 (5) 13,470 (5)
Sorciere Limited.................. 5,000 26,104 (5) 21,104 (5)
Colin Campbell.................... 5,750 37,776 (5) 32,026 (5)
Anthony Goldsmith................. 4,000 30,378 (5) 26,378 (5)
Paul Wood......................... 3,500 25,181 (5) 21,681 (5)
Graham Wedlake.................... 3,000 31,888 (5) 28,888 (5)
William Healey.................... 3,000 21,688 (5) 18,688 (5)
Anthony Cartmell.................. 2,250 13,457 (5) 11,207 (5)
Philip Wylie...................... 2,000 15,214 (5) 13,214 (5)
Carol McKearney................... 500 5,526 (5) 5,026 (5)
Jonathan Steel.................... 2,000 10,418 (5) 8,418 (5)
Derwent Jeffrey................... 250 1,886 (5) 1,636 (5)
Henrik Hansen..................... 2,250 14,276 (5) 12,026 (5)
Peter Thomson-Smith............... 2,000 14,370 (5) 12,370 (5)
R.A.M. Williams................... 1,500 18,704 (5) 17,204 (5)
William Mills..................... 1,500 11,387 (5) 9,887 (5)
John Trotter...................... 1,250 10,252 (5) 9,002 (5)
Nick Ivey......................... 1,250 10,252 (5) 9,002 (5)
John Craig........................ 1,250 10,252 (5) 9,002 (5)
Alan Quarterman................... 1,000 7,229 (5) 6,229 (5)
John Barkhan...................... 1,000 7,605 (5) 6,605 (5)
Michael Wainright................. 1,000 7,605 (5) 6,605 (5)
Jeffrey Worboys................... 1,000 7,605 (5) 6,605 (5)
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE SHARES OWNED AFTER THE
OFFERING OFFERING
NUMBER OF ------------------------- ------------------------
SELLING STOCKHOLDER SHARES OFFERED NUMBER(1) PERCENT(2) NUMBER(1) PERCENT(2)
- ------------------- -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
John Grieves...................... 1,000 10,629 (5) 9,629 (5)
Lawrence Olsen.................... 1,250 10,958 (5) 9,708 (5)
Peter Krause...................... 1,000 7,229 (5) 6,229 (5)
Industrial Maintenance Group,
Ltd............................. 500 3,781 (5) 3,281 (5)
Joanne Chandra.................... 250 3,235 (5) 2,985 (5)
William Waters.................... 500 3,781 (5) 3,281 (5)
Clive Taylor...................... 500 500 (5) -0- N/A
Rev. Bonita Appleton.............. 500 3,781 (5) 3,281 (5)
Stephen S. McKeag(6).............. 15,000 265,000 2.1% 250,000 2.0%
John McKeag....................... 7,500 7,500 (5) -0- N/A
Dominick Gullemot................. 7,500 7,500 (5) -0- N/A
Richard Sandfer................... 7,500 7,500 (5) -0- N/A
Robb Peck McCooey Clearing
Corporation(7).................. 250,000 250,000 2.0% -0- N/A
H.A.A. Inc.(8)(9)(10)............. 1,707,000 1,707,000 12.1% -0- N/A
Lowen Holdings(8)(10)............. 648,000 648,000 4.9% -0- N/A
Beestons Investment
Ltd.(8)(9)(10).................. 2,430,000 2,430,000 16.5% -0- N/A
</TABLE>
- ------------------------
(1) Includes the following as to the person specified: Stephen Brown--exercise
of warrant for 1,500,000 shares and exercise of option for 50,000 shares;
Farida Alikhan--exercise of warrant for 312,500 shares; Rochford
Young--exercise of warrant for 50,000 shares; Rohail Alikhan--exercise of
warrant for 312,500 shares; Loretta Harty--exercise of warrant for 312,500
shares; Ray Longstaff--exercise of warrant for 312,500 shares; 531287 BC
Ltd.--exercise of warrant for 187,500 shares; RAK Enterprises--exercise of
warrant for 187,500 shares; Oughton York Holdings--exercise of warrant for
312,500 shares; Brunswick Ltd.--exercise of warrant for 312,500 shares; Ray
Alikhan--exercise of warrant for 312,500 shares; Raaheen Alikhan--exercise
of warrant for 312,500 shares; Latymer Investments Limited--exercise of
warrant for 146,640 shares; Simon Ford--exercise of warrant for
50,000 shares; Elizabeth Bradley--exercise of warrant for 69,610 shares;
Marionette Limited--exercise of warrant for 34,000 shares; David Ruellan,
Pauline Phillips and Anthony Phillips--exercise of warrants for
12,000 shares each; Michael Clinton--exercise of warrant for 8,000 shares;
Christopher Wilkinson and Sorciere Limited--exercise of warrants for
5,000 shares each; Colin Campbell--exercise of warrant for 5,750 shares;
Anthony Goldsmith--exercise of warrant for 4,000 shares; Paul Wood--exercise
of warrant for 3,500 shares; Graham Wedlake and William Healey--exercise of
warrants for 3,000 shares each; Anthony Cartmell and Henrik Hansen--exercise
of warrants for 2,250 shares each; Philip Wylie, Peter Thomson-Smith and
Jonathan Steel--exercise of warrants for 2,000 shares each; R.A.M. Williams
and William Mills--exercise of warrants for 1,500 shares each; John Trotter,
Nick Ivey, John Craig and Lawrence Olsen--exercise of warrants for
1,250 shares each; Alan Quarterman, John Barkhan, Michael Wainright, Jeffrey
Worboys, John Grieves and Peter Krause--exercise of warrants for
1,000 shares each; Carol McKearney, Industrial Maintenance Group Ltd.,
William Waters, Clive Taylor and Rev. Bonita Appleton--exercise of warrants
for 500 shares each; Derwent Jeffrey and Joanne Chandra--exercise of
warrants for 250 shares each; Stephen S. McKeag--exercise of options for
250,000 shares; and Robb Peck McCooey Clearing Corporation--exercise of
warrant for 250,000 shares.
(2) Calculated for each Selling Stockholder based on 12,452,500 shares of Common
Stock presently outstanding plus the shares specified for that person in
footnotes (1) , (9) and (10).
51
<PAGE>
(3) Mr. Brown is an officer, director and major stockholder of Entertainment
Boulevard. See "Management," "Principal Stockholders" and "Certain
Transactions and Relationships."
(4) This Selling Stockholder has previously loaned money to Entertainment
Boulevard.
(5) Indicates less than one percent of the total outstanding Common Stock.
(6) Mr. McKeag is a consultant to Entertainment Boulevard.
(7) This entity currently provides investment banking services to Entertainment
Boulevard and has a two-year right to appoint a designee to serve on
Entertainment Boulevard's Board of Directors. See "Recent Developments--Sale
of Series A Preferred Stock."
(8) This entity is a principal stockholder of Entertainment Boulevard and has
various other relationships with the Company. See "Recent Developments,"
"Principal Stockholders" and "Certain Transactions and Relationships."
(9) Includes the following as to the person specified: H.A.A. Inc.--conversion
of promissory note for 125,000 shares; and Beestons Investment
Ltd.--conversion of promissory note for 125,000 shares.
(10) Amounts shown assume the following: (i) sale of an additional 2,000 shares
of Series A Preferred Stock, allocated 700 shares to H.A.A. Inc., 300 shares
to Lowen Holdings and 1,000 shares to Beestons Investment Ltd., (ii)
conversion of 1,400 shares of Series A Preferred Stock held by H.A.A. Inc.
into a maximum of 1,512,000 shares, (iii) conversion of 600 shares of
Series A Preferred Stock held by Lowen Holdings into a maximum of
648,000 shares and (iv) conversion of 2,000 shares of Series A Preferred
Stock held by Beestons Investment Ltd. into a maximum of 2,160,000 shares.
See "Description of Our Securities--Preferred Stock."
PLAN OF DISTRIBUTION
We are registering the Common Stock on behalf of the Selling Stockholders.
As used in this Prospectus, the term "Selling Stockholders" includes donees and
pledgees selling Common Stock that they received from a named Selling
Stockholder after the date of this Prospectus. Each Selling Stockholder is free
to offer and sell his, her or its shares of Common Stock at such times, in such
manner and at such prices as the Selling Stockholder shall determine. Such
Common Stock may be offered by the Selling Stockholders in one or more types of
transactions, which may or may not involve brokers, dealers or cash
transactions. The Selling Stockholders may also use Rule 144 under the
Securities Act to sell their Common Stock, if they meet the criteria and conform
to the requirements of such Rule.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of Common Stock by the Selling Stockholders. The Selling
Stockholders have advised us that sales of Common Stock may be effected from
time to time by the following means:
- transactions in the OTCBB, including block transactions;
- negotiated transactions;
- through the writing of options on the Common Stock; and
- a combination of the above methods of sale at fixed prices (which may be
changed), at market prices prevailing at the time of sale, or at
negotiated prices
The Selling Stockholders may effect such transactions by selling Common
Stock directly to purchasers or to or through broker-dealers which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders.
52
<PAGE>
The Selling Stockholders and any broker-dealers that act in connection with
the sale of their Common Stock may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
them and any profit on the resale of the Common Stock as principal may be deemed
to be underwriting discounts and commissions under the Securities Act. The
Selling Stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. Because
Selling Stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, they will be subject to Prospectus delivery
requirements under the Securities Act. Furthermore, in the event of a
distribution of his, her or its Common Stock, any Selling Stockholder, any
selling broker-dealer and any affiliated purchasers may be subject to Regulation
M which prohibits any "stabilizing bid" or "stabilizing purchase" for the
purpose of pegging, fixing or stabilizing the price of the Common Stock in
connection with that distribution.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for us by our counsel, Richman, Lawrence, Mann, Chizever & Phillips, Beverly
Hills, California.
EXPERTS
Our consolidated financial statements for the year ended December 31, 1998
and the periods from April 1, 1997 (inception) to December 31, 1997 and 1998,
which appear in this Prospectus beginning at page F-1, have been audited by
Singer Lewak Greenbaum & Goldstein LLP, independent certified public
accountants, as set forth in their report thereon appearing at page F-2 of this
Prospectus (which report includes an explanatory paragraph regarding our ability
to continue as a going concern). Such report is given on the authority of that
firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement with the SEC on Form SB-2 relating to
the shares offered by this Prospectus. This Prospectus does not contain all of
the information included in the Registration Statement. The information
contained in this Prospectus is current as of the date it was filed with the
SEC. Please note that the statements made in this Prospectus regarding the
contents of any contract or other document are not necessarily complete, and you
may examine a copy of that contract or other document to the extent that it has
been filed as an exhibit to the Registration Statement. All statements about
those contracts or other documents in this Prospectus are qualified in their
entirety by referring you to the exhibits to the Registration Statement.
For further information regarding Entertainment Boulevard and its Common
Stock, reference is made to the Registration Statement and the exhibits thereto.
You may read and copy the Registration Statement and any other document we file
at the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The SEC also maintains a Web site at WWW.SEC.GOV
that contains registration statements and other information regarding companies
(including Entertainment Boulevard) that file electronically with the SEC. As a
result, the Registration Statement is available at that site as well. Our Common
Stock is quoted in the Over-the-Counter Bulletin Board.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements. We will
also file annual and quarterly reports, as well as proxy statements and other
information, with the SEC. Such reports, proxy statements and other information
can be inspected and copied at the SEC's public reference rooms and Web site, as
described above.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Deficit.......... F-5
Consolidated Statements of Cash Flows..................... F-6 - F-8
Notes to Consolidated Financial Statements................ F-9 - F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Entertainment Boulevard, Inc.
We have audited the accompanying consolidated balance sheet of Entertainment
Boulevard, Inc. and subsidiary (a development stage company) as of December 31,
1998, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the year then ended, and for the periods from
April 1, 1997 (inception) to December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Entertainment Boulevard, Inc. and subsidiary as of December 31, 1998, and the
results of its operations and its cash flows for the year then ended, and for
the periods from April 1, 1997 (inception) to December 31, 1998 and 1997 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the year
ended December 31, 1998 and the period from April 1, 1997 (inception) to
December 31, 1997, the Company incurred net losses of $1,435,153 and $649,626,
respectively. In addition, the Company's net cash used in operating activities
was $1,300,205 and $587,591, respectively, for the year ended December 31, 1998
and the period from April 1, 1997 (inception) to December 31, 1997, and the
Company's accumulated deficit was $2,084,779 as of December 31, 1998. Recovery
of the Company's assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's transition,
ultimately, to the attainment of profitable operations is dependent upon
obtaining adequate financing to fulfill its development activities and achieving
a level of sales adequate to support the Company's cost structure. These
factors, among others, as discussed in Note 2 to the consolidated financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
July 16, 1999
F-2
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 553,673 $200,072
Accounts receivable....................................... 12,715 --
Prepaid expenses.......................................... 75,000 --
---------- --------
Total current assets.................................. 641,388 200,072
NOTE RECEIVABLE--RELATED PARTY.............................. 400,000 --
FURNITURE AND EQUIPMENT, NET................................ 244,860 58,450
INTANGIBLE ASSET, net of accumulated amortization of
$10,000 (unaudited) and $1,344............................ -- 8,656
DEPOSITS.................................................... 103,378 --
---------- --------
TOTAL ASSETS.................................. $1,389,626 $267,178
========== ========
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt........................................... $ 712,907 $ 458,552
Note payable--related party............................... 400,000 --
Accounts payable.......................................... 261,980 46,103
Accrued liabilities....................................... 229,455 128,026
------------ -----------
Total current liabilities............................... 1,604,342 632,681
LONG-TERM DEBT.............................................. -- 852,268
------------ -----------
Total liabilities..................................... 1,604,342 1,484,949
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Series A preferred stock, $0.01 par value
1,000,000 shares authorized
2,000 (unaudited) shares issued and outstanding......... 20 --
Common stock, $0.001 par value
50,000,000 shares authorized
12,312,500 (unaudited) and 7,675,000 shares issued and
outstanding............................................. 12,313 7,675
Deferred compensation..................................... (27,025) --
Additional paid-in capital................................ 11,458,458 859,333
Deficit accumulated during the development stage.......... (11,658,482) (2,084,779)
------------ -----------
Total stockholders' deficit........................... (214,716) (1,217,771)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT......... $ 1,389,626 $ 267,178
============ ===========
</TABLE>
F-3
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE FOR THE PERIOD FROM PERIOD FROM
NINE NINE APRIL 1, APRIL 1,
MONTHS MONTHS FOR THE 1997 1997
ENDED ENDED YEAR ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE........................ $ 12,715 $ -- $ -- $ -- $ --
----------- ---------- ----------- ---------- -----------
OPERATING EXPENSES
Compensation expense......... 2,201,026 531,108 708,145 415,385 1,123,530
Consulting expense........... 196,250 -- -- -- --
Depreciation and
amortization............... 39,694 7,573 20,089 2,765 22,854
Other operating expense...... 1,814,958 366,414 703,164 231,476 934,640
----------- ---------- ----------- ---------- -----------
Total operating expenses....... 4,251,928 905,095 1,431,398 649,626 2,081,024
----------- ---------- ----------- ---------- -----------
LOSS FROM OPERATIONS........... (4,239,213) (905,095) (1,431,398) (649,626) (2,081,024)
----------- ---------- ----------- ---------- -----------
OTHER EXPENSE
Interest expense............. (37,690) -- (3,755) -- (3,755)
Financing costs.............. (5,296,800) -- -- -- --
----------- ---------- ----------- ---------- -----------
Total other expense........ (5,334,490) -- (3,755) -- (3,755)
----------- ---------- ----------- ---------- -----------
NET LOSS....................... $(9,573,703) $ (905,095) $(1,435,153) $ (649,626) $(2,084,779)
=========== ========== =========== ========== ===========
BASIC AND DILUTED LOSS PER
SHARE........................ $ (0.82) $ (0.19) $ (0.30) $ (0.59) $ (0.65)
=========== ========== =========== ========== ===========
WEIGHTED-AVERAGE SHARES
OUTSTANDING.................. 11,687,086 4,750,000 4,814,286 1,109,124 3,225,430
=========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
------------------- ---------------------- DEFERRED PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT COMPENSATION CAPITAL STAGE
-------- -------- ----------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1997
(INCEPTION)................. -- $ -- -- $ -- $ -- $ -- $ --
CAPITALIZATION OF
INTERNATIONAL NET
BROADCASTING, LLC........... 1,000,000 1,000 (900)
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 3,700,000 3,700 30,475
STOCK ISSUED IN CONNECTION
WITH MINERAL RIGHTS......... 50,000 50 (50)
CAPITAL CONTRIBUTIONS......... 88,500
NET LOSS...................... (649,626)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, DECEMBER 31, 1997.... -- -- 4,750,000 4,750 -- 118,025 (649,626)
CAPITAL CONTRIBUTIONS......... 533,000
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 2,925,000 2,925 208,308
NET LOSS...................... (1,435,153)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, DECEMBER 31, 1998.... -- -- 7,675,000 7,675 -- 859,333 (2,084,779)
WARRANTS
EXERCISED(unaudited)........ 2,925,000 2,925 728,325
STOCK OPTIONS ISSUED TO
VENDORS (unaudited)......... 196,250
STOCK OPTIONS ISSUED AS
COMPENSATION (unaudited).... $ $ $(27,025) $ 130,732 $
CONVERSION OF LONG-TERM DEBT
(unaudited)................. 1,600,000 1,600 850,668
WARRANTS ISSUED TO EXECUTIVE
FOR
COMPENSATION(unaudited)..... 1,780,500
WARRANTS ISSUED TO DEBT
HOLDERS (unaudited)......... 474,800
FINANCING COSTS ON CONVERSION
OF LONG-TERM DEBT
(unaudited)................. 4,597,000
STOCK-BASED INTEREST ON BRIDGE
FINANCING(unaudited)........ 112,500 113 224,887
PREFERRED STOCK SALE
(unaudited)................. 2,000 20 1,999,980
OFFERING COSTS ON PLACEMENTS
AND WARRANTS (unaudited).... (384,017)
NET LOSS (unaudited).......... (9,573,703)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, SEPTEMBER 30,
1999(unaudited)............. 2,000 $ 20 $12,312,500 $12,313 $(27,025) $11,458,458 $(11,658,482)
===== ==== =========== ======= ======== =========== ============
<CAPTION>
TOTAL
-----------
<S> <C>
BALANCE, APRIL 1, 1997
(INCEPTION)................. $ --
CAPITALIZATION OF
INTERNATIONAL NET
BROADCASTING, LLC........... 100
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 34,175
STOCK ISSUED IN CONNECTION
WITH MINERAL RIGHTS......... --
CAPITAL CONTRIBUTIONS......... 88,500
NET LOSS...................... (649,626)
-----------
BALANCE, DECEMBER 31, 1997.... (526,851)
CAPITAL CONTRIBUTIONS......... 533,000
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 211,233
NET LOSS...................... (1,435,153)
-----------
BALANCE, DECEMBER 31, 1998.... (1,217,771)
WARRANTS
EXERCISED(unaudited)........ 731,250
STOCK OPTIONS ISSUED TO
VENDORS (unaudited)......... 196,250
STOCK OPTIONS ISSUED AS
COMPENSATION (unaudited).... $ 103,707
CONVERSION OF LONG-TERM DEBT
(unaudited)................. 852,268
WARRANTS ISSUED TO EXECUTIVE
FOR
COMPENSATION(unaudited)..... 1,780,500
WARRANTS ISSUED TO DEBT
HOLDERS (unaudited)......... 474,800
FINANCING COSTS ON CONVERSION
OF LONG-TERM DEBT
(unaudited)................. 4,597,000
STOCK-BASED INTEREST ON BRIDGE
FINANCING(unaudited)........ 225,000
PREFERRED STOCK SALE
(unaudited)................. 2,000,000
OFFERING COSTS ON PLACEMENTS
AND WARRANTS (unaudited).... (384,017)
NET LOSS (unaudited).......... (9,573,703)
-----------
BALANCE, SEPTEMBER 30,
1999(unaudited)............. $ (214,716)
===========
</TABLE>
F-5
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE NINE FOR THE NINE PERIOD FROM PERIOD FROM
MONTHS MONTHS FOR THE YEAR APRIL 1, 1997 APRIL 1, 1997
ENDED ENDED ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss....................... $(9,573,703) $(905,095) $(1,435,153) $(649,626) $(2,084,779)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation and
amortization............... 39,694 7,573 20,089 2,765 22,854
Non-cash compensation........ 1,884,207 -- -- -- --
Financing charges............ 5,296,800 -- -- -- --
Stock options issued to
vendors.................... 196,250 -- -- -- --
Increase in
Accounts receivable.......... (12,715) -- -- -- --
Prepaid expenses............. (75,000) -- -- -- --
Deposits..................... (103,378) -- -- -- --
Increase (decrease) in
Accounts payable............. 215,877 (2,842) 25,558 20,545 46,103
Accrued liabilities.......... 101,429 50,125 89,301 38,725 128,026
----------- --------- ----------- --------- -----------
Net cash used in operating
activities................... (2,030,539) (850,239) (1,300,205) (587,591) (1,887,796)
----------- --------- ----------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of furniture and
equipment.................. $ (217,448) $ (32,060) $ (64,410) $ (15,550) $ (79,960)
Purchase of mineral rights... -- -- -- (10,000) (10,000)
----------- --------- ----------- --------- -----------
Net cash used in investing
activities................... (217,448) (32,060) (64,410) (25,550) (89,960)
----------- --------- ----------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from short-term
debt....................... 1,069,355 66,750 432,302 -- 432,302
Payments on short-term
debt....................... (815,000) -- -- -- --
Long-term debt............... -- 363,744 389,994 488,524 878,518
Capital contributions........ -- 459,000 533,000 88,600 621,600
Proceeds from private
placement.................. 2,000,000 -- 234,000 34,175 268,175
</TABLE>
F-6
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE NINE FOR THE NINE PERIOD FROM PERIOD FROM
MONTHS MONTHS FOR THE YEAR APRIL 1, 1997 APRIL 1, 1997
ENDED ENDED ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Proceeds from execution of
warrants................... 731,250 -- -- -- --
Offering costs............... (384,017) -- (22,767) -- (22,767)
----------- --------- ----------- --------- -----------
Net cash provided by financing
activities................... 2,601,588 889,494 1,566,529 611,299 2,177,828
----------- --------- ----------- --------- -----------
Net increase (decrease) in
cash......................... $ 353,601 $ 7,195 $ 201,914 $ (1,842) $ 200,072
CASH (BOOK OVERDRAFT),
BEGINNING OF PERIOD.......... 200,072 -- (1,842) -- --
----------- --------- ----------- --------- -----------
CASH (BOOK OVERDRAFT), END OF
PERIOD....................... $ 553,673 $ 7,195 $ 200,072 $ (1,842) $ 200,072
=========== ========= =========== ========= ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
INTEREST PAID................ $ 4,166 $ -- $ -- $ -- $ --
=========== ========= =========== ========= ===========
INCOME TAXES PAID.............. $ -- $ -- $ -- $ -- $ --
=========== ========= =========== ========= ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the period from April 1, 1997 (inception) to December 31, 1997, the
Company issued 50,000 shares of common stock in exchange for mineral rights.
On January 15, 1999, the Company converted long-term debt of $852,268
(unaudited) to 1,600,000 (unaudited) shares of common stock. In connection with
the conversion, the Company recognized financing costs of $4,597,000 (unaudited)
related to beneficial conversion rates.
During the nine months ended September 30, 1999, the Company issued options
to purchase 250,000 (unaudited) shares of common stock to vendors. The options
were valued at $196,250 (unaudited).
During the nine months ended September 30, 1999, the Company issued stock
options to employees as compensation. Related to these options, the Company has
capitalized deferred compensation of $27,025 (unaudited) and recognized
compensation expense of $103,707(unaudited).
During the nine months ended September 30, 1999, the Company issued 112,500
(unaudited) shares of common stock as interest expense on bridge loans. In
connection with the shares of common stock, the Company recognized financing
charges of $225,000 (unaudited).
F-7
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
On July 14, 1999, the Company issued warrants to purchase 1,500,000
(unaudited) shares of the Company's common stock to its Chief Executive Officer.
In connection with the warrants, the Company recognized compensation expense of
$1,780,500 (unaudited).
On July 14, 1999, the Company issued warrants to purchase 400,000
(unaudited) shares of the Company's common stock to certain debt holders. In
connection with the warrants, the Company recognized financing charges of
$474,800 (unaudited).
F-8
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 1--ORGANIZATION AND LINE OF BUSINESS
International Net Broadcasting was originally founded on April 1, 1997 as a
proprietorship and began to solicit funds from investors in order to establish
an on-line marketplace for entertainment-related products and services. On
September 18, 1998, the proprietorship formed International Net Broadcasting,
LLC ("INB"), a limited liability company and continued operations as such. On
January 15, 1999, 100% of INB was acquired by Sedmet Explorations, Inc.
("Sedmet"), a public shell with substantially no assets (see Note 4). Subsequent
to the acquisition, Sedmet changed its name to Entertainment Boulevard, Inc. The
acquisition has been accounted for as a pooling of interests transaction.
Subsequent to and in connection with the acquisition, certain of INB's debt
was converted to common stock of Entertainment Boulevard, Inc.
Entertainment Boulevard, Inc. remains in the business of providing Internet
distribution of entertainment products and services, as well as the distribution
of certain other infomercial-related merchandise and sports-related information
services. To date, Entertainment Boulevard, Inc. has continued to expend its
resources in the development of its web-based business and has not begun to
generate sales or revenues of a material nature.
NOTE 2--GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 1998, the period from April 1,
1997 (inception) to December 31, 1998, and the nine months ended September 30,
1999 and 1998, the Company incurred losses of $1,435,153, $649,626, $9,573,703
(unaudited), and $905,095 (unaudited), respectively. In addition, the Company's
cash flow requirements have been met by the generation of capital through
private placements of the Company's preferred and common stock and placement of
unsecured debt to investors. No assurance can be given that this source of
financing will continue to be available to the Company and demand for the
Company's equity instruments will be sufficient to meet its capital needs. If
the Company is unable to generate profits and unable to continue to obtain
financing for its working capital requirements, it may have to cease business
altogether.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to retain its current financing,
to obtain additional financing, and ultimately to attain profitability.
To meet these objectives, the Company expects to complete an additional
$2,000,000 private placement of preferred equity in early 2000, contingent on
the filing and effectiveness of a Registration
F-9
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 2--GOING CONCERN MATTERS (CONTINUED)
Statement, which management expects will provide sufficient funding to continue
the Company's present operations and support future marketing and development
activities.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Entertainment
Boulevard, Inc. and its wholly-owned subsidiary, INB (collectively, the
"Company"). All significant intercompany accounts have been eliminated.
DEVELOPMENT STAGE ENTERPRISE
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially all of its
present efforts to establish a new business, and its planned principal
operations have not yet commenced. All losses accumulated since inception have
been considered as part of the Company's development stage activities.
INTERIM UNAUDITED FINANCIAL INFORMATION
The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management, are necessary to fairly state the Company's financial
position, the results of operations, and cash flows for the periods presented.
The results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of results for the entire fiscal year ending
December 31, 1999.
CASH
Cash consists primarily of cash in banks. Deposits at the banks are insured
by the Federal Deposit Insurance Corporation up to $100,000. As of December 31,
1998 and September 30, 1999, uninsured portions of the balance totaled
approximately $102,000 and $450,700 (unaudited), respectively.
INTANGIBLE ASSET
Intangible asset represents the rights to certain mining and related leases
(see Note 9) and has been accounted for at cost. As of September 30, 1999, the
rights were fully amortized (unaudited).
INCOME TAXES
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income
F-10
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting
amounts at each period end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The provision for
income taxes represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
REVENUE RECOGNITION
From time to time, the Company enters into non-cash barter arrangements with
other Internet service providers. These contracts are considered immaterial and
as such, have not been recorded on the Company's financial statements.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported
primary and fully diluted loss per share with basic and diluted loss per share.
Unlike primary loss per share, basic loss per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted loss per share
is very similar to the previously reported fully diluted loss per share. Basic
loss per share is computed using the weighted-average number of common shares
outstanding during the period. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive. As such, basic and diluted loss
per share are the same.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash, accounts payable, and accrued liabilities, the
carrying amounts approximate fair value due to their short maturities.
ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
COMPREHENSIVE INCOME
For the period from April 1, 1997 (inception) to December 31, 1998, the
Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting
F-11
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
comprehensive income and its components in a financial statement. Comprehensive
income as defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in comprehensive
income, which are excluded from net income, include foreign currency translation
adjustments and unrealized gains and losses on available-for-sale securities.
Comprehensive income is not presented in the Company's financials statements
since the Company did not have any of the items of comprehensive income in any
period presented.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post-Retirement Benefits." The Company does not expect
adoption of SFAS No. 132 to have a material impact, if any, on its financial
position or results of operations.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for financial statements with fiscal years beginning
after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. This statement is not applicable to
the Company.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," is effective for financial statements with the first fiscal quarter
beginning after December 15, 1998. This statement is not applicable to the
Company.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections," is effective for financial statements with fiscal years beginning
February 1999. This statement is not applicable to the Company.
In June 1999, the FASB issued SFAS No. 136, "Transfer of Assets to a
Not-for-Profit Organization or Charitable Trust that Raises or Holds
Contributions for Others." This statement is not applicable to the Company.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." The Company does not expect adoption of
SFAS No. 137 to have a material impact, if any, on its financial position or
results of operations.
NOTE 4--ACQUISITION OF INTERNATIONAL NET BROADCASTING, LLC ("INB")
On January 15, 1999, the Company exchanged 1,000,000 shares of the Company's
common stock for a 100% interest in INB. INB primarily operates as an Internet
content provider of entertainment-related products.
This transaction has been accounted for as a pooling of interests.
Accordingly, the financial statements for all periods presented have been
restated to include the accounts and operations of INB.
F-12
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 4--ACQUISITION OF INTERNATIONAL NET BROADCASTING, LLC ("INB") (CONTINUED)
The combined entities' separate operating results for the period from April 1,
1997 (inception) to December 31, 1997 and the year ended December 31, 1998 were
as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Net revenues
The Company........................................ $ -- $ --
INB................................................ -- --
----------- ---------
COMBINED....................................... $ -- $ --
=========== =========
Net loss
The Company........................................ $ -- $ (24,175)
INB................................................ (1,435,153) (625,451)
----------- ---------
COMBINED....................................... $(1,435,153) $(649,626)
=========== =========
Net loss per common share
PRIOR TO ACQUISITION............................... $ -- $ (0.17)
----------- ---------
AS RESTATED........................................ $ (0.30) $ (0.59)
=========== =========
</TABLE>
NOTE 5--FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Computer equipment.................................. $284,712 $72,960
Furniture........................................... 12,696 7,000
-------- -------
297,408 79,960
Less accumulated depreciation....................... 52,548 21,510
-------- -------
TOTAL............................................. $244,860 $58,450
======== =======
</TABLE>
NOTE 6--SHORT-TERM DEBT
During the year ended December 31, 1998, the Company received advances from
various investors through short-term, unsecured debt instruments. The advances
bear interest at 8% and are generally due within one year of the original
advance date. Balances on these short-term advances aggregated to $458,552 and
$712,907 (unaudited) at December 31, 1998 and September 30, 1999, respectively,
and accrued interest was $3,755 and $33,524 (unaudited), respectively.
F-13
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 6--SHORT-TERM DEBT (CONTINUED)
From time to time, the Company has borrowed unsecured amounts for working
capital requirements. During the nine months ended September 30, 1999, advances
and repayments of these bridge financings aggregated to $500,000 (unaudited),
none of which were outstanding at September 30, 1999. Associated with these
bridge financings, the Company issued 112,500 (unaudited) shares of its common
stock as interest and recorded $225,000 (unaudited) of interest expense related
to the stock.
NOTE 7--LONG-TERM DEBT
During the development stage, the Company has been funded in part through
the use of long-term advances from various investors located overseas. These
advances, totaling $852,268 at December 31, 1998, bear no interest and have no
stated maturity date. On January 15, 1999, in connection with the acquisition of
the Company by Sedmet, these advances were converted into 1,600,000 shares of
the Company's $0.001 par value common stock. Due to the advances being converted
at a rate below-market to the debt holders, the Company incurred a charge to
earnings for financing costs of $4,597,000 (unaudited). Certain long-term debt
holders were granted 400,000 (unaudited) warrants subsequent and related to the
conversion (see Note 11).
NOTE 8--RELATED PARTY TRANSACTIONS
The Company incurred expenses in the amounts of approximately $520,000 and
$360,000 related to compensation for officers of the Company during the year
ended December 31, 1998 and the period from April 1, 1997 (inception) to
December 31, 1997, respectively. Included in these amounts are consulting fees
and expenses paid on behalf of the officers.
On August 20, 1999 (unaudited), the Company settled a dispute with a major
stockholder by issuing a note payable for $400,000. The note is due on
November 30, 1999 and bears interest at 8% per annum. Related to this
settlement, an officer of the Company signed a non-interest-bearing note
promising to pay $400,000 to the Company. The note receivable is due in
5 years, and management believes it is fully collectible.
NOTE 9--COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its facilities under a non-cancelable lease, which
commenced on September 1, 1999 and expired on August 31, 1999. The lease
requires monthly payments of $3,139 and is renewable at the Company's option.
Rent expense was $36,585, $23,568, $54,932 (unaudited), and $27,167
(unaudited) for the year ended December 31, 1998, the period from April 1, 1997
(inception) to December 31, 1997, and the nine months ended September 30, 1999
and 1998, respectively.
F-14
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
MINING RIGHTS
Prior to the acquisition of INB, the Company entered into an agreement,
whereby the Company assumed all terms and obligations of a twenty-year lease
relating to mining claims in Utah. Under the agreement, the Company is required
to pay a 1% net smelter returns royalty upon commencement of commercial
production. In exchange for the rights, the Company paid $10,000 and issued
50,000 shares of common stock.
Under the lease, the Company is granted the exclusive and irrevocable right
and option to purchase the mining project at any time for $1,000,000, less all
amounts previously paid to the owner and all annual advance minimum royalty
payments, under certain conditions.
Until the lease is terminated or the project purchased, the Company must
complete certain improvements and pay advance minimum royalties in the amount of
$3,000 on or before January 11, 1999, $6,000 on or before January 11, 2000,
$9,000 on or before January 11, 2001, and $12,000 on or before January 11, 2002
and succeeding years. In addition, the Company must pay a 3% net smelter return
starting on the date of commencement of commercial production.
AGREEMENTS
On February 2, 1999 (unaudited), the Company entered into a "Web Access"
service agreement with a worldwide web access provider. The agreement requires
the Company to pay minimum monthly payments through March 2001. Minimum annual
payments required under the agreement are as follows:
<TABLE>
<CAPTION>
YEAR ENDING,
DECEMBER 31,
- ------------
<S> <C>
1999............................................... $31,890
2000............................................... 37,428
2001............................................... 9,357
-------
TOTAL............................................ $78,675
=======
</TABLE>
On July 31, 1999 (unaudited), the Company executed an agreement with an
investor relations firm. The agreement calls for monthly payments in the amount
of $5,000 (unaudited) and an option to purchase 50,000 (unaudited) shares of the
Company's common stock (see Note 12).
LITIGATION
The Company may become involved in various litigation arising in the normal
course of business. Management believes the outcome of such litigation would not
have a material effect on the Company.
F-15
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 10--INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
for federal income taxes consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- ------------
<S> <C> <C>
Deferred tax assets
Operating losses.................................. $1,836,000 $13,000
Temporary differences from stock options.......... 102,000 --
Valuation allowance................................. (1,938,000) (13,000)
---------- -------
NET DEFERRED TAX ASSET.......................... $ -- $ --
========== =======
</TABLE>
Deferred tax assets consisted of net operating loss carryforwards and
temporary differences arising from the issuance of stock options. The operating
losses at September 30, 1999 were approximately $4,600,000 (unaudited) and were
generated during an interim period and as such, may be impacted as a result of
the Company's operations for the remainder of the tax year.
NOTE 11--STOCKHOLDERS' DEFICIT
SERIES A PREFERRED STOCK
On September 3, 1999, the Company sold 2,000 (unaudited) shares of its
Series A $0.01 par value convertible preferred stock for $1,000 (unaudited) per
share. The sale provided for an additional 2,000 (unaudited) shares to be
purchased within 10 days after the effective date of a Registration Statement to
be filed within 60 business days from the initial purchase of securities.
Offering costs associated with the purchase were $277,842 (unaudited), which
consisted of lawyers' fees and placement agent fees. In addition, a warrant for
the purchase of 250,000 (unaudited) shares of the Company's common stock was
issued to the placement agent in connection with the offering. The warrant is
exercisable immediately at $2 per share and expires on September 3, 2004.
The Company's Series A $0.01 par value convertible preferred stock bears an
8% cumulative dividend and is convertible at the option of the holder, 50% after
the 31st day after its original issue and the remaining after the 91st day after
the original issue. The stock is convertible to the Company's common stock at
the stated value ($1,000 per share), plus accumulated, unpaid dividends, divided
by the lesser of (i) $2 per share or (ii) an amount equal to the average per
share market value for the three trading days having the lowest per share market
value during the 30 trading days immediately before the conversion date, subject
to certain adjustments. The conversion price at the date of issue approximated
the fair market value of the Company's common stock. At September 30, 1999, none
of the convertible shares were exercisable.
F-16
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 11--STOCKHOLDERS' DEFICIT (CONTINUED)
COMMON STOCK
During the year ended December 31, 1998, the Company completed a private
placement of the Company's common stock, whereby investors paid $0.08 per share
for one share of common stock, one warrant for the purchase of an additional
share of common stock at $0.25 per share, and one warrant for the purchase of
one share of common stock for $1 per share. In the placement, the Company
generated cash in the amount of $234,000 and issued 2,925,000 shares of common
stock. In connection with the offering, the Company incurred offering costs of
$22,767.
During the year ended December 31, 1998 and the period from April 1, 1997
(inception) to December 31, 1997, an officer of the Company contributed $533,000
and $88,500, respectively, to the Company.
On December 23, 1997, the Company issued 3,700,000 shares of common stock in
a private placement for $34,175.
During the period from April 1, 1997 (inception) to December 31, 1997, the
Company issued 50,000 shares of common stock in connection with the purchase of
certain mineral rights (see Note 9).
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED)
STOCK PURCHASE WARRANTS
In connection with a private placement of its $0.001 par value common stock,
the Company issued warrants to purchase 2,925,000 shares of common stock at
$0.25 per share (see Note 11). Subsequent to December 31, 1998, all of these
warrants were exercised for $731,250 with associated costs of $106,175. In
addition, the Company issued warrants to purchase 2,925,000 shares of common
stock at $1 per share. The warrants are exercisable for a period of one year
from the effective date of the Registration Statement. As of December 31, 1998,
none of these warrants were exercised.
On July 14, 1999, the Company issued warrants to purchase 1,500,000 shares
of the Company's common stock to its Chief Executive Officer. The warrants are
exercisable at $1 per share and expire on August 1, 2004. In connection with the
warrants, the Company recognized $1,780,500 in compensation expense.
On July 14, 1999, the Company issued warrants to purchase 400,000 shares of
the Company's common stock to certain debt holders. The warrants are exercisable
at $1 per share and expire on August 1, 2004. In connection with the warrants,
the Company recognized financing charges of $474,800.
STOCK OPTION PLAN
The Company adopted the 1999 Stock Option Plan (the "1999 Plan") on
February 2, 1999. The purpose of the 1999 Plan is to obtain, retain, and
motivate the best available employees and directors
F-17
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED) (CONTINUED)
by giving them incentives which are linked directly to increases in the value of
the common stock of the Company. Each director, officer, employee, or other
individual as determined by the Board of Directors of the Company is eligible to
be considered for the grant of awards under the 1999 Plan. The maximum number of
shares of common stock that may be issued pursuant to awards granted under the
1999 Plan is 1,000,000. Any shares of common stock subject to an award, which
for any reason expires or terminates unexercised, are again available for
issuance under the 1999 Plan. Under the 1999 Plan, no incentive stock option
will be less than 89% of the fair market value of the shares on the date the
stock option is granted, provided that no employee inventive stock option shall
be granted at an exercise price less than 100% of the fair market value of the
Company's common stock.
STOCK OPTIONS
Stock options were granted during the nine months ended September 30, 1999,
which under certain agreements, allow employees to purchase shares of common
stock, which were issued under the provisions of the 1999 Plan. These options
expire upon certain events and were issued at exercise prices below the trading
value of the Company's underlying common stock. In accordance with generally
accepted accounting principles, the Company has recognized deferred compensation
to the extent of the fair market value the underlying securities over the
exercise price of the stock options. The deferred compensation is being
amortized over the vesting period of the options.
Related to these options, the Company has capitalized deferred compensation
in the amount of $27,025 and recognized compensation expense of $103,707 during
the nine months ended September 30, 1999.
On July 31, 1999, the Company granted an option to purchase 50,000 shares of
the Company's common stock at $6 per share. The option is exercisable
immediately and expires on August 2, 2002. In connection with the option, the
Company charged $5,000 to operations.
On March 26, 1999, the Company issued 25,000 options to purchase common
stock for $1.50 per share to a consultant for services. The options expire in
five years and were immediately vested. In connection with these options, the
Company recognized expense of $38,250.
On March 26, 1999, the Company issued 100,000 options to purchase common
stock at $1.50 per share to a consultant for services. The options expire in
five years and were immediately vested. In connection with these options, the
Company recognized expense of $153,000.
F-18
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED) (CONTINUED)
The following summarizes the Company's stock option transactions:
<TABLE>
<CAPTION>
ALL OPTIONS EMPLOYEE PLAN OTHER OPTIONS
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
OUT- EXERCISE OUT- EXERCISE OUT- EXERCISE
STANDING PRICE STANDING PRICE STANDING PRICE
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING, SEPTEMBER 30, 1999............. 497,000 $1.97 322,000 $1.50 175,000 $2.84
======= ======= =======
EXERCISABLE AT SEPTEMBER 30, 1999........... 360,000 $2.15 185,000 $1.50 175,000 $2.84
======= ======= =======
</TABLE>
The following table summarizes information about the options outstanding at
September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
STOCK OPTIONS STOCK OPTIONS REMAINING
EXERCISE PRICE OUTSTANDING EXERCISABLE CONTRACTUAL LIFE
-------------- ------------- ------------- ----------------
<C> <C> <C> <S>
$1.50 322,000 185,000 10 years
$2.00 125,000 125,000 10 years
$6.00 50,000 50,000 10 years
------- -------
497,000 360,000
======= =======
</TABLE>
NOTE 13--YEAR 2000 ISSUE
The Company is conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the Issue.
The Issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is dependent on computer processing in the conduct of its
business activities.
Based on the review of the computer systems, management does not believe the
cost of implementation will be material to the Company's financial position and
results of operations.
NOTE 14--SUBSEQUENT EVENTS (UNAUDITED)
On November 1, 1999, the Company issued options to purchase 250,000 shares
of the Company's common stock to a consultant. The options are exercisable at
$1.50 per share, were immediately vested, and expire in five years from the date
of grant.
F-19
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 14--SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
Subsequent to September 30, 1999, the Company began leasing new facilities.
The new lease calls for annual payments totaling $320,136 for the first year
with a 3.5% escalation rate each year thereafter. The lease expires on
December 31, 2004. Under the provisions of the lease, the Company is required to
deliver to the lessor a letter of credit in the amount of $240,000.
On November 1, 1999, the Company entered into an employment agreement with
its Chief Executive Officer. The agreement calls for annual payments of
$240,000, plus certain stock option grants, and expires two years from
execution.
On November 12, 1999, the Company received $500,000 in unsecured bridge
financing. The advance bears an interest rate of 10% and is due and payable
90 days from execution.
F-20
<PAGE>
BETWEEN 7,797,133 AND 9,897,500 SHARES OF COMMON STOCK
[LOGO]
ENTERTAINMENT BOULEVARD, INC.
------------------------
PROSPECTUS
------------------------
UNTIL [ ], ALL DEALERS THAT EFFECT TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[ ], 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Nevada law, Article V of the Registrant's Articles of
Incorporation provides that "no director or officer of the Corporation shall be
liable to the Corporation or to its stockholders for damages for breach of
fiduciary duty as a director or officer." Excepted from that immunity are:
(i) acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law or (ii) the payment of improper distributions.
Under certain circumstances, Nevada law provides for indemnification of the
Registrant's officers, directors, employees and agents against liabilities that
they may incur in such capacities. In general, any officer, director, employee
or agent may be indemnified against expenses, fines, settlements or judgments
arising in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Registrant's best interest, and were not unlawful. Unless such person is
successful upon the merits in such action, indemnification may be awarded only
after a determination by independent decision of the Board of Directors, by
legal counsel, or by a vote of the stockholders, that the applicable standard of
conduct was met by the person to be indemnified.
The circumstances under which indemnification is granted in connection with
an action brought on behalf of the Registrant is generally the same as those set
forth above; however, with respect to such actions, indemnification is granted
only with respect to expenses actually incurred in connection with the defense
or settlement of the action. In such actions, the person to be indemnified must
have acted in good faith and in a manner believed to have been in the
Registrant's best interest, and must not have been adjudged liable for
negligence or misconduct.
Consistent with Nevada law, Article VI of the Registrant's Articles of
Incorporation, as amended, provides as follows:
"The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person against all liability
and expense (including attorneys' fees) incurred by reason of the fact that
he is or was a director or officer of the Corporation, he is or was serving
at the request of the Corporation as a director, officer, employee or agent
of, or in any similar managerial or fiduciary position of, another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall also indemnify any person who is serving or has served the
Corporation as a director, officer, employee or agent of the Corporation to
the extent and in the manner provided in any bylaw, resolution of the
shareholders or directors, contract, or otherwise, so long as such provision
is legally permissible."
In addition, Article VI of the Registrant's Bylaws provides as follows:
"6.1 INDEMNIFICATION; ADVANCEMENT OF EXPENSES. To the fullest extent
permitted by the laws of the State of Nevada (currently set forth in NRS
78.751), as the same now exists or may hereafter be amended or supplemented,
the Corporation shall indemnify its directors and officers, including
payment of expenses as they are incurred and in advance of the final
disposition of any action, suit or proceeding. Employees, agents and other
persons may be similarly indemnified by the Corporation, including
advancement of expenses, in such case or cases and to the extent set forth
in a resolution or resolutions adopted by the Board of Directors. No
amendment of this Section shall have any effect on indemnification or
advancement of expenses relating to any event arising prior to the date of
such amendment.
6.2 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. To the fullest extent permitted
by the laws of the State of Nevada (currently set forth in NRS 78.752), as
the same now exists or may hereafter be amended or
II-1
<PAGE>
supplemented, the Corporation may purchase and maintain insurance and make
other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, for any liability asserted against such person and liability and
expense incurred by such person in its capacity as a director, officer,
employee or agent, or arising out of such person's status as such, whether
or not the Corporation has the authority to indemnify such person against
such liability and expenses."
The Registrant has also entered into, or intends to enter into,
indemnification agreements (the "Indemnification Agreement") with its directors
and officers providing indemnity consistent with the foregoing. The
Indemnification Agreements constitute binding agreements between the Registrant
and each of the other parties thereto, thus preventing the Registrant from
modifying its indemnification policy in a way that is adverse to any person who
is a party to an Indemnification Agreement. The Registrant has also obtained
officer and director liability insurance with respect to liabilities arising out
of certain matters, including matters arising under the Securities Act.
The foregoing is only a summary description and is qualified in its entirety
by reference to the applicable Nevada statutes.
See Part 4 of Item 28 below for information regarding the position of the
Securities and Exchange Commission with respect to the effect of any
indemnification for liabilities arising under the Securities Act of 1933, as
amended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby, all of which will be
paid by the Registrant.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 5,878
NASD Registration fee....................................... Not applicable
Printing and engraving...................................... $ 25,000*
Accountants' fees and expenses.............................. $ 100,000*
Legal fees.................................................. $ 75,000*
Transfer agent's fees and expenses.......................... $ 1,000*
Blue Sky fees and expenses.................................. $ 5,000*
Miscellaneous............................................... $ 5,000*
---------------
Total................................................... $ 216,878
===============
</TABLE>
- ------------------------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since its formation, the Registrant has issued securities to a limited
number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith.
Between February 24, 1998 and March 31, 1998, the Registrant privately
issued 3,700,000 shares of common stock to various investors (including Colin
Leech-Porter, its sole officer and director) for a total of $37,000 in cash.
On April 29, 1998, the Registrant privately issued 50,000 shares of Common
Stock to Dunn Creek Management in connection with the Registrant's acquisition
of certain mining property.
II-2
<PAGE>
In December 1998, the Registrant privately issued 2,925,000 units, each unit
consisting of one share of Common Stock, one warrant exercisable for $0.25 per
share and one warrant exercisable for $1.00 per share for one year after the
effective date of a registration statement filed by the Registrant with the
Securities and Exchange Commission. The issuance was to eleven investors for
$234,000 in cash. All 2,925,000 of the $0.25 warrants were exercised in February
1999.
On January 15, 1999, the Registrant privately issued 2,600,000 shares of
Common Stock to the 46 holders of debt or equity in International Net
Broadcasting, LLC (the "INB Holders") in return for all of their equity or debt
interests in that entity.
On July 1, 1999, the Registrant privately issued 25,000 shares of Common
Stock to Typhoon Capital Consultants, LLC as payment for consulting services.
On July 30, 1999, the Registrant privately issued to Venture Catalyst.com a
three-year option to purchase 50,000 shares of Common Stock at $6.00 per share.
That option was granted as partial payment for investor relations and financial
communication services.
In July 1999, the Registrant privately issued to certain of the INB Holders
five-year warrants to purchase 1,900,000 shares of Common Stock at $1.00 per
share. Those warrants were granted as part of a dispute settlement with those
INB Holders.
On August 4, 1999, the Registrant privately issued 37,500 shares of Common
Stock to four persons. Those shares were issued in consideration of a $125,000
loan to the Registrant.
On August 4, 1999, the Registrant privately issued 75,000 shares of Common
Stock to Beestons Investment Ltd. Those shares were issued in consideration of a
$250,000 loan to the Registrant.
On September 3, 1999, the Registrant (i) privately issued 2,000 shares of
8.0% Mandatorily Convertible Series A Preferred Stock to three accredited
investors (H.A.A. Inc., Beestons Investment Ltd. and Lowen Holdings) for
$2,000,000 in cash and (ii) agreed to issue an additional 2,000 shares of that
Preferred Stock to the investors for another $2,000,000 in cash upon the
occurrence of certain events. In connection with that transaction, the
Registrant entered into a Placement Agency Agreement with Robb Peck McCooey
Clearing Corporation pursuant to which that entity was granted a five-year
warrant to purchase 250,000 shares of the Registrant's Common Stock for $2.00
per share and was paid cash in the amount of $240,000.
From January 1999 until November 1, 1999, the Registrant has granted various
employees and consultants options to purchase a total of 808,000 shares of
Common Stock under the Option Plan. These options are exercisable over five
years at prices ranging from $1.00 to $1.75 per share.
On November 12, 1999, the Registrant privately issued 140,000 shares of
Common Stock to H.A.A. Inc. and Beestons Investment Ltd. in consideration of a
$500,000 loan to the Registrant. The loan itself is convertible into 250,000
shares of Common Stock.
In reliance on Section 3(b), 4(2), 4(6) and/or Regulation D of the
Securities Act of 1933, as amended, the Registrant believes that each of the
above transactions was exempt from registration as a transaction by an issuer
not involving a public offering. Certain issuances described above are also
believed to be exempt from registration under the Securities Act in reliance on
Rule 701 as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each of the above
transactions either received adequate information about the Registrant or had
access, through employment or other relationships, to such information.
II-3
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- ----------------------- -------------------
<C> <S>
3.1 Articles of Incorporation, as amended to date
3.2 Bylaws, as amended to date
4.1 Form of Common Stock certificate
4.2 Form of 8% Mandatorily Convertible Series A Preferred Stock
certificate
4.3 Form of Warrant issued to Farida Alikhan, Rochford Young,
Rohail Alikhan, Loretta Harty, Ray Longstaff, 531287
BC Ltd., RAK Enterprises, Oughton York Holdings,
Brunswick Ltd., Ray Alikhan and Raaheen Alikhan
4.4 Form of Warrant issued to Stephen Brown
4.5 Form of Warrant issued to various other investors
4.6 Form of Warrant issued to Robb Peck McCooey Clearing
Corporation
5.1 Opinion of Richman, Lawrence, Mann, Chizever & Phillips*
10.1 Standard Office Lease between the Registrant and Westbrook
Marina Office, LLC dated August 18, 1999
10.2 Employment Agreement between the Registrant and Stephen
Brown dated November 1, 1999
10.3 1999 Stock Option Plan
10.4 Form of Non-Qualified Stock Option Agreement
10.5 Form of Indemnification Agreement for the Registrant's
directors and officers
10.6 License Agreement between the Registrant and Sonique dated
as of June 3, 1999
10.7 Co-Marketing Agreement between the Registrant and
Everything LLC (d/b/a CheckOut.com) dated as of July 21,
1999
10.8 Agreement between the Registrant and Typhoon Capital
Consultants, LLC dated July 1, 1999
10.9 Letter agreement between the Registrant and Venture
Catalyst.com dated July 30, 1999
10.10 Internet Commerce Partner Agreement between the Registrant
and Radiant Systems, Inc. dated as of June 23, 1999
10.11 Bolt/EBLD Agreement between the Registrant and Bolt
Media, Inc. dated as of July 26, 1999
10.12 College Broadcast/Entertainment Boulevard Agreement between
the Registrant and College Broadcast, Inc. dated as of
August 4, 1999
10.13 Hosting Service Agreement between International Net
Broadcasting, LLC and Liquid Audio, Inc. dated August 31,
1998
10.14 License Agreement between International Net
Broadcasting, LLC and Marathon Sports Group, Inc. dated
October 29, 1998
10.15 Web Collocation Service Order Form between the Registrant
and Level (3) Communications dated February 8, 1999
10.16 Strategic and Co-Marketing Partnership Agreement between the
Registrant and Scour Inc. dated February 25, 1999
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- ----------------------- -------------------
<C> <S>
10.17 Video Content Management & Delivery Services Agreement
between the Registrant and InterVU dated February 8, 1999
10.18 License Agreement between the Registrant and Dimension
Music, Inc. dated as of February 25, 1999
10.19 License Agreement between the Registrant and SRN
Broadcasting & Marketing, Inc. dated March 4, 1999
10.20 Sales Agent Agreement between the Registrant and EarthLink
Network, Inc. dated March 11, 1999
10.21 License Agreement between the Registrant and American
Interactive Media, Inc. dated as of December 21, 1998
10.22 Hearme.com Syndication Partner Program Agreement between the
Registrant and Mpath Interactive, Inc. dated March 18, 1999
10.23 Agreement between the Registrant and L.A. Group, Inc. dated
as of March 30, 1999
10.24 License Agreement between the Registrant and Synge.com dated
as of June 7, 1999
10.25 Strategic Alliance Agreement between the Registrant and
Digital Bitcasting Corp. dated July 23, 1999
10.26 Wall of Sound/Vidnet Agreement and addendum between the
Registrant and ABC News/Starwave Partners d/b/a ABC Internet
Ventures dated as of June 14, 1999
10.27 Content Provider Agreement between the Registrant and
ChannelSEEK, Inc. dated July 21, 1999
10.28 $125,000 Bridge Loan evidenced by promissory notes payable
to each of Steve McKeag, Richard Sandfer, John McKeag and
Dominick Guillemot
10.29 Loan and Security Agreement dated August 6, 1999 between the
Registrant and Beeston Investment Ltd.
10.30 $400,000 Promissory Note from the Registrant to Arthur Brown
and Riz Alikhan dated August 20, 1999
10.31 Stock Purchase Agreement between Sedmet Exploration, Inc.
and International Net Broadcasting, LLC dated as of
January 15, 1999
10.32 Securities Purchase Agreement between the Registrant and
H.A.A. Inc., Lowen Holdings and Beestons Investment Ltd.
dated as of September 3, 1999
10.33 Placement Agency Agreement between the Registrant and Robb
Peck McCooey Clearing Corporation dated September 3, 1999
10.34 Registration Rights Agreement between the Registrant and
Robb Peck McCooey Clearing Corporation to purchase 250,000
shares of common stock dated September 3, 1999
10.35 Registration Rights Agreement between the Registrant and the
purchasers of the 8.0% Mandatorily Convertible Series A
Preferred Stock dated September 3, 1999
10.36 Settlement Agreement between the Registrant, Arthur Brown,
Akbar Alikhan, Riz Alikhan and Stephen Brown dated as of
July 14, 1999
10.37 Loan and Security Agreement dated November 12, 1999 between
the Registrant and Beestons Investment Ltd. and H.A.A. Inc.
10.38 Web Site Link Agreement between the Registrant and ICTV,
Inc. dated as of April 14, 1999, with Addendum
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- ----------------------- -------------------
<C> <S>
10.39 Webcast Distribution Agreement between the Registrant and
iBeam Broadcasting Corporation dated August 3, 1999
10.40 Content Provider Agreement dated September 8, 1999 between
the Registrant and ServiceCo, LLC dba Road Runner
21.1 Subsidiaries of the Registrant
23.1 Consent of Singer Lewak Greenbaum & Goldstein, LLP, the
Registrant's Independent Auditors
23.2 Consent of Richman, Lawrence, Mann, Chizever & Phillips
(included in Exhibit 5).*
24.1 Power of Attorney (see Page II-8)
27 Financial Data Schedule (electronic filing version only)
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration statement:
(a) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. For determining liability under the Securities Act, to 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. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe it
meets all the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Los Angeles, California on November 30, 1999.
<TABLE>
<S> <C> <C>
ENTERTAINMENT BOULEVARD, INC.
By: /s/ STEPHEN BROWN
-----------------------------------------
Stephen Brown,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
TREASURER
</TABLE>
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEPHEN BROWN President, Chief Executive
-------------------------------------- Officer, Treasurer and November 30, 1999
Stephen Brown Director
/s/ ARTHUR BROWN*
-------------------------------------- Director November 30, 1999
Arthur Brown
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN BROWN
---------------------------------
Stephen Brown
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen Brown his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits and schedules thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully ratifying and confirming all that said attorney-in-fact and
agent or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 23, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ ARTHUR BROWN
-------------------------------------- Director
Arthur Brown
</TABLE>
II-8
<PAGE>
EXHIBIT 3.1
[SEAL]
ARTICLES OF INCORPORATION
OF
SEDMET EXPLORATION INC.
ARTICLE I
The name of the corporation is Sedmet Exploration Inc. (the
"Corporation").
ARTICLE II
The amount of total authorized capital stock which the Corporation
shall have authority to issue is 50,000,000 shares of common stock, each with
$0.001 par value, and 1,000,000 shares of preferred stock, each with $0.01 par
value. To the fullest extent permitted by the laws of the State of Nevada
(currently set forth in NRS 78.195), as the same now exists or may hereafter
be amended or supplemented, the Board of Directors may fix and determine the
designations, rights, preferences or other variations of each class or series
within each class of capital stock of the Corporation.
ARTICLE III
The business and affairs of the Corporation shall be managed by a
Board of Directors which shall exercise all the powers of the Corporation
except as otherwise provided in the Bylaws, these Articles of Incorporation
or by the laws of the State of Nevada. The number of members of the Board of
Directors shall be set in accordance with the Company's Bylaws; however, the
initial Board of Directors shall consist of one member. The name and address
of the person who shall serve as the directors until the first annual meeting
of stockholders and until his successors are duly elected and qualified is as
follows:
NAME ADDRESS
- ---- -------
Dr. Colin Leech Porter 3550 Quesnel Drive
Vancouver, B.C. V6L 2W6
Canada
1
<PAGE>
ARTICLE IV
The name and address of the incorporator of the Corporation is Craig
A. Stoner, 455 Sherman Street, Suite 300, Denver, Colorado 80203.
ARTICLE V
To the fullest extent permitted by the laws of the State of Nevada
(currently set forth in NRS 78.037), as the same now exists or may hereafter
be amended or supplemented, no director or officer of the Corporation shall
be liable to the Corporation or to its stockholders for damages for breach of
fiduciary duty as a director or officer.
ARTICLE VI
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person against all liability
and expense (including attorneys' fees) incurred by reason of the fact that
he is or was a director or officer of the Corporation, he is or was serving
at the request of the Corporation as a director, officer, employee, or agent
of, or in any similar managerial or fiduciary position of, another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall also indemnify any person who is serving or has served the
Corporation as a director, officer, employee, or agent of the Corporation to
the extent and in the manner provided in any bylaw, resolution of the
shareholders or directors, contract, or otherwise, so long as such provision
is legally permissible.
ARTICLE VII
The owners of shares of stock of the Corporation shall not have a
preemptive right to acquire unissued shares, treasury shares of securities
convertible into such shares.
ARTICLE VIII
Only the shares of capital stock of the Corporation designated at
issuance as having voting rights shall be entitled to vote at meetings of
stockholders of the Corporation, and only stockholders of record of shares
having voting rights shall be entitled to notice of and to vote at meetings
of stockholders of the Corporation.
2
<PAGE>
ARTICLE IX
The initial resident agent of the Corporation shall be the Corporation
Trust Company of Nevada, whose street address is 1 East 1st Street, Reno, Nevada
89501.
ARTICLE X
The provisions of NRS 78.378 to 78.3793 inclusive, shall not apply to
the Corporation.
ARTICLE XI
The purposes for which the Corporation is organized and its powers are
as follows:
To engage in all lawful business; and
To have, enjoy, and exercise all of the rights, powers, and privileges
conferred upon corporations incorporated pursuant to Nevada law, whether now or
hereafter in effect, and whether or not herein specifically mentioned.
ARTICLE XII
One-third of the votes entitled to be cast on any matter by each
shareholder voting group entitled to vote on a matter shall constitute a quorum
of that voting group for action on that matter by shareholders.
ARTICLE XIII
The holder of a bond, debenture or other obligation of the Corporation
may have any of the rights of a stockholder in the Corporation to the extent
determined appropriate by the Board of Directors at the time of issuance of such
bond, debenture or other obligation.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 18th day of December, 1997.
By /s/ Craig A. Stoner
----------------------------
Craig A. Stoner
Incorporator
STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )
Personally appeared before me this 18th day of December, 1997, Craig A.
Stoner who, being first duly sworn, declared that he executed the foregoing
Articles of Incorporation and that the statements therein are true and correct
to the best of his knowledge and belief.
Witness my hand and official seal.
[Notary Seal] /s/ Nancy J. Parks
--------------------------
Notary Public
My commission expires:
10/26/98 Address:
455 Sherman Street
Suite 300
Denver, CO 80237
<PAGE>
[SEAL]
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
1. Name of corporation: Sedmet Exploration, Inc.
2. The articles have been amended as follows:
ARTICLE I
The name of the corporation is Entertainment Boulevard, Inc. (the
"Corporation").
3. The vote by which the stockholders holding shares in the Corporation
entitling them to exercise at least a majority of the voting power, or
such greater proportion of the voting power as may be required in the
case of a vote by classes or series, or as may be required by the
provisions of the articles of incorporation have voted in favor of the
amendment is: 3,400,500 shares of common stock.
4. Signature:
/s/ Akbar Alikhan
-------------------------------
Akbar Alikhan
as President and Secretary
REPUBLIC OF PAKISTAN )
United States Embassy CITY OF KARACHI )
Pakistan CONSULATE GENERAL OF THE ) ss:
UNITED STATES OF AMERICA )
This instrument was acknowledged before me on
January 28th, 1999 by Akbar Alikhan
as President and Secretary
as designated to sign this certificate
for Sedmet Exploration, Inc.
[SEAL}
/s/ Michael J. Mates
Consul of the United States of America
<PAGE>
[SEAL]
CERTIFICATE OF DESIGNATION, POWERS,
PREFERENCES AND RIGHTS OF THE SERIES
OF
PREFERRED STOCK
OF
ENTERTAINMENT BOULEVARD, INC.
TO BE DESIGNATED
8.0% MANDATORILY CONVERTIBLE SERIES A PREFERRED STOCK
Pursuant to Section 78.1955 of the General Corporation Law of the
State of Nevada, I, the undersigned, Stephen Brown, being the President and
the Secretary of Entertainment Boulevard, Inc. (the "CORPORATION"), formerly
known as Sedmet Exploration, Inc., a corporation organized and existing under
the General Corporation Law of the State of Nevada, DO HEREBY CERTIFY that
the following resolution was duly adopted by the Board of Directors of the
Corporation by unanimous written consent:
RESOLVED, that, pursuant to authority expressly granted to and
vested in the Board of Directors by the provisions of the Articles of
Incorporation, as amended, the Board of Directors hereby creates a series of
the preferred stock, $0.01 per share, of the Corporation, with a par value of
$0.01 per share and a stated value of $1,000 per share, to be designated
"8.0% Mandatorily Convertible Series A Preferred Stock" and to consist of ten
thousand (10,000) shares, and hereby fixes the powers, designations,
preferences and relative, participating, option and other rights of the
shares of such series, and the qualifications, limitations, or restrictions
thereof (in addition to those provisions set forth in the Articles of the
Incorporation, as amended, which are applicable to the 8.0% Mandatorily
Convertible Series A Preferred Stock), as follows:
Section 1. DESIGNATION, AMOUNT, PAR VALUE, STATED VALUE AND RANK.
The aforesaid series of preferred stock shall be designated as 8.0%
Mandatorily Convertible Series A Preferred Stock (the "SERIES A PREFERRED
STOCK"), and the number of shares so designated shall be 10,000 (which shall
not be subject to increase without the consent of the holders of the Series A
Preferred Stock ("HOLDERS") pursuant to Section 3 hereof). Each share of
Series A Preferred Stock shall have a par value of $0.01 per share and a
stated value of $1,000 per share (the "STATED VALUE").
The Series A Preferred Stock shall rank senior to the Junior
Securities (as defined below) in respect of dividend rights and preferences
as to distributions and payments upon Liquidation (as defined in Section 4).
Section 2. DIVIDENDS.
(a) Each share of Series A Preferred Stock shall be entitled to
receive, in preference to the holders of Junior Securities, cumulative annual
dividends at the rate of 8.0% per annum on the Stated Value thereof. Such
dividends on such shares shall begin accumulating from the Initial Closing
Date and dividends shall be due and payable in cash or as provided in Section
2(b) semi-annually in arrears on the last day of February and August of each
year (each, a "DIVIDEND PAYMENT
<PAGE>
DATE"), commencing on February 29, 2000. Dividends shall accumulate daily on
each share of Series A Preferred Stock from the Initial Closing Date, whether
or not earned or declared, until such share of Series A Preferred Stock has
been converted or redeemed as herein provided. To the extent dividends are
not paid (or added to the Stated Value pursuant to subsection (b) below) on
the applicable Dividend Payment Date, such dividends shall be cumulative and
shall compound semi-annually until the date of payment of such dividend. To
the extent holders purchase their shares of Series A Preferred Stock after
the Initial Closing Date, they shall, concurrently with such purchase, return
any accrued dividends up to the date of their purchase of Series A Preferred
Stock to the Corporation.
(b) The dividends are payable in such coin or currency of the United
States of America as at the time of payment is legal tender, to the Holder of
record on the tenth day prior to the applicable Dividend Payment Date and at
the address as designated in writing by such Holder thereof from time to
time, PROVIDED, HOWEVER, that, in lieu of paying such dividends in coin or
currency, the Corporation may, at its option, in full or in part, pay
dividends on the shares of Series A Preferred Stock on any Dividend Payment
Date by increasing the Stated Value of the Series A Preferred Stock by the
amount of such dividend such that the sum of (i) the amount of such increase
in the Stated Value and (ii) the amount of cash dividend paid in part, if
any, is equal to the amount of the cash dividend which would otherwise be
paid on such Dividend Payment Date if such dividend were paid entirely in
cash. Any such increase in the Stated Value (plus the amount of cash
dividend, if any, paid together therewith) shall constitute full payment of
such dividend. When any dividend is added to the Stated Value, such dividend
shall, for all purposes of the Series A Preferred Stock, be deemed to be part
of the Stated Value for purposes of determining dividends thereafter payable
hereunder and amounts thereafter convertible into Common Stock hereunder, and
all references herein to the Stated Value shall mean the Stated Value, as
adjusted pursuant to these provisions.
(c) If the Corporation shall elect to pay any part of a dividend by
increasing the Stated Value as described in Section 2(b), the Corporation
will provide notice at least ten (10) Trading days prior to exercising such
option for each applicable Dividend Payment Date setting forth the new Stated
Value to each Holder (a "DIVIDEND NOTICE").
(d) If the cash dividends due hereunder are not paid or the Dividend
Notice is not delivered to each Holder prior to the expiration of ten (10)
calendar days after the applicable Dividend Payment Date, the Corporation
shall no longer have the right to choose the method by which dividends are
paid, and each Holder may elect either cash dividends payable by increasing
the Stated Value on each share of Series A Preferred Stock held by such
Holder.
(e) Except as specifically provided herein, an election by the
Corporation to pay dividends, in full or in part, in cash on any Dividend
Payment Date shall not preclude the Corporation from electing any other
available alternative in respect of all or any portion of any subsequent
dividend.
(f) So long as any shares of Series A Preferred Stock are
outstanding, no dividends, including, without limitation, dividends or
distributions paid in shares of, or options, warrants or
-2-
<PAGE>
rights to subscribe for or purchase shares of, equity securities of the
Corporation to which the Series A Preferred Stock ranks prior (whether with
respect to dividends or upon Liquidation or otherwise), including the Common
Stock or all future classes of preferred stock of the Corporation that may be
issued and outstanding (collectively, the "JUNIOR SECURITIES") or on parity
(whether with respect to dividends or upon Liquidation or otherwise)
(collectively, the "PARITY SECURITIES"), shall be declared or paid or set
apart for payment or other distribution upon the Junior Securities or the
Parity Securities, nor shall any Junior Securities or Parity Securities be
redeemed, purchased or otherwise acquired for any consideration (or any
monies to be paid to, or made available for, a sinking fund for the
redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion to, or exchange for, Junior Securities or
Parity Securities, respectively); PROVIDED, HOWEVER, the restrictions set
forth in this Section 2(f) shall not apply to dividends payable in shares of
Common Stock.
Section 3. VOTING RIGHTS. The Holders of Series A Preferred Stock
shall have the right to vote, together with the holders of all the
outstanding shares of Common Stock (and the holders of every other class or
series entitled to vote together with such holders) and not by class, except
as otherwise required by Nevada law, on all matters on which holders of
Common Stock shall have the right to vote. Each Holder of Series A Preferred
Stock shall have the right to cast one vote for each share of Series A
Preferred Stock held by such Holder. In addition, so long as any shares of
Series A Preferred Stock are outstanding, the Corporation shall not and shall
cause its subsidiaries not to, without the affirmative vote of the Holders of
66-2/3% of the shares of the Series A Preferred Stock then outstanding, (a)
amend, alter or change the preferences or rights of any series or class of
capital stock of the Corporation (including the Series A Preferred Stock) or
the qualifications, limitations or restrictions thereof if such amendment,
alteration or change adversely affects the powers, preferences or rights
given to the Series A Preferred Stock, (b) alter or amend this Certificate of
Designation, (c) authorize or create any class or series of any class of
capital stock ranking as to distribution of assets upon a Liquidation or
otherwise senior to the Series A Preferred Stock, (d) amend its Articles of
Incorporation, bylaws or other charter documents so as to affect adversely
any rights of any Holders, (e) increase the authorized number of shares of
Series A Preferred Stock, and (f) enter into any agreement with respect to
the foregoing.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-
up of the Corporation, whether voluntary or involuntary (a "LIQUIDATION"),
the Holders of Series A Preferred Stock shall be entitled to receive out of
the assets of the Corporation, whether such assets are capital or surplus,
for each share of Series A Preferred Stock an amount equal to the Stated
Value before any distribution or payment shall be made to the holders of any
Junior Securities, and if the assets of the Corporation shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the
Holders of Series A Preferred Stock shall be distributed among the Holders of
Series A Preferred Stock and the holders of all securities ranking pari passu
to the Series A Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon
were paid in full. A sale, conveyance or disposition of all or substantially
all of the assets of the Corporation or the effectuation by the Corporation
of a transaction or series of related transactions in which more than 50% of
the voting power of the Corporation is disposed of, or a consolidation or
merger of the Corporation with or into any other company or companies
-3-
<PAGE>
shall not be treated as a Liquidation, but instead shall be subject to the
provisions of Section 5(c)(vii). The Corporation shall mail written notice of
any such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record Holder of Series A Preferred Stock.
Section 5. CONVERSION.
(a) (i) Each share of Series A Preferred Stock shall be convertible at
the option of the Holder into shares of Common Stock (subject to
Section 5(a)(iii)) at the Conversion Ratio (as defined in Section 6).
One-half of the shares of Series A Preferred Stock held by each Holder
may be converted beginning on the 31st day after its respective
Original Issue Date, with the remainder becoming convertible on the
91st day after its respective Original Issue Date. The Holders shall
effect conversions by surrendering the certificate or certificates
representing the shares of Series A Preferred Stock to be converted to
the Corporation, together with the form of conversion notice attached
hereto as EXHIBIT A (the "CONVERSION NOTICE"). Each Conversion Notice
shall specify the number of shares of Series A Preferred Stock to be
converted. The date on which such conversion is to be effected shall be
the date the Holder delivers such Conversion Notice by facsimile (with
the original stock certificates to follow via Federal Express delivery)
(the "CONVERSION DATE"). Subject to Section 5(b) hereof, each
Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all shares of Series A Preferred Stock represented
by the certificate or certificates tendered by the Holder with the
Conversion Notice, or if a conversion hereunder cannot be effected in
full for any reason, the Corporation shall promptly deliver to such
Holder (in the manner and within the time set forth in Section 5(b)) a
certificate for such number of shares as have not been converted.
(ii) Subject to the completeness and accuracy of the Holders'
representations and warranties herein, upon the conversion of any
Series A Preferred Stock by a person who is a non-U.S. Person, and
following the expiration of any applicable Restricted Period (as those
terms are defined in Regulation S), the Corporation shall, at its
expense, take all necessary action (including the issuance of an
opinion of counsel) to assure that the Corporation's transfer agent
shall issue stock certificates without restrictive legend or stop
orders in the name of Holder (or its nominee (being a non-U.S. Person)
or such non-U.S. Persons as may be designated by Holder) and in such
denominations to be specified at conversion representing the number of
shares of Common Stock issuable upon such conversion, as applicable.
Nothing in this Section 5, however, shall affect in any way Holder's or
such nominee's obligations and agreement to comply with all applicable
securities laws upon resale of the securities.
(iii) In no event shall a Holder be permitted to convert any
shares of Series A Preferred Stock in excess of the number of such
shares upon the conversion of which, (x) the number of shares of Common
Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon conversion of shares of Series A Preferred Stock)
plus (y) the number of shares of Common Stock issuable upon such
conversion of such shares of Series A Preferred Stock, would be equal
to or exceed (z) 9.999% of the number of shares
-4-
<PAGE>
of Common Stock then issued and outstanding, including shares issuable
on conversion of the Series A Preferred Stock by such Holder after
application of this Section 5(a)(iii). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations thereunder. To the extent
that the limitation contained in this Section 5(a)(iii) applies, the
determination of whether shares of Series A Preferred Stock are
convertible (in relation to other securities owned by a Holder) and of
which shares of Series A Preferred Stock are convertible shall be in
the sole discretion of such Holder, and the submission of shares of
Series A Preferred Stock for conversion shall be deemed to be such
Holder's determination of whether such shares of Series A Preferred
Stock are convertible (in relation to other securities owned by a
Holder) and of which shares of Series A Preferred Stock are
convertible, in each case subject to such aggregate percentage
limitation, and the Corporation shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein
shall be deemed to restrict the right of a Holder to convert such
shares of Series A Preferred Stock at such time as such conversion will
not violate the provisions of this paragraph. The provisions of this
Section 5(a)(iii) may be waived by a Holder of Series A Preferred Stock
as to itself (and solely as to itself) upon not less than 61 days prior
notice to the Corporation, and the provisions of this Section 5(a)(iii)
shall continue to apply until such 61st day (or later, if stated in the
notice of waiver). No conversion in violation of this paragraph but
otherwise in accordance with this Certificate of Designation shall
affect the status of the securities issued upon such conversion as
validly issued, fully-paid and nonassessable.
(b) (i) Not later than five (5) Trading Days after any Conversion
Date, the Corporation will deliver to the applicable Holder by express
courier (A) a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those required
by SECTION 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being issued upon the conversion of shares of
Series A Preferred Stock (subject to reduction pursuant to Section
5(a)(iii)) and (B) one or more certificates representing the number of
shares of Series A Preferred Stock not converted. If in the case of any
Conversion Notice such certificate or certificates are not delivered to
or as directed by the applicable Holder by the fifth Trading Day after
the Conversion Date (the "DELIVERY DATE"), the Holder shall be entitled
by written notice to the Corporation at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Corporation shall immediately return the
certificates representing the shares of Series A Preferred Stock
tendered for conversion, whereupon the Corporation and the Holder shall
each be restored to their respective positions immediately prior to the
delivery of such notice of revocation, except that any amounts
described in Sections 5(b)(ii) and (iii) shall be payable through the
date notice of rescission is given to the Corporation.
(ii) The Corporation understands that a delay in the delivery
of the shares of Common Stock upon conversion of shares of Series A
Preferred Stock and failure to deliver certificates representing the
unconverted shares of Series A Preferred Stock beyond the Delivery Date
could result in economic loss to the Holder. If the Corporation fails
to deliver to the Holder such certificate or certificates pursuant to
this Section hereunder by the
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Delivery Date, the Corporation shall pay to such Holder, in cash, an
amount per Trading Day for each Trading Day until such certificates are
delivered equal to (i) 1% of the Stated Value of the shares of Series A
Preferred Stock requested to be converted for the first five Trading
Days after the Delivery Date and (ii) 2% of the Stated Value of the
shares of Series A Preferred Stock requested to be converted for each
Trading Day thereafter (which amounts shall be paid as liquidated
damages and not as a penalty), together with interest on such amount at
a rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full. Nothing herein shall limit a Holder's
right to pursue actual damages for the Corporation's failure to deliver
certificates representing shares of Common Stock upon conversion
within the period specified herein (including, without limitation,
damages relating to any purchase of shares of Common Stock by such
Holder to make delivery on a sale effected in anticipation of receiving
certificates representing shares of Common Stock upon conversion, as
provided in Section 5(b)(iii) below), and such Holder shall have the
right to pursue all remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).
(iii) In addition to any other rights available to the Holder,
if the Corporation fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i) by the Delivery Date and if
after the Delivery Date the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which
the Holder anticipated receiving upon such conversion (a "BUY-IN"),
then the Corporation shall pay in cash to the Holder (in addition to
any remedies available to or elected by the Holder) the amount by which
(A) the Holder's total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (B) the
aggregate Stated Value of the shares of Series A Preferred Stock for
which such conversion was not timely honored (which amount shall be
paid as liquidated damages and not as a penalty), together with
interest thereon at a rate of 15% per annum, accruing until such amount
and any accrued interest thereon is paid in full. For example, if the
Holder purchases shares of Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 aggregate Stated Value of the shares of Series A Preferred
Stock, the Corporation shall be required to pay the Holder $1,000, plus
interest. The Holder shall provide the Corporation written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(c) (i) The conversion price for each share of Series A Preferred Stock
(the "CONVERSION PRICE") in effect on any Conversion Date shall be the
lesser of (A) $2.00 or (B) an amount equal to the average Per Share
Market Value for the three Trading Days having the lowest Per Share
Market Values (not necessarily consecutive Trading Days) during the 30
Trading Days immediately before the Conversion Date, except that if
during any period (a "BLACK-OUT PERIOD") beginning with the date on
which the registration statement required to be filed by the
Corporation relating to the Underlying Shares is declared effective
pursuant to the terms and subject to the conditions set forth in the
Registration Rights Agreement, a Holder is unable to trade any Common
Stock issued or issuable upon conversion of Series A Preferred Stock
immediately due to the postponement of filing or delay or suspension of
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effectiveness of a registration statement or suspension of trading
because the Corporation has otherwise informed such Holder that an
existing prospectus cannot be used at that time in the sale or transfer
of such Common Stock, such Holder shall have the option but not the
obligation on any Conversion Date within ten Trading Days following the
expiration of the Black-out Period of using the Conversion Price
applicable on such Conversion Date or any Conversion Price selected by
such Holder that would have been applicable had such Conversion Date
been at any earlier time during the Black-out Period or within the ten
Trading Days thereafter.
Notwithstanding the foregoing, if the Corporation has failed to file a
registration statement as required by the Registration Rights Agreement
within 30 days after the date (the "FILING DATE") it was required to
file such registration statement pursuant to the Registration Rights
Agreement or if any registration statement required to be filed by the
Corporation pursuant to the Registration Rights Agreement has not been
declared effective by the Commission within 30 days after the date it
was required to be declared effective by the Commission pursuant to the
Registration Rights Agreement, or if the Corporation has allowed any
registration statement required to be filed pursuant to the
Registration Rights Agreement to lapse for a period of 30 consecutive
days, then the Conversion Price shall, immediately after such 30th day,
as applicable, be decreased by 3% and shall be further decreased by an
additional 0.1% for each subsequent day thereafter until such time as
such registration statement is filed, declared effective or had its
effectiveness reinstated, as applicable; PROVIDED, that if any such
registration statement is not effective within 180 days after the
Filing Date, then the Conversion Price shall be decreased by an
additional 1.25% for each seven calendar days following such 180th day
and continuing until any such registration statement is effective;
PROVIDED FURTHER, that the Conversion Price shall not be decreased by
more than either $1.00 or 50% of the Per Share Market Value. The
provisions of this Section are not exclusive and shall in no way limit
the Corporation's obligations under the Registration Rights Agreement.
(ii) If the Corporation, any time while any shares of Series A
Preferred Stock are outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or
(d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Corporation, the applicable Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(c)(ii) shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the case
of a subdivision, combination or re-classification.
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(iii) If the Corporation, at any time while any shares of
Series A Preferred Stock are outstanding, shall sell or issue
additional shares of Common Stock or rights or warrants to acquire
shares of Common Stock (subject to the allowances of this Section
5(c)(iii) set forth below) at a price per share less than the
Conversion Price then in effect or the Per Share Market Value at the
record date mentioned below, excluding any rights of the Holders of the
Stock, the applicable Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such shares, rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such shares, rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so
offered would purchase at the greater of such Per Share Market Value
and such Conversion Price. Such adjustment shall be made whenever such
shares, rights or warrants are issued, and shall become effective
immediately after the issuance of such shares, rights or warrants or,
if such rights or warrants are issued to shareholders of the
Corporation, the record date for the determination of shareholders
entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the
issuance of which resulted in an adjustment in the applicable
Conversion Price pursuant to this Section 5(c)(iii), if any such right
or warrant shall expire and shall not have been exercised, the
applicable Conversion Price shall immediately upon such expiration be
re-computed and effective immediately upon such expiration be increased
to the price which it would have been (but reflecting any other
adjustments in the applicable Conversion Price made pursuant to the
provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the applicable Conversion Price made
upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
Notwithstanding the foregoing, the following actions by the Corporation
shall not result in any adjustment to the Conversion Price pursuant to
this Section 5(c)(iii): (i) the granting of options or warrants to
employees, officers, directors and consultants, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Corporation (including
any stock options plans which are restated after the date hereof), (ii)
the issuance of shares upon exercise of any currently outstanding
warrants disclosed in SCHEDULE 2.1(c)(i) of the Purchase Agreement,
(iii) the issuance of 112,500 shares pursuant to the two bridge loans
made to the Corporation as disclosed in SCHEDULE 2.1(s) of the Purchase
Agreement, and (iv) the issuance of shares of Common Stock upon
conversion or redemption of the Series A Preferred Stock.
(iv) If the Corporation, at any time while shares of Series A
Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to Holders of Series A Preferred Stock) evidences
of its indebtedness or assets or rights or warrants to subscribe
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for or purchase any security (excluding those referred to in Sections
5(c)(ii) and (iii) above), then in each such case the applicable
Conversion Price at which each share of Series A Preferred Stock shall
thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed
for determination of shareholders entitled to receive such distribution
by a fraction of which the denominator shall be the Per Share Market
Value determined as of the record date mentioned above, and of which
the numerator shall be such Per Share Market Value on such record date
less the then fair market value at such record date of the portion of
such assets or evidence of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board of
Directors in good faith; PROVIDED, HOWEVER, that in the event of a
distribution exceeding ten percent of the net assets of the
Corporation, such fair market value shall be determined by an
Independent Appraiser (as defined below) selected in good faith by the
Holders of a majority in interest of the shares of Series A Preferred
Stock then outstanding; and PROVIDED, FURTHER, that the Corporation,
after receipt of the determination by such Independent Appraiser shall
have the right to select an additional Independent Appraiser, in good
faith, in which case the fair market value shall be equal to the
average of the determinations by each such Independent Appraiser. In
either case the adjustments shall be described in a statement provided
to the Holders of Series A Preferred Stock of the portion of assets or
evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the applicable Conversion Price is adjusted
pursuant to Section 5(c)(ii), (iii) or (iv) (for purposes of this
Section 5(c)(vi), each an "adjustment"), the Corporation shall cause
its Chief Financial Officer to prepare and execute a certificate
setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on
which the Board made any determination hereunder), and the applicable
conversion Price after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to each Holder
promptly after each adjustment. Any dispute between the Corporation and
the Holders with respect to the matters set forth in such certificate
which cannot be resolved by good faith negotiations within a period of
10 days may at the option of the Holders be submitted to one of the
national accounting firms currently known as the "big four" selected by
the Holders of a majority in interest of the shares of Series A
Preferred Stock then outstanding, PROVIDED that the Corporation shall
have ten days after receipt of notice from such Holders of their
selection of such firm to object thereto, in which case the Holders of
a majority in interest of the shares of Series A Preferred Stock then
outstanding shall select another firm and the Corporation shall have no
right of objection. The firm selected by the Holders of a majority in
interest of the shares of Series A Preferred Stock then outstanding as
provided in the preceding sentence shall be instructed to deliver
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a written opinion as to such matters to the Corporation and the Holders
within 30 days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The fees and expenses
of such accounting firm shall be paid by the Corporation, unless the
Corporation prevailed in the dispute, in which case the fees and
expenses shall be paid by the Holders.
(vii) In case the Corporation after the Original Issue Date
shall do any of the following (each, a "TRIGGERING EVENT") (a)
consolidate with or merge into any other person and the Corporation
shall not be the continuing or surviving corporation of such
consolidation or merger, or (b) permit any other person to consolidate
with or merge into the Corporation and the Corporation shall be the
continuing or surviving person but, in connection with such
consolidation or merger, any capital stock (excluding cash paid out on
account of fractional shares) of the Corporation shall be changed into
or exchanged for securities of any other person or cash or any other
property, or (c) transfer all or substantially all of its properties or
assets to any other person, or (d) effect a capital reorganization or
reclassification of its capital stock, the Holders of the Series A
Preferred Stock then outstanding shall have the right thereafter to
convert such shares only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of
Common Stock following such Triggering Event, and the Holders of the
Series A Preferred Stock shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common
Stock of the Corporation into which such shares of Series A Preferred
Stock could have been converted immediately prior to such Triggering
Event would have been entitled. The terms of any such Triggering Event
shall include such terms so as to continue to give to the Holders of
Series A Preferred Stock the right to receive the securities, cash or
property set forth in this Section 5(c)(vii) upon any conversion
following such Triggering Event. This provision shall similarly apply
to successive Triggering Events.
(viii) If:
A. the Corporation shall declare a dividend
(or any other distribution) on its
Common Stock; or
B. the Corporation shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Corporation shall authorize the granting
to all holders of the Common Stock rights
or warrants to subscribe for or purchase
any shares of capital stock of any class
or of any rights; or
D. the approval of any shareholders of the
Corporation shall be required in
connection with any Triggering Event; or
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E. the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation;
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of Series A Preferred Stock,
and shall cause to be mailed to the Holders of Series A Preferred Stock
at their last addresses as they shall appear upon the stock books of
the Corporation, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; PROVIDED,
HOWEVER, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to
convert shares of Series A Preferred Stock during the 30-day period
commencing the date of such notice to the effective date of the event
triggering such notice.
(d) (i) If (1) any shares of Series A Preferred Stock remain
outstanding on the third anniversary of its respective Original Issue
Date or (2) the shares of Series A Preferred Stock should have a Per
Share Market Value of $6.00 or greater (adjusted for splits, dividends
and combinations) for 30 consecutive Trading Days, the Corporation
shall have the right to cause the Holders to convert such outstanding
shares of Series A Preferred Stock into shares of Common Stock at the
applicable Conversion Price, in accordance with this Section 5(d)(i)
(such date being referred to herein as the "MANDATORY CONVERSION
DATE").
(ii) The Corporation will send each Holder written notice of
any Mandatory Conversion Date and the place designated for mandatory
conversion of the Series A Preferred Stock pursuant to this Section
5(d) (the "MANDATORY CONVERSION NOTICE"). The Mandatory Conversion
Notice need not be given in advance of the occurrence of the Mandatory
Conversion Date. Upon receipt of such notice, each Holder shall
surrender the Series A Preferred Stock subject to such conversion
pursuant to Section 5(d)(i), to the Corporation at the place designated
in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such Holder is entitled as a
result of such Mandatory Conversion. On the Mandatory Conversion Date,
all rights with respect to the Series A Preferred Stock so converted,
including the rights, if any, to receive notices and vote, will
terminate, except only the rights of the Holders thereof, upon
surrender of their certificate or certificates therefor, to receive
certificates for the number of shares of Common Stock into which the
Series A Preferred Stock have been converted. The Corporation shall
deliver to such Holder a certificate or certificates for the number of
full shares of Common
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Stock and Warrants into which the Series A Preferred Stock have been
converted in accordance with Section 5(d)(ii) hereof, and cash as
provided herein with respect to any fraction of a share of Common
Stock, in each case, as if such Mandatory Conversion Date were a
Conversion Date.
(e) The Corporation covenants that it will at all times reserve and
keep available out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of Series A Preferred Stock free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders of Series A Preferred Stock, not less than such number
of shares of Common Stock as shall (subject to any additional requirements of
the Corporation as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions
of Section 5(c)) upon the conversion of all outstanding shares of Series A
Preferred Stock. The Corporation covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and the subject of a registration
statement.
(f) Upon a conversion hereunder the Corporation shall not be
required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time. If the Corporation elects not, or is unable, to make such a cash
payment, the Holder of a share of Series A Preferred Stock shall be entitled
to receive, in lieu of the final fraction of a share, one share of Common
Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion or redemption of Series A Preferred Stock shall be made without
charge to the Holders thereof for any documentary stamp or similar taxes that
may be payable in respect of the issue or delivery of such certificate.
(h) Shares of Series A Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares
of undesignated preferred stock.
(i) Any and all notices or other communications or deliveries to be
provided by the Holders of the Series A Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the President and to the Secretary of
the Corporation at the facsimile telephone number or address of the principal
place of business of the Corporation as set forth in the Purchase Agreement.
Any and all notices or other communications or deliveries to be provided by
the Corporation hereunder including, without limitation, any Mandatory
Conversion Notice, shall be in writing and delivered personally, by facsimile
or sent by a nationally recognized overnight courier service, addressed to
each Holder of Series A Preferred Stock at the facsimile telephone number or
address of such Holder appearing on the books of the Corporation, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder as designated by the Holder to the Corporation. Any
notice or other communication or deliveries hereunder shall be deemed given
and effective on the earlier of (i) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile
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telephone number specified in this Section prior to 5:00 p.m., New York City
time, (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii)
receipt, if sent by a nationally recognized overnight courier service, or
(iv) actual receipt by the party to whom such notice is required to be given.
(j) In the event a Holder shall elect to convert any shares of
Series A Preferred Stock as provided herein, the Corporation cannot refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law or
otherwise, unless, an injunction from a court, on notice, restraining and or
adjoining conversion of all or of said shares of Series A Preferred Stock
shall have issued and the Corporation posts a surety bond for the benefit of
such Holder in the amount of the difference between the Conversion Price and
the Per Share Market Value on the Trading Day preceding the date of the
attempted conversion multiplied by the number of shares of Series A Preferred
Stock sought to be converted, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder in the event it obtains judgment.
Section 6. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings.
"COMMON STOCK" means the common stock, $0.01 par value per share, of
the Corporation and stock of any other class in which such shares may
hereafter have been reclassified or changed.
"CONVERSION RATIO" means the number of shares of Common Stock
issuable upon conversion of each share of Series A Preferred Stock determined
by the application of the following formula where "D" equals the accumulated
but unpaid dividends (whether or not earned or declared) for each share of
Series A Preferred Stock (not previously added to the Stated Value pursuant
to Section 2 hereof) as of the applicable Conversion Date:
Stated Value + D
----------------
Conversion Price
"INDEPENDENT APPRAISER" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Corporation) that is regularly
engaged in the business of appraising the capital stock or assets of
corporations or other entities as going concerns, and which is not affiliated
with either the Corporation or any Holder.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
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"ORIGINAL ISSUE DATE" means the date of the first issuance by the
Corporation of shares of the Series A Preferred Stock regardless of the
number of transfers of any particular share of Series A Preferred Stock and
regardless of the number of certificates which may be issued to evidence such
Series A Preferred Stock. Such date shall coincide with the Initial Closing
Date as defined in the Purchase Agreement.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the OTC
Bulletin Board, The Nasdaq Small Cap Market, the Nasdaq National Market or
other registered national stock exchange on which the Common Stock is then
traded or listed or if there is no such price on such date, then the closing
bid price on such exchange or quotation system on the date nearest preceding
such date, or (b) if the Common Stock is not traded or listed then on the OTC
Bulletin Board, The Nasdaq Small Cap Market, the Nasdaq National Market or
any registered national stock exchange, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by NASDAQ or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding
to its functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith by the
holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Independent
Appraiser selected in good faith by the Holders of a majority in interest of
the shares of the Series A Preferred Stock; PROVIDED, HOWEVER, that the
Corporation, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent
Appraiser, in which case, the fair market value shall be equal to the average
of the determinations by each such Independent Appraiser; and PROVIDED,
FURTHER that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period. The determination of fair market value by an
Independent Appraiser shall be based upon the fair market value of the
Corporation determined on a going concern basis as between a willing buyer
and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to the
existence or absence of, or any limitations on, voting rights.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PURCHASE AGREEMENT" means the Securities Purchase Agreement, as
from time to time amended, dated as of the Original Issue Date, among the
Corporation and the original Holders of the Series A Preferred Stock.
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"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, as from time to time amended, dated as of the Original Issue Date,
by and among the Corporation and the original Holders.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the OTC Bulletin Board, the NASDAQ Small Cap Market, the Nasdaq National
Market or other registered national stock exchange on which the Common Stock
has been traded or listed, or (b) if the Common Stock is not traded or listed
on the OTC Bulletin Board, The Nasdaq Small Cap Market, the Nasdaq National
Market or any registered national stock exchange, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
PROVIDED, HOWEVER, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or
a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"UNDERLYING SHARES" means the number of shares of Common Stock into
which the shares of Series A Preferred Stock are convertible in accordance
with the terms hereof and the Purchase Agreement.
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IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite each of our names below and do hereby affirm, under the penalties of
perjury, that the statements contained therein have been examined by us and are
true and correct.
Date: September 1, 1999 ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
---------------------------------
Name: Stephen Brown
Title: President
/s/ Stephen Brown
---------------------------------
Name: Stephen Brown
Title: Secretary
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EXHIBIT A
ENTERTAINMENT BOULEVARD, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock of Entertainment Boulevard, Inc. to be
Designated 8.0% Mandatorily Convertible Series A Preferred Stock (the
"CERTIFICATE OF DESIGNATION"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $0.01 per share and stated
value [$1,000] per shares (the "PREFERRED SHARES"), of Entertainment Boulevard,
Inc., a Nevada corporation (the "Corporation"), indicated below into shares of
Common Stock, par value $0.001 per share (the "COMMON STOCK"), of the
Corporation, by tendering the stock certificate(s) representing the share(s) of
Preferred Shares specified below as of the date specified below.
Date of Conversion:
Number of Preferred Shares to be converted:
Stock certificate no(s). of Preferred Shares to be converted:
The Common Stock have been sold pursuant to the Registration Statement
(as defined in the Registration Rights Agreement): YES___ NO___
Please confirm the following information:
Conversion Price: $___________
If the conversion price is based on the average Per Share Market Value for the
three Trading Days having the lowest Per Share Market Value during the 30
Trading Days immediately before the Conversion Date, pursuant to Section 5(c)(i)
of the Certificate of Designation, please list the dates of the three Trading
Days used in calculating the Conversion Price below:
Trading Days:_______________
Number of shares of Common Stock to be issued:
----------------------------
-17-
<PAGE>
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Corporation
in the following name and to the following address:
Issued to:_______________________________________
Facsimile Number:________________________________
Authorization:___________________________________
By:_______________________________________
Title:____________________________________
Dated:___________________________________________
Account Number:__________________________________
(if electronic book entry transfer)
Transaction Code Number:__________________________________
(if electronic book entry transfer)
PRICES ATTACHED
-18-
<PAGE>
STATE OF NEVADA
SECRETARY OF STATE
I hereby certify that this is a true and
complete copy of the document as filed
in this office.
SEP. 02 '99
/s/ Dean Heller
DEAN HELLER
SECRETARY OF STATE
By: /s/ D. Farmer
- ---------------------
<PAGE>
SEDMET EXPLORATION INC.
BYLAWS
- -------------------------------
Adopted as of December 24, 1997
<PAGE>
SEDMET EXPLORATION INC.
BYLAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
ARTICLE I
OFFICES
<C> <S> <C>
1.1 Registered Office................................................ 1
1.2 Principal Office................................................. 1
<CAPTION>
ARTICLE II
STOCKHOLDERS
<C> <S> <C>
2.1 Annual Meeting................................................... 1
2.2 Special Meetings................................................. 1
2.3 Place of Meeting................................................. 2
2.4 Notice of Meeting................................................ 2
2.5 Adjournment...................................................... 2
2.6 Organization..................................................... 2
2.7 Closing of Transfer Books or Fixing of Record Date............... 3
2.8 Quorum........................................................... 3
2.9 Proxies.......................................................... 3
2.10 Voting of Shares................................................. 3
2.11 Action Taken Without a Meeting................................... 4
2.12 Meetings by Telephone............................................ 4
-i-
<PAGE>
SECTION PAGE
- ------- ----
<CAPTION>
ARTICLE III
DIRECTORS
<C> <S> <C>
3.1 Board of Directors; Number; Qualifications; Election............. 4
3.2 Powers of the Board of Directors: Generally...................... 4
3.3 Committees of the Board of Directors............................. 5
3.4 Resignation...................................................... 5
3.5 Removal.......................................................... 5
3.6 Vacancies........................................................ 5
3.7 Regular Meetings................................................. 5
3.8 Special Meetings................................................. 6
3.9 Notice........................................................... 6
3.10 Quorum........................................................... 6
3.11 Manner of Acting................................................. 6
3.12 Compensation..................................................... 6
3.13 Action Taken Without a Meeting................................... 6
3.14 Meeting by Telephone.............. .............................. 6
<CAPTION>
ARTICLE IV
OFFICERS AND AGENTS
<C> <S> <C>
4.1 Officers of the Corporation...................................... 7
4.2 Election and Term of Office...................................... 7
4.3 Removal.......................................................... 7
4.4 Vacancies........................................................ 7
4.5 President........................................................ 8
4.6 Vice Presidents.................................................. 8
4.7 Secretary........................................................ 8
4.8 Treasurer........................................................ 9
4.9 Salaries......................................................... 9
4.10 Bonds............................................................ 9
</TABLE>
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<PAGE>
SECTION PAGE
ARTICLE V
STOCK
5.1 Certificates...................................................... 10
5.2 Record............................................................ 11
5.3 Consideration for Shares.......................................... 11
5.4 Cancellation of Certificates...................................... 11
5.5 Lost Certificates................................................. 11
5.6 Transfer of Shares................................................ 11
5.7 Transfer Agents, Registrars, and Paying Agents.................... 12
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
6.1 Indemnification; Advancement of Expenses.......................... 12
6.2 Insurance and Other Financial Arrangements Against Liability
of Directors, Officers, Employees, and Agents................... 12
ARTICLE VII
ACQUISITION OF CONTROLLING INTEREST
7.1 Acquisition of Controlling Interest............................... 13
ARTICLE VIII
EXECUTION OF INSTRUMENTS; LOANS, CHECKS AND ENDORSEMENTS;
DEPOSITS; PROXIES
8.1 Execution of Instruments.......................................... 13
8.2 Loans............................................................. 13
8.3 Checks and Endorsements........................................... 13
8.4 Deposits.......................................................... 14
8.5 Proxies........................................................... 14
8.6 Contracts......................................................... 14
-iii-
<PAGE>
SECTION PAGE
ARTICLE IX
MISCELLANEOUS
9.1 Waivers of Notice................................................. 14
9.2 Corporate Seal.................................................... 14
9.3 Fiscal Year....................................................... 15
9.4 Amendment of Bylaws............................................... 15
9.5 Uniformity of Interpretation and Severability..................... 15
9.6 Emergency Bylaws.................................................. 15
Secretary's Certification............................................... 16
-iv-
<PAGE>
BYLAWS
OF
SEDMET EXPLORATION INC.
ARTICLE I
OFFICES
1.1 REGISTERED OFFICE. The registered office of the Corporation
required by the General Corporation Law of Nevada, Nevada Revised Statutes,
1957 ("NRS"), Chapter 78, to be maintained in Nevada may be, but need not be,
identical with the principal office if in Nevada, and the address of the
registered office may be changed from time to time by the Board of Directors.
1.2 PRINCIPAL OFFICE. The Corporation may have such other office or
offices either within or outside of the State of Nevada as the business of
the Corporation may require from time to time if so designated by the Board
of Directors.
ARTICLE II
STOCKHOLDERS
2.1 ANNUAL MEETING. Unless otherwise designated by the Board of
Directors, the annual meeting shall be held on the date and at the time and
place fixed by the Board of Directors; provided, however, that the first
annual meeting shall be held on a date that is within 18 months after the
date on which the Corporation first has stockholders, and each successive
annual meeting shall be held on a date that is within 18 months after the
preceding annual meeting.
2.2 SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation, for any purpose, may be called by the Chairman of the Board, the
president, any vice president, any two members of the Board of Directors, or
the holders of at least 10% of all of the shares entitled to vote at such
meeting. Any holder or holders of not less than 10% of all the outstanding
shares of the Corporation who desire to call a special meeting pursuant to
this Section 2 of Article II shall notify the president that a special
meeting of the stockholders shall be called. Within 30 days after notice to
the president, the president shall set the date, time, and location of a
stockholders' meeting. The date set by the president shall be not less than
30 nor more than 120 days after the date of notice to the president. If the
president fails to set the date, time, and location of special meeting within
1
<PAGE>
the 30-day time period described above, the stockholder or stockholders
calling the meeting shall set the date, time, and location of the special
meeting. At a special meeting no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of the
meeting.
2.3 PLACE OF MEETING. The Board of Directors may designate any place,
either within or outside the State of Nevada, as the place for any annual
meeting or special meeting called by the Board of Directors. If no
designation is made, or if a meeting shall be called otherwise than by the
Board, the place of meeting shall be the Company's principal offices, whether
within or outside the State of Nevada.
2.4 NOTICE OF MEETING. Written notice signed by an officer designated
by the Board of Directors, stating the place, day, and hour of the meeting
and the purpose for which the meeting is called, shall be delivered
personally or mailed postage prepaid to each stockholder of record entitled
to vote at the meeting not less than 10 nor more than 60 days before the
meeting. If mailed, such notice shall be directed to the stockholder at his
address as it appears upon the records of the Corporation, and notice shall
be deemed to have been given upon the mailing of any such notice, and the
time of the notice shall begin to run from the date upon which the notice is
deposited in the mail for transmission to the stockholder. Personal delivery
of any such notice to any officer of a corporation or association, or to any
member of a partnership, constitutes delivery of the notice to the
corporation, association or partnership. Any stockholder may waive notice of
any meeting by a writing signed by him, or his duly authorized attorney,
either before or after the meeting.
2.5 ADJOURNMENT. When a meeting is for any reason adjourned to
another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
2.6 ORGANIZATION. The president or any vice president shall call
meetings of stockholders to order and act as chairman of such meetings. In
the absence of said officers, any stockholder entitled to vote at that
meeting, or any proxy of any such stockholder, may call the meeting to order
and a chairman shall be elected by a majority of the stockholders entitled to
vote at that meeting. In the absence of the secretary or any assistant
secretary of the Corporation, any person appointed by the chairman shall act
as secretary of such meeting. An appropriate number of inspectors for any
meeting of stockholders may be appointed by the chairman of such meeting.
Inspectors so appointed will open and close the polls, will receive and take
charge of proxies and ballots, and will decide all questions as to the
qualifications of voters, validity of proxies and ballots, and the number of
votes properly cast.
2
<PAGE>
2.7 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The directors
may prescribe a period not exceeding 60 days before any meeting of the
stockholders during which no transfer of stock on the books of the
Corporation may be made, or may fix a day not more than 60 days before the
holding of any such meeting as the day as of which stockholders entitled to
notice of and to vote at such meetings must be determined. Only stockholders
of record on that day are entitled to notice or to vote at such meeting.
2.8 QUORUM. Unless otherwise provided by the Articles of Incorporation,
one-third of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
stockholders. If fewer than one-third of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting without further notice for a period not to exceed 60 days at any
one adjournment. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The stockholders present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of stockholders so that less than a quorum
remains.
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall
be the act of the stockholders, unless the vote of a greater number or voting
by classes is required by law or the Articles of Incorporation.
2.9 PROXIES. At all meetings of stockholders, a stockholder may vote by
proxy, as prescribed by law. Such proxy shall be filed with the secretary of
the Corporation before or at the time of the meeting. No proxy shall be
valid after 6 months from the date of its creation, unless it is coupled with
an interest, or unless the stockholder specifies in it the length of time for
which it is to continue in force, which may not exceed 7 years from the date
of its creation.
2.10 VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote, and each fractional share shall be entitled to
a corresponding fractional vote on each matter submitted to a vote at a
meeting of stockholders, except as may be otherwise provided in the Articles
of Incorporation or in the resolution providing for the issuance of the stock
adopted by the Board of Directors pursuant to authority expressly vested in
it by the provisions of the Articles of Incorporation. If the Articles of
Incorporation or any such resolution provide for more or less than one vote
per share for any class or series of shares on any matter, every reference in
the Articles of Incorporation, these Bylaws and the General Corporation Law
of Nevada to a majority or other proportion or number of shares shall be
deemed to refer to a majority or other proportion of the voting power of all
of the shares or those classes or series of shares, as may be required by the
Articles of Incorporation, or in the resolution providing for the issuance of
the stock adopted by the Board of Directors pursuant to authority expressly
vested in it by the Articles of
3
<PAGE>
Incorporation, or the General Corporation Law of Nevada. Cumulative voting
shall not be allowed. Unless the General Corporation Law of Nevada, the
Articles of Incorporation, or these Bylaws provide for different proportions,
an act of stockholders who hold at least a majority of the voting power and
are present at a meeting at which a quorum is present is the act of the
stockholders.
2.11 ACTION TAKEN WITHOUT A MEETING. Unless otherwise provided in the
Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at a meeting of the stockholders may be taken without a meeting
if a written consent thereto is signed by stockholders holding at least a
majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consents is required. In no instance where action is authorized by
written consent need a meeting of stockholders be called or notice given. The
written consent must be filed with the minutes of the proceedings of the
stockholders.
2.12 MEETINGS BY TELEPHONE. Unless other restricted by the Articles of
Incorporation or these Bylaws, stockholders may participate in a meeting of
stockholders by means of a telephone conference or similar method of
communication by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section constitutes
presence in person at the meeting.
ARTICLE III
DIRECTORS
3.1 BOARD OF DIRECTORS; NUMBER; QUALIFICATIONS; ELECTION. The
Corporation shall be managed by a Board of Directors, all of whom must be
natural persons at least 18 years of age. Directors need not be residents of
the State of Nevada or stockholders of the Corporation. The number of
directors of the Corporation shall be not less than one nor more than twelve.
Subject to such limitations, the number of directors may be increased or
decreased by resolution of the Board of Directors, but no decrease shall have
the effect of shortening the term of any incumbent director. Subject to the
provisions of Article III of the Corporation's Articles of Incorporation,
each director shall hold office until the next annual meeting of shareholders
or until his successor has been elected and qualified.
3.2 POWERS OF THE BOARD OF DIRECTORS: GENERALLY. Subject only to such
limitations as may be provided by the General Corporation Law of Nevada or
the Articles of Incorporation, the Board of Directors shall have full control
over the affairs of the Corporation.
4
<PAGE>
3.3 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more
directors, which, to the extent provided in the resolution or resolutions or
in these Bylaws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
and may have power to authorize the seal of the Corporation to be affixed to
all papers on which the Corporation desires to place on a seal. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Unless
the Articles of Incorporation or these Bylaws provide otherwise, the Board
of Directors may appoint natural persons who are not directors to serve on
committees.
3.4 RESIGNATION. Any director of the Corporation may resign at any time
by giving written notice of his resignation to the Board of Directors, the
president, any vice president, or the secretary of the Corporation. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
When one or more directors shall resign from the Board, effective at a future
date, a majority of the directors then in office.
3.5 REMOVAL. Except as otherwise provided in the Articles of
Incorporation, any director may be removed, either with or without cause, at
any time by the vote of the stockholders representing not less than
two-thirds of the voting power of the issued and outstanding stock entitled
to voting power.
3.6 VACANCIES. All vacancies, including those caused by an increase in
the number of directors, may be filled by a majority of the remaining
directors, though less than a quorum, unless it is otherwise provided in the
Articles of Incorporation. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. A director
elected to fill a vacancy caused by an increase in the number of directors
shall hold office until the next annual meeting of stockholders and until his
successor has been elected and has qualified.
3.7 REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after and at the
same place as the annual meeting of stockholders. The Board of Directors may
provide by resolution the time and place, either within or outside the State
of Nevada, for the holding of additional regular meetings without other
notice than such resolution.
5
<PAGE>
3.8 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the president or a one-third of the
directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or
outside Nevada, as the place for holding any special meeting of the Board of
Directors called by them.
3.9 NOTICE. Notice of any special meeting shall be given at least two
days previously thereto by written notice delivered personally or mailed
to each director at his business address. Any director may waive notice of
any meeting. A director's presence at a meeting shall constitute a waiver of
notice of such meeting if the director's oral consent is entered on the
minutes or by taking part in the deliberations at such meeting without
objecting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.10 QUORUM. A majority of the number of directors elected and
qualified at the time of the meeting shall constitute a quorum for the
transaction of business at any such meeting of the Board of Directors, but
if less than such majority is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice.
3.11 MANNER OF ACTING. If a quorum is present, the affirmative vote of
a majority of the directors present at the meeting and entitled to vote on
that particular matter shall be the act of the Board, unless the vote of a
greater number is required by law or the Articles of Incorporation.
3.12 COMPENSATION. By resolution of the Board of Directors, any
director may be paid any one or more of the following: his expenses, if any,
of attendance at meetings; a fixed sum for attendance at such meeting; or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
3.13 ACTION TAKEN WITHOUT A MEETING. Unless otherwise provided in the
Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at a meeting of the Board of Directors or a committee thereof may
be taken without a meeting if, before or after the action, a written consent
thereto is signed by all the members of the Board or of the committee. The
written consent must be filed with the minutes of the proceedings of the
Board or committee.
6
<PAGE>
3.14 MEETINGS BY TELEPHONE. Unless other restricted by the Articles of
Incorporation or these Bylaws, members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board
or committee by means of a telephone conference or similar method of
communication by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section constitutes
presence in person at the meeting.
ARTICLE IV
OFFICERS AND AGENTS
4.1 OFFICERS OF THE CORPORATION. The Corporation shall have a
president, a secretary, and a treasurer, each of whom shall be elected by the
Board of Directors. The Board of Directors may appoint one or more vice
presidents and such other officers, assistant officers, committees, and
agents, including a chairman of the board, assistant secretaries, and
assistant treasurers, as they may consider necessary, who shall be chosen in
such manner and hold their offices for such terms and have such authority and
duties as from time to time may be determined by the Board of Directors. One
person may hold any two or more offices. The officers of the Corporation
shall be natural persons 18 years of age or older. In all cases where the
duties of any officer, agent, or employee are not prescribed by the Bylaws or
by the Board of Directors, such officer, agent, or employee shall follow the
orders and instructions of (a) the president, and if a chairman of the board
has been elected, then (b) the chairman of the board.
4.2 ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected by the Board of Directors annually at the first meeting of
the Board held after each annual meeting of the stockholders. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold office until
the first of the following occurs: until his successor shall have been duly
elected and shall have qualified; or until his death, or until he shall
resign; or until he shall have been removed in the manner hereinafter
provided.
4.3 REMOVAL. Any officer or agent may be removed by the Board of
Directors or by the executive committee, if any, whenever in its judgment the
best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
4.4 VACANCIES. A vacancy in any office, however occurring, may be
filled by the Board of Directors for the unexpired portion of the term.
7
<PAGE>
4.5 PRESIDENT. The president shall, subject to the direction and
supervision of the Board of Directors, be the chief executive officer of the
Corporation and shall have general and active control of its affairs and
business and general supervision of its officers, agents, and employees. He
shall, unless otherwise directed by the Board of Directors, attend in person
or by substitute appointed by him, or shall execute, on behalf of the
Corporation, written instruments appointing a proxy or proxies to represent
the Corporation, at all meetings of the stockholders of any other corporation
in which the Corporation shall hold any stock. He may, on behalf of the
Corporation, in person or by substitute or by proxy, execute written waivers
of notice and consents with respect to any such meetings. At all such
meetings and otherwise, the president, in person or by substitute or proxy as
aforesaid, may vote the stock so held by the Corporation and may execute
written consents and other instruments with respect to such stock and may
exercise any and all rights and powers incident to the ownership of said
stock, subject however to the instructions, if any, of the Board of
Directors. The president shall have custody of the treasurer's bond, if any.
If a chairman of the board has been elected, the chairman of the board shall
have, subject to the direction and modification of the Board of Directors,
all the same responsibilities, rights, and obligations as described in these
Bylaws for the president.
4.6 VICE PRESIDENTS. The vice presidents, if any, shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the Board of Directors. In the absence of the president, the
vice president designated by the Board of Directors or (if there be no such
designation) the vice president designated in writing by the president shall
have the powers and perform the duties of the president. If no such
designation shall be made, all vice presidents may exercise such powers and
perform such duties.
4.7 SECRETARY. The secretary shall perform the following: (a) keep
the minutes of the proceedings of the stockholders, executive committee, and
the Board of Directors; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian
of the corporate records and of the seal of the Corporation and affix the
seal to all documents when authorized by the Board of Directors; (d) keep, at
the Corporation's registered office or principal place of business within or
outside Nevada, a record containing the names and addresses of all
stockholders and the number and class of shares held by each, unless such a
record shall be kept at the office of the Corporation's transfer agent or
registrar; (e) sign with the president or a vice president, certificates for
shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation, unless the Corporation has a transfer
agent; and (g) in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him
by the president or by the Board of Directors. Assistant secretaries, if any,
shall have the same duties and powers, subject to supervision by the
secretary.
8
<PAGE>
4.8 TREASURER. The treasurer shall be the principal financial officer
of the Corporation and shall have the care and custody of all funds,
securities, evidences of indebtedness, and other personal property of the
Corporation, and shall deposit the same in accordance with the instructions
of the Board of Directors. He shall receive and give receipts and
acquittances for monies paid in or on account of the Corporation, and shall
pay out of the funds on hand all bills, payrolls, and other just debts of the
Corporation of whatever nature upon maturity. He shall perform all other
duties incident to the office of the treasurer and, upon request of the
Board, shall make such reports to it as may be required at any time. He
shall, if required by the Board, give the Corporation a bond in such sums
and with such sureties as shall be satisfactory to the Board, conditioned
upon the faithful performance of his duties and for the restoration to the
Corporation of all books, papers, vouchers, money, and other property of
whatever kind in his possession or under his control belonging to the
Corporation. He shall have such other powers and perform such other duties as
may be from time to time prescribed by the Board of Directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
Corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account,
prepare and file all local, state, and federal tax returns, prescribe and
maintain an adequate system of internal audit, and prepare and furnish to the
president and the Board of Directors statements of account showing the
financial position of the Corporation and the results of its operations.
4.9 SALARIES. Officers of the Corporation shall be entitled to such
salaries, emoluments, compensation, or reimbursement as shall be fixed or
allowed from time to time by the Board of Directors.
4.10 BONDS. If the Board of Directors by resolution shall so require,
any officer or agent of the Corporation shall give bond to the Corporation in
such amount and with such surety as the Board of Directors may deem
sufficient, conditioned upon the faithful performance of that officer's or
agent's duties and offices.
9
<PAGE>
ARTICLE V
STOCK
5.1 CERTIFICATES. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the Corporation by
its president or a vice president and by the treasurer or an assistant
treasurer or by the secretary or an assistant secretary, and shall be sealed
with the seal of the Corporation, or with a facsimile thereof. Whenever any
certificate is countersigned or otherwise authenticated by a transfer agent
or transfer clerk, and by a registrar, then a facsimile of the signatures of
the officers or agents, the transfer agent or transfer clerk or the registrar
of the Corporation may be printed or lithographed upon the certificate in
lieu of the actual signatures. If the Corporation uses facsimile signatures
of its officers and agents on its stock certificates, it cannot act as the
registrar of its own stock, but its transfer agent and registrar may be
identical if the institution acting in those dual capacities countersigns or
otherwise authenticates any stock certificates in both capacities. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate
is delivered by the Corporation, the certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed the certificates, or whose facsimile
signature has been used thereon, had not ceased to be an officer of the
Corporation. If the Corporation is authorized to issue shares of more than
one class or more than one series of any class, each certificate shall set
forth upon the face or back of the certificate or shall state that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued and, if the
Corporation is authorized to issue any preferred or special class in series,
the variations in the relative rights and preferences between the shares of
each such series, so far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the relative rights
and preferences of subsequent series.
Each certificate representing shares shall state the following upon the
face thereof: the name of the state of the Corporation's organization; the
name of the person to whom issued; the number and class of shares and the
designation of the series, if any, which such certificate represents; the par
value of each share represented by such certificate or a statement that the
shares are without par value. Certificates of stock shall be in such form
consistent with law as shall be prescribed by the Board of Directors. No
certificate shall be issued until the shares represented thereby are fully
paid.
10
<PAGE>
5.2 RECORD. A record shall be kept of the name of each person or
other entity holding the stock represented by each certificate for shares of
the Corporation issued, the number of shares represented by each such
certificate, the date thereof and, in the case of cancellation, the date of
cancellation. The person or other entity in whose name shares of stock stand
on the books of the Corporation shall be deemed the owner thereof, and thus a
holder of record of such shares of stock, for all purposes as regards the
Corporation.
5.3 CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof)
as shall be fixed from time to time by the Board of Directors. That part of
the surplus of the Corporation which is transferred to stated capital upon
the issuance of shares as a share dividend shall be deemed the consideration
for the issuance of such dividend shares. Such consideration may consist, in
whole or in part, of money, promissory notes, other property, tangible or
intangible, or in labor or services actually performed for the Corporation,
contracts for services to be performed or other securities of the Corporation.
5.4 CANCELLATION OF CERTIFICATES. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and canceled, except as herein provided
with respect to lost, stolen, or destroyed certificates.
5.5 LOST CERTIFICATES. In cases of the alleged loss, destruction, or
mutilation of a certificate of stock, the Board of Directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions
in conformity with law as it may prescribe. The Board of Directors may in
its discretion require a bond, in such form and amount and with such surety
as it may determine, before issuing a new certificate.
5.6 TRANSFER OF SHARES. Upon surrender to the Corporation or to a
transfer agent of the Corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, and such documentary stamps as may be required by law, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock shall
be entered on the stock book of the Corporation which shall be kept at its
principal office or by its registrar duly appointed.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claim to or interest in such share
on the part of any other person whether or not it shall have express or other
notice thereof, except as may be required by the laws of Nevada.
11
<PAGE>
5.7 TRANSFER AGENTS, REGISTRARS, AND PAYING AGENTS. The Board may at
its discretion appoint one or more transfer agents, registrars, and agents
for making payment upon any class of stock, bond, debenture, or other security
of the Corporation. Such agents and registrars may be located either within
or outside Nevada. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
6.1 INDEMNIFICATION; ADVANCEMENT OF EXPENSES. To the fullest extent
permitted by the laws of the State of Nevada (currently set forth in NRS
78.751), as the same now exists or may hereafter be amended or supplemented,
the Corporation shall indemnify its directors and officers, including payment
of expenses as they are incurred and in advance of the final disposition of
any action, suit, or proceeding. Employees, agents, and other persons may be
similarly indemnified by the Corporation, including advancement of expenses,
in such case or cases and to the extent set forth in a resolution or
resolutions adopted by the Board of Directors. No amendment of this Section
shall have any effect on indemnification or advancement of expenses relating
to any event arising prior to the date of such amendment.
6.2 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS. To the fullest extent permitted
by the laws of the State of Nevada (currently set forth in NRS 78.752), as
the same now exists or may hereafter be amended or supplemented, the
Corporation may purchase and maintain insurance and make other financial
arrangements on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, for any
liability asserted against such person and liability and expense incurred by
such person in its capacity as a director, officer, employee, or agent, or
arising out of such person's status as such, whether or not the Corporation
has the authority to indemnify such person against such liability and
expenses.
12
<PAGE>
ARTICLE VII
ACQUISITION OF CONTROLLING INTEREST
7.1 ACQUISITION OF CONTROLLING INTEREST. The provisions of the
General Corporation Law of Nevada pertaining to the acquisition of a
controlling interest (currently set forth NRS 78.378 to 78.3793, inclusive),
as the same now exists or may hereafter be amended or supplemented, shall not
apply to the Corporation.
ARTICLE VIII
EXECUTION OF INSTRUMENTS; LOANS, CHECKS AND ENDORSEMENTS;
DEPOSITS; PROXIES
8.1 EXECUTION OF INSTRUMENTS. The president or any vice president
shall have the power to execute and deliver on behalf of and in the name of
the Corporation any instrument requiring the signature of an officer of the
Corporation, except as otherwise provided in these Bylaws or where the
execution and delivery thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. Unless
authorized to do so by these Bylaws or by the Board of Directors, no officer,
agent, or employee shall have any power or authority to bind the Corporation
in any way, to pledge its credit, or to render it liable pecuniarily for any
purpose or in any amount.
8.2 LOANS. The Corporation may lend money to, guarantee the
obligations of, and otherwise assist directors, officers, and employees of
the Corporation, or directors of another corporation of which the Corporation
owns a majority of the voting stock, only upon compliance with the
requirements of the General Corporation Law of Nevada.
No loans shall be contracted on behalf of the Corporation and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
8.3 CHECKS AND ENDORSEMENTS. All checks, drafts, or other orders for
the payment of money, obligations, notes, or other evidences of indebtedness,
bills of lading, warehouse receipts, trade acceptances, and other such
instruments shall be signed or endorsed by such officers or agents of the
Corporation as shall from time to time be determined by resolution of the
Board of Directors, which resolution may provide for the use of facsimile
signatures.
8.4 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the Corporation's credit in such
banks or other depositories as shall from time to time be determined by
resolution of the Board of Directors, which
13
<PAGE>
resolution may specify the officers or agents of the Corporation who shall
have the power, and the manner in which such power shall be exercised, to
make such deposits and to endorse, assign, and deliver for collection and
deposit checks, drafts, and other orders for the payment of money payable to
the Corporation or its order.
8.5 PROXIES. Unless otherwise provided by resolution adopted by the
Board of Directors, the president or any vice president may from time to time
appoint one or more agents or attorneys-in-fact of the Corporation, in the
name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, association, or other entity any of
whose stock or other securities may be held by the Corporation, at meetings
of the holders of the stock or other securities of such other corporation,
association, or other entity or to consent in writing, in the name of the
Corporation as such holder, to any action by such other corporation,
association, or other entity, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and
may execute or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the
premises.
8.6 CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
ARTICLE IX
MISCELLANEOUS
9.1 WAIVERS OF NOTICE. Whenever notice is required by the General
Corporation Law of Nevada, by the Articles of Incorporation, or by these
Bylaws, a waiver thereof in writing signed by the director, stockholder, or
other person entitled to said notice, whether before, at, or after the time
stated therein, or his appearance at such meeting in person or (in the case
of a stockholders' meeting) by proxy, shall be equivalent to such notice.
9.2 CORPORATE SEAL. The Board of Directors may adopt a seal circular
in form and bearing the name of the Corporation, the state of its
incorporation, and the word "Seal" which, when adopted, shall constitute the
seal of the Corporation. The seal may be used by causing it or a facsimile of
it to be impressed, affixed, manually reproduced, or rubber stamped with
indelible ink.
9.3 FISCAL YEAR. The Board of Directors may, by resolution, adopt a
fiscal year for the Corporation.
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<PAGE>
9.4 AMENDMENT OF BYLAWS. The provisions of these Bylaws may at any
time, and from time to time, be amended, supplemented or repealed by the
Board of Directors.
9.5 UNIFORMITY OF INTERPRETATION AND SEVERABILITY. These Bylaws shall be
so interpreted and contrued as to conform to the Articles of Incorporation
and the laws of the State of Nevada or of any other state in which conformity
may become necessary by reason of the qualification of the Corporation to do
business in such state, and where conflict between these Bylaws, the Articles
of Incorporation or the laws of such a state has arisen or shall arise, these
Bylaws shall be considered to be modified to the extent, but only to the
extent, conformity shall require. If any provision hereof or the application
thereof shall be deemed to be invalid by reason of the foregoing sentence,
such invalidity shall not affect the validity of the remainder of these
Bylaws without the invalid provision or the application thereof, and the
provisions of these Bylaws are declared to be severable.
9.6 EMERGENCY BYLAWS. Subject to repeal or change by action of the
stockholders, the Board of Directors may adopt emergency bylaws in accordance
with and pursuant to the provisions of the laws of the State of Nevada.
15
<PAGE>
SECRETARY'S CERTIFICATION
The undersigned Secretary of Sedmet Exploration Inc. (the "Corporation")
hereby certifies that the foregoing Bylaws are the Bylaws of the Corporation
adopted by the Board of Directors as of the 24th day of December, 1997.
By /s/ Colin Leech Porter
------------------------
Dr. Colin Leech Porter
Secretary
16
<PAGE>
- ---------------
NUMBER
- ---------------
01430
- ---------------
- ---------------
SHARES
- ---------------
- ---------------
ENTERTAINMENT BOULEVARD, INC. SEE REVERSE FOR
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA CERTAIN DEFINITIONS
COMMON STOCK CUSIP 2938LA 10 5
THIS CERTIFIES THAT:
IS OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH OF
ENTERTAINMENT BOULEVARD, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Nevada,
and to the Articles of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
/s/ [ILLEGIBLE] [SEAL] /s/ [ILLEGIBLE]
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED AMERICAN SECURITIES TRANSFER & TRUST, INC.
(BOX [ILLEGIBLE], DENVER, CO [ILLEGIBLE])
BY:
TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE
<PAGE>
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE OF
THIS CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
TEN COM - AS TENENTS IN COMMON
TEN ENT - AS TENENTS BY THE ENTIRETIES
JT TEN - AS JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENENTS IN
COMMON
UNIF GIFT MIN ACT - ................Custodian.................
(CUST) (MINOR)
under Uniform Gifts to Minors
Act .............
(State)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
FOR VALUE RECEIVED, ___________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
_________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________SHARES
OF THE STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT ________________________________________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
-------------------------------
-------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE
FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST
COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK
EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM.
<PAGE>
NUMBER
SHARES
- --------------------------------------------------------------------------------
ENTERTAINMENT BOULEVARD, INC.,
a Nevada Corporation
8% Mandatorily Convertible Series A Preferred Stock, $0.01 Per Share
(10,000 Shares Authorized)
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT ___________________________________________ IS THE HOLDER
OF _________________________________ SHARES OF THE ABOVE REFERENCED CAPITAL
STOCK TRANSFIXABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF
IN PERSON OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE HEREUNTO
AFFIXED THIS __________ DAY OF __________ A.D.
/s/ Stephen Brown /s/ Stephen Brown
- ------------------------------ --------------------------------
Stephen Brown SECRETARY Stephen Brown PRESIDENT
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
FOR VALUE RECEIVED ________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
_____________________________
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
________________________________________________________________________________
______________________________________________________________SHARES REPRESENTED
BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________ATTORNEY TO TRANSFER THE SAID SHARES ON
THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION, WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
DATED ____________________________
IN PRESENCE OF _________________________________________________________________
________________________________________________________________________________
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
A COPY OF THE CERTIFICATE OF DESIGNATION SETTING FORTH THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER RIGHTS OF THE 8% MANDATORILY CONVERTIBLE SERIES A PREFERRED
STOCK, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, IS
ATTACHED HERETO.
<PAGE>
EXHIBIT 4.3
WARRANT
THIS CERTIFIES THAT _______________ (such person or persons who are the
owners of the Warrant will be hereinafter referred to as the "Holder"), is
entitled to purchase from ENTERTAINMENT BOULEVARD, INC. (a Nevada corporation)
(the "Company"), at the price and during the period as hereinafter specified, up
to _______ shares of common stock, $.001 par value per share (the "Shares").
1. EXERCISE PRICE/PERIOD
The rights represented by this warrant (the "Warrant") shall be
exercised for a period of one year from the effective date of a
registration statement filed with the United States Securities and
Exchange Commission ("SEC") at US$1.00, subject to adjustment in
accordance with paragraph 8 of hereof.
2. EXERCISE PROCEDURE
The Warrant may be exercised at any time within the period above
specified, in whole or in part, by
(i) the surrender of the Warrant, with the purchase form (the
"Purchase Form") at the end hereof properly executed, at the
principal executive office of the Company (or such other
office or agency as it may designate by notice in writing to
the Holder at the address of the Holder appearing on its
books);
(ii) payment to the Company of the Exercise Price then in effect
for the number of Shares specified in the Purchase Form
together with applicable stock transfer taxes, if any; and
(iii) delivery to the Company of a duly executed agreement signed by
the person(s) designated in the purchase form to the effect
that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7
hereof.
The Warrant shall be deemed to have been exercised, in whole or in part
to the extent specified, immediately prior to the close of business on
the date it is surrendered and payment is made in pursuant to this
paragraph, and the person or persons in whose name or names the
certificates for Shares shall be issuable upon such exercise shall
become the Holder or Holders as of that date. The certificates for the
Shares so purchased shall be delivered to the Holder(s) within a
reasonable time after the Warrant shall have been exercised.
3. TRANSFER
The Warrant is issued under Regulation D to the United States
Securities Act of 1933, as amended (the "1933 Act"), and shall not be
transferred, sold, assigned, or hypothecated except pursuant to an
effective registration statement under the 1933 Act or an exemption
therefrom. Any such assignment shall be effected by the Holder by
(i) executing the form of assignment at the end hereof and
(ii) surrendering the Warrant for cancellation at the office or
agency of the Company referred to in paragraph 2 hereof,
1
<PAGE>
whereupon the Company shall issue, in the name(s) specified by the
Holder ("Transferee(s)") and, which may include the Holder, a new
Warrant or Warrants of like tenor representing in the aggregate rights
to purchase the same number of Shares as are purchasable hereunder.
4. UNDERLYING SHARES OF COMMON STOCK
The Company covenants and agrees that all Shares which may be issued
upon exercise of the Warrants will, upon issuance, be duly and validly
issued, fully paid and nonassessable. The Company further covenants and
agrees that during the periods within which the Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of Shares to provide for the exercise of the Warrant.
5. NO ENTITLEMENT
The Warrant shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. FILING OF REGISTRATION STATEMENT
(a) The Company will include the Shares underlying the Warrant
in the first registration statement filed with the SEC
subsequent to the date hereof. Notwithstanding, if such
registration statement relates to an underwriting, the
Company shall use its best efforts to cause the underwriter
to permit the Holder to include the Underlying Shares in
such underwritten offering. If the underwriter advises the
Holder that the total amount of securities which the Holder
desires to include in such offering is such as to
materially and adversely affect its success, then the
number of Underlying Shares to be offered for the account
of the Holder shall be eliminated or reduced to the extent
recommended by such underwriter pro rata to all persons
similarly situated. The Holder will pay the Holder's own
legal fees and expenses and any underwriting discounts and
commissions on the securities sold by such Holder but shall
not be responsible for any other expenses of such
registration.
The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate
the public sale or other disposition of the Shares. The
Holder shall furnish information and indemnification as set
forth in paragraph 7 except that the maximum amount which
may be recovered from the Holder shall be limited to the
amount of proceeds received by the Holder from the sale of
the Shares.
(b) In the event persons who have the right to purchase 50% of
the Underlying Shares, subsequent to the date on which the
Company becomes a "reporting" company under SEC Rules shall
give notice to the Company at any time to the effect that
they desire to register under the 1933 Act the Underlying
Shares, then the Company will promptly, but no later than
60 days after receipt of such notice, file a registration
statement or a post-effective amendment to a current
registration statement pursuant to the 1933 Act, to the end
that the Underlying Shares may be publicly sold under the
1933 Act; and the Company will use its best efforts to
cause such registration to become and remain effective for
a period of 120 days; provided that each Holder shall
furnish the Company appropriate information in connection
therewith as the Company may reasonably request in writing.
Persons who have the right to purchase 50% of the
Underlying Shares may make such request on only two
occasions during the term of the Warrant. Within ten
business days after receiving any such request, the Company
shall give notice to each Holder advising such Holder that
it is registering Underlying Shares and shall offer to
include therein each
2
<PAGE>
Holder's Underlying Shares. Each Holder electing to include
Underlying Shares in any such offering shall provide
written notice to the Company within twenty days after
receipt of notice from the Company. The failure to provide
such notice to the Company shall be deemed conclusive
evidence of such holder's election not to include
Underlying Shares owned by such persons in such offering.
All costs and expenses of only one such registration shall
be borne by the Company, except that each Holder shall bear
the fees of the Holder's own counsel and any underwriting
discounts or commissions applicable to any of the
securities sold by such Holder.
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this section if
(i) the Company is engaged in a material acquisition,
reorganization, or divestiture;
(ii) the Company is currently engaged in a self-tender or exchange
offer and the filing of a registration statement would cause a
violation of Rule 10b-6 under the Securities Exchange Act of
1934;
(iii) the Company is engaged in an underwritten offering and the
underwriter has advised the Company in writing that such
registration statement would have a material adverse effect on
the consummation of such offering; or
(iv) the Company is subject to an underwriter's lockup as a
result of an underwritten public offering and such
underwriter has refused in writing, the Company's request
to waive such lockup. In the event of such postponement,
the Company shall be required to file the registration
statement pursuant to this section, within 60 days of the
expiration of the event requiring such postponement.
The Company will use its best efforts to maintain the
currency of any registration statement under the 1933 Act
for a period of at least six months from the effective date
thereof. The Company shall supply prospectuses, and such
other documents as the Holder may reasonably request in
order to facilitate the public sale or other disposition of
the Shares, use its best efforts to register and qualify
any of the Underlying Shares for sale in such states as
such Holder designates, provided that the Company shall not
be required to qualify as a foreign corporation or a dealer
in securities or execute a general consent to service of
process in any jurisdiction in any action and furnish
indemnification in the manner provided in paragraph 7
hereof.
7. INDEMNIFICATION
(a) Whenever pursuant to paragraph 6 a registration statement
relating to the Warrant or the Underlying Shares, is filed
under the 1933 Act, the Company will indemnify and hold
harmless each Holder whose Underlying Shares are being
registered (the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the 1933 Act) the
Distributing Holder, against any claims or liabilities to
which such person may become subject, insofar as such
claims or liabilities arise out of any alleged untrue
statement of any material fact contained in any such
registration statement or any amendment or supplement
thereto, or arise out of or are based upon the omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading;
and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other
expenses reasonably incurred by the Distributing Holder or
such controlling person or underwriter in connection with
investigating or
3
<PAGE>
defending any such loss, claim, damage, liability, or action;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission
made in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or
supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder or any other
Distributing Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers
who have signed said registration statement and such
amendments and supplements thereto, and each person, if
any, who controls the Company (within the meaning of the
1933 Act) against any losses, claims, damages, or
liabilities, joint and several, to which the Company or any
such director, officer, or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages, or liabilities arise out of or are
based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said
amendment or supplement, or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent that such untrue
statement or alleged untrue statement or omission or
alleged omission was made in said registration statement,
said preliminary prospectus, said final prospectus, or said
amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing
Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer, or
controlling person for any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party, give the indemnifying
party notice of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise
than under this Paragraph 7.
(d) In case any such action is brought against any indemnified
party, and such party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this paragraph 7 for any legal or
other expenses subsequently incurred by such indemnified
party in connection with the defense thereof.
8. ADJUSTMENT
The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be
subject to adjustment from time to time upon the happening of certain
events as follows:
4
<PAGE>
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding Shares; (ii) subdivide or
reclassify its outstanding shares of into a greater number
of shares, or (iii) combine or reclassify its outstanding
shares into a smaller number of shares, the Exercise Price
in effect at the time of the record date for such dividend
or distribution or of the effective date of such
subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by
multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares
outstanding after giving effect to such action, and the
numerator of which shall be the number of shares
outstanding immediately prior to such action.
(b) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its common
stock entitling them to subscribe for or purchase Shares
(or securities convertible into common stock) at a price
(the "Subscription Price") (or having a conversion price
per share) less than the current market price of the Shares
(as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so
that the same shall equal the price determined by
multiplying the number of shares then comprising underlying
Shares by the product of the Exercise Price in effect
immediately prior to the date of such issuance multiplied
by a fraction, the numerator of which shall be the sum of
the number of Shares outstanding on the record date
mentioned below and the number of additional Shares which
the aggregate offering price of the total number of Shares
so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such
current market price per share of its common stock, and the
denominator of which shall be the sum of the number of
Shares outstanding on such record date and the number of
additional Shares offered for subscription or purchase (or
into which the convertible securities so offered are
convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such
rights or warrants; and to the extent that Shares are not
delivered (or securities convertible into its common stock
are not delivered) after the expiration of such rights or
warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the
number of Shares (or securities convertible into its common
stock actually delivered).
(c) In case the Company shall hereafter distribute to the
holders of its common stock evidences of its indebtedness
or assets (excluding cash dividends or distributions and
dividends or distributions referred to in Subsection (a)
above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such
case the Exercise Price in effect thereafter shall be
determined by multiplying the number of shares then
comprising an Shares by the product of the Exercise Price
in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number
of Shares outstanding multiplied by the current market
price of the Shares (as defined in Subsection (e) below),
less the fair market value (as determined by the Company's
Board of Directors) of the assets or evidences of
indebtedness so distributed or of such rights or warrants,
and the denominator of which shall be the total number of
Shares outstanding multiplied by such current market price
per share of its common stock. Such adjustment shall be
made successively whenever such a record date is fixed.
Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately
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<PAGE>
after the record date for the determination of
shareholders entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of the
Warrant is adjusted pursuant to Subsections (a), (b) or (c)
above, the number of Shares purchasable upon exercise of the
Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of the
Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as
adjusted.
(e) For the purpose of any computation under Subsections (b)
or (c) above, the current market price per share of its
common stock at any date shall be deemed to be the
average of the daily closing prices for 20 consecutive
business days before such date. The closing price for
each day shall be the last sale price regular way or, in
the case no such reported sale takes place on such day,
the average of the last reported bid and asked prices
regular way, in either case on the principal national
securities exchange on which its common stock is admitted
to trading or listed, or if not listed or admitted to
trading on such exchange, the average of the highest
reported bid and lowest reported asked prices as
reported by NASDAQ, or other similar organization if
NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by
the Board of Directors.
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or
decrease of at least fifteen cents ($0.15) in such price;
provided, however, that an adjustments which by reason
of this Subsection (i) are not required to be made
shall be carried forward and taken into account in
any subsequent adjustment required to be made
hereunder. All calculations under this Section 8 shall
be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled, but shall
not be required, to make any changes in the Exercise
Price, in addition to those required by this Section 8,
as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in
Shares, or any subdivision, reclassification or
combination of its common stock, hereafter made by the
Company shall not result in any Federal Income tax
liability to the holders of its common stock or securities
convertible into its common stock.
(g) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly, but not later than
10 days after any request for such an adjustment by the
Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable
upon exercise of the Warrant and, if requested,
information describing the transactions giving rise to
such adjustments, to be mailed to the Holder, at the
address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent
certified public accountants selected by its board of
directors (which may be the regular accountants employed
by the Company) to make any computation required by this
Section 8, and a certificate signed by such firm
shall be conclusive evidence of the correctness of
such adjustment.
(h) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder
thereafter shall become entitled to receive any shares of
the Company, other than its common stock, thereafter the
number of such other shares so receivable upon exercise of
the Warrant shall be subject to adjustment from time to
time in a manner
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<PAGE>
and on terms as nearly equivalent as practicable to the
provisions with respect to its common stock contained in
Subsections (a) to (g) inclusive above.
9. APPLICABLE LAW
This Agreement shall be governed by and in accordance with the
laws of the State of Nevada applicable to contracts made and
performed in the State of Nevada.
IN WITNESS WHEREOF, Entertainment Boulevard, Inc. has caused
the Warrant to be signed by its duly authorized officer under
its corporate seal, and the Warrant to be dated the date first
above written.
SEDMET EXPLORATION
--------------------------
Name:
Title:
<PAGE>
Exhibit 4.4
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ENTERTAINMENT BOULEVARD, INC.
Warrant to Purchase __________ Shares
(subject to adjustment as set forth herein)
Exercise Price $1.00 Per Share
(subject to adjustment as set forth herein)
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR REGISTERED OR QUALIFIED UNDER ANY OTHER
APPLICABLE FEDERAL OR STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR QUALIFICATION FILED IN ACCORDANCE WITH THE ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
ENTERTAINMENT BOULEVARD, INC., a Nevada Corporation (the "Company"),
hereby certifies that, for value received, __________ ("Holder") is entitled,
subject to the terms and conditions set forth below, to purchase from the
Company at any time before 5:00 p.m., Los Angeles time, on August 1, 2004
(the "Expiration Date"), up to __________ shares (the "Shares") of the
Company's Common Stock at a purchase price per share of $1.00 (the "Exercise
Price"), subject to adjustment as provided for below.
The number and character of the securities purchasable upon exercise
of this Warrant and the Exercise Price are subject to adjustment as provided
below. The term "Warrant" as used herein shall include this Warrant and any
Warrants issued in substitution for or replacement of this Warrant, or any
Warrants into which this Warrant may be divided or exchanged. The securities
purchasable upon the exercise of this Warrant are hereinafter referred to as
"Warrant Securities." As used herein, "Holder" shall mean the Holder
described above and any valid transferee thereof.
This Warrant may be assigned, transferred, sold, offered for sale, or
exercised by the Holder only upon compliance with all the pertinent provisions
hereof.
<PAGE>
1. EXERCISE OF WARRANT.
(a) Subject to the other terms and conditions of this Warrant,
the purchase rights evidenced by this Warrant may be exercised in whole or in
part at any time, and from time to time, before 5:00 p.m., Los Angeles time, on
the Expiration Date, by the Holder's presentation and surrender of this Warrant
to the Company at its principal office or at the office of the Company's stock
transfer agent, accompanied by a duly executed Notice of Exercise, in the form
attached to, and by this reference incorporated in, this Warrant as Exhibit A,
and by payment of the aggregate Exercise Price, in certified funds or a bank
cashier's check, for the number of Shares specified in the Notice of Exercise.
In the event this Warrant is exercised in part only, as soon as is practicable
after the presentation and surrender of this Warrant to the Company for
exercise, the Company shall execute and deliver to the Holder a new Warrant,
containing the same terms and conditions as this Warrant, evidencing the right
of the Holder to purchase the number of Shares as to which this Warrant has not
been exercised. Notwithstanding the foregoing, the Holder may elect to exercise
this Warrant pursuant to a cashless exercise, whereby the Holder would receive
the full amount of the Warrant Securities less that number of shares of the
Warrant Securities having a fair market value equal to the aggregate Exercise
Price. Assuming such cashless exercise, the Holder will pay no other
consideration in connection with the exercise of this Warrant.
(b) Upon receipt of this Warrant by the Company as described in
subsection (a) above, the Holder shall be deemed to be the holder of record of
the Warrant Securities issuable upon such exercise, notwithstanding that the
transfer books of the Company may then be closed or that certificates
representing such Warrant Securities may not have been prepared or actually
delivered to the Holder.
2. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
(a) All sales, transfers, assignments or hypothecations of this
Warrant must be in compliance with Section 7 hereof. Any assignment or transfer
of this Warrant shall be made by the presentation and surrender of this Warrant
to the Company at its principal office or the office of its transfer agent
accompanied by a duly executed Assignment Form, in the form attached to, and by
this reference incorporated in, this Warrant as Exhibit B. Upon the
presentation and surrender of these items to the Company, the Company, at its
sole expense, shall execute and deliver to the new Holder or Holders a new
Warrant or Warrants, containing the same terms and conditions as this Warrant,
in the name of the new Holder or Holders as named in the Assignment Form, and
this Warrant shall be canceled at that time.
(b) This Warrant, alone or with other Warrants containing
substantially the same terms and conditions and owned by the same Holder, is
exchangeable at the option of the Holder but at the Company's sole expense, at
any time prior to its expiration either by its terms or by its exercise in full
upon presentation and surrender to the Company at the Company's principal office
or at the office of its transfer agent, if any, for another Warrant or other
Warrants, of different denominations but containing the same terms and
conditions as this Warrant, entitling the Holder to purchase the same aggregate
number of Warrant Securities that were purchasable pursuant to the Warrant or
Warrants presented and surrendered. At the time of presentation and surrender
by the Holder to the Company, the Holder also shall deliver to the Company a
written notice, signed by the Holder, specifying the denominations in which new
Warrants are to be issued to the Holder.
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<PAGE>
(c) The Company will execute and deliver to the Holder a new
Warrant containing the same terms and conditions as this Warrant upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, provided that (i) in the case of
loss, theft or destruction, the Company receives from the Holder a reasonably
satisfactory indemnification, and (ii) in the case of mutilation, the Holder
presents and surrenders this Warrant to the Company for cancellation. Any new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company regardless of whether the Warrant that was
lost, stolen, destroyed or mutilated shall be enforceable by anyone at any time.
3. ADJUSTMENTS: PUBLIC OFFERING, STOCK DIVIDENDS, RECLASSIFICATION,
REORGANIZATION, MERGER AND ANTI-DILUTION PROVISIONS.
(a) If the Company increases or decreases the number of its
issued and outstanding shares of Common Stock, or changes in any way the rights
and privileges of such shares, by means of (i) the payment of a stock dividend
or the making of any other distribution on such shares payable in its Common
Stock, (ii) a stock split or reverse stock split or other subdivision of shares,
(iii) a consolidation or combination involving its Common Stock, or (iv) a
reclassification or recapitalization involving its Common Stock, then the
Exercise Price in effect at the time of such action and the number of Warrant
Securities purchasable pursuant to this Warrant at that time shall be
proportionately adjusted so that the numbers, rights, and privileges relating to
the Warrant Securities then purchasable pursuant to this Warrant shall be
increased, decreased or changed in like manner, for the same aggregate purchase
price as set forth in this Warrant, as if the Warrant Securities purchasable
pursuant to this Warrant immediately prior to the event at issue had been
issued, outstanding, fully paid and nonassessable at the time of that event. As
an example, if the Company were to declare a two-for-one stock split or a 100
percent stock dividend, then the unpurchased number of Warrant Securities
subject to this Warrant would be doubled and the Exercise Price for all
unpurchased Warrant Securities would be reduced by 50 percent. These
adjustments would result in the Holder's rights under this Warrant not being
diluted by the stock split or stock dividend and the Holder paying the same
aggregate exercise price.
If the Company shall declare a dividend payable in money on its Common
Stock and at substantially the same time shall offer to its shareholders a right
to purchase new shares of Common Stock from the proceeds of such dividend or for
an amount substantially equal to the dividend, all shares of Common Stock so
issued shall, for purposes of this Warrant, be deemed to have been issued as a
stock dividend.
(b) If the Company pays or makes any dividend or other
distribution upon its Common Stock payable in securities or other property,
excluding money or the Company's Common Stock but including (without limitation)
shares of any other class of the Company's stock or stock or other securities
convertible into or exchangeable for shares of Common Stock or any other class
of the Company's stock or other interests in the Company or its assets
("Convertible Securities"), a proportionate part of those securities or that
other property shall be set aside by the Company and delivered to the Holder in
the event that the Holder exercises this Warrant. The securities and other
property then deliverable to the Holder upon the exercise of this Warrant shall
be in the same ratio to the total securities and property set aside for the
Holder as the number of Warrant Securities with respect to which the Warrant is
then exercised is to the total Warrant Securities purchasable pursuant to this
Warrant at the time the securities or property were set aside for the Holder.
3
<PAGE>
If the Company shall declare a dividend payable in money on its Common
Stock and at substantially the same time shall offer to its shareholders a right
to purchase new shares of a class of stock (other than Common Stock),
Convertible Securities, property or other interests from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
stock, Convertible Securities, property or other interests so issued or
transferred shall, for purposes of this Warrant, be deemed to have been issued
as a dividend or other distribution subject to this subsection (b).
(c) If at any time the Company grants to its shareholders
rights to subscribe pro rata for additional securities of the Company, whether
Common Stock, Convertible Securities, or other classifications, or for any other
securities, property or interests that the Holder would have been entitled to
subscribe for if, immediately prior to such grant, the Holder had exercised this
Warrant, then the Company shall also grant to the Holder the same subscription
rights that the Holder would be entitled to if the Holder had exercised this
Warrant in full immediately prior to such grant.
(d) The Company shall cause effective provision to be made so
that the Holder shall have the right after any event described below, by the
exercise of this Warrant, to purchase for the aggregate Exercise Price described
in this Warrant the kind and amount of shares of stock and other securities, and
property and interests, as would be issued or payable with respect to or in
exchange for the number of Warrant Securities of the Company that are then
purchasable pursuant to this Warrant as if such Warrant Securities had been
issued to the Holder immediately before the occurrence of any of the following
events: (i) the reclassification, capital reorganization, or other similar
change of outstanding shares of Common Stock of the Company, other than as
described and provided for in subsection (a) above; (ii) the merger or
consolidation of the Company with one or more other corporations or other
entities, other than a merger with a subsidiary or affiliate pursuant to which
the Company is the continuing entity and the outstanding shares of Common Stock,
including the Warrant Securities purchasable pursuant to this Warrant, are not
converted or exchanged; or (iii) the spin-off of assets to a subsidiary or an
affiliated entity, or the sale, lease, or exchange of a significant portion of
the Company's assets, in a transaction pursuant to which the Company's
shareholders of record are to receive securities or other interests in another
entity. Any such provision made by the Company for adjustments with respect to
this Warrant shall be as nearly equivalent to the adjustments otherwise provided
for in this Warrant as is reasonably practicable. The foregoing provisions of
this subsection (d) shall similarly apply to successive reclassifications,
capital reorganizations and similar changes of shares of Common Stock and to
successive consolidations, mergers, spin-offs, sales, leases or exchanges.
(e) If any sale, lease or exchange of all, or substantially
all, of the Company's assets or business or any dissolution, liquidation or
winding up of the Company (a "Termination of Business") shall be proposed, the
Company shall deliver written notice to the Holder or Holders of this Warrant in
accordance with Section 3 below as a condition precedent to the consummation of
that Termination of Business. If the result of the Termination of Business is
that shareholders of the Company are to receive securities or other interests of
another entity, the provisions of subsection (d) above shall apply. However, if
the result of the Termination of Business is that shareholders of the Company
are to receive money or property other than securities or other interests in
another entity, the Holder or Holders of this Warrant shall be entitled to
exercise this Warrant prior to the consummation of the event at issue and, with
respect to any Warrant Securities so purchased, shall be entitled to all of the
rights of the other shareholders of Common Stock with respect to any
4
<PAGE>
distribution by the Company in connection with the Termination of Business. In
the event no other entity is involved and subsection (d) does not apply, all
purchase rights under this Warrant shall terminate at the close of business on
the date as of which shareholders of record of the Common Stock shall be
entitled to participate in a distribution of the assets of the Company in
connection with the Termination of Business; provided, that in no event shall
that date be less than 30 days after delivery to the Holder or Holders of this
Warrant of the written notice described above and in Section 4. If the
termination of purchase rights under this Warrant is to occur as a result of the
event at issue, a statement to that effect shall be included in that written
notice.
(f) The provisions of this Section 2 shall apply to successive
events that may occur from time to time but shall only apply to a particular
event if it occurs prior to the expiration of this Warrant either by its terms
or by its exercise in full. All adjustments required hereby shall be calculated
or verified by the Company's independent public accountants.
(g) Unless the context requires otherwise, whenever reference
is made in this Section 2 to the issue or sale of shares of Common Stock, the
term "Common Stock" shall mean (i) the common stock of the Company, (ii) any
other class of stock ranking on a parity with, and having substantially similar
rights and privileges as the Company's common stock, and (iii) any Convertible
Security convertible into either (i) or (ii). However, subject to the
provisions of subsections (d) and (e) above, Warrant Securities issuable upon
exercise of this Warrant shall include only shares of the common stock
designated as common stock of the Company as of the date of this Warrant and
Warrants to purchase such common stock.
(h) For purposes of subsections (a) and (b) above, shares of
Common Stock owned or held at any relevant time by, or for the account of, the
Company, in its treasury or otherwise, shall not be deemed to be outstanding for
purposes of the calculations and adjustments described.
4. NOTICE TO HOLDERS. If, prior to the expiration of this Warrant
either by its terms or by its exercise in full, any of the following shall
occur:
(i) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the
shareholders of its Common Stock of rights to subscribe for or purchase any
securities or any other similar rights; or
(iii) any reclassification, reorganization or similar change of
the Common Stock, or any consolidation or merger to which the Company is a
party, or the sale, lease, or exchange of any significant portion of the assets
of the Company; or
(iv) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) any purchase, retirement or redemption by the Company of
its Common Stock;
5
<PAGE>
then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least 30 days prior to the earliest applicable date
specified below with respect to which notice is to be given, which notice shall
state the following:
(i) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights, or, if a record is not to be taken,
the date as of which the shareholders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined;
(ii) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
purchase, retirement or redemption is expected to become effective, and the
date, if any, as of which the Company's shareholders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up, purchase,
retirement or redemption; and
(iii) if any matters referred to in the foregoing clauses (i) and
(ii) are to be voted upon by shareholders of Common Stock, the date as of which
those shareholders to be entitled to vote are to be determined.
5. OFFICERS' CERTIFICATE. Whenever the Exercise Price or the
aggregate number of Warrant Securities purchasable pursuant to this Warrant
shall be adjusted as required by the provisions of Section 3 above, the Company
shall promptly file with its Secretary or an Assistant Secretary at its
principal office, and with its transfer agent, an officers' certificate executed
by the Company's President and Secretary or Assistant Secretary, describing the
adjustment and setting forth, in reasonable detail, the facts requiring such
adjustment and the basis for and calculation of such adjustment in accordance
with the provisions of this Warrant. Each such officers' certificate shall be
made available to the Holder or Holders of this Warrant for inspection at all
reasonable times, and the Company, after each such adjustment, shall promptly
deliver a copy of the officers' certificate relating to that adjustment to the
Holder or Holders of this Warrant. The officers' certificate described in this
Section 5 shall be deemed to be conclusive as to the correctness of the that
adjustment reflected therein if, and only if, no Holder of this Warrant delivers
written notice to the Company of an objection to the adjustment within 90 days
after the officers' certificate is delivered to the Holder or Holders of this
Warrant. The Company will make its books and records available for inspection
and copying during normal business hours by the Holder so as to permit a
determination as to the correctness of the adjustment. If written notice of an
objection is delivered by a Holder to the Company and the parties cannot
reconcile the dispute, the Holder and the Company shall submit the dispute to
arbitration. Failure to prepare or provide the officers' certificate shall not
modify the parties' rights hereunder.
6. RESERVATION OF WARRANT SECURITIES. The Company hereby agrees that
at all times prior to the Expiration Date it will have authorized, and will
reserve and keep available for issuance and delivery to the Holder, that number
of shares of its Common Stock that may be required from time to time for
issuance and delivery upon the exercise of the then-unexercised portion of this
Warrant and all other similar Warrants then outstanding and unexercised and upon
the exercise of any Warrant Securities.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933; REGISTRATION
RIGHTS.
6
<PAGE>
(a) This Warrant, the Warrant Securities, and all other
securities issued or issuable upon exercise of this Warrant, may not be offered,
sold or transferred, in whole or in part, except in compliance with the Act, and
except in compliance with all applicable state securities laws.
(b) The Company may cause substantially the following legend,
or its equivalent, to be set forth on each certificate representing the Warrant
Securities, or any other security issued or issuable upon exercise of this
Warrant:
"The shares represented by this Certificate have not been registered under the
Securities Act of 1933 ("the Act") and are "restricted securities" as that term
is defined in Rule 144 under the Act. The shares may not be offered for sale,
sold or otherwise transferred except pursuant to an effective registration
statement under the Act or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the satisfaction of the
Company."
(c) If, at any time prior to the Expiration Date, the Company
files a registration statement (other than on Form S-4 or S-8) with the
Securities and Exchange Commission ("SEC"), the Company shall include therein
the Warrant Securities. In connection herewith, the Company shall give written
notice to the Holder at least forty-five (45) days before such registration is
filed and the Holder must notify the Company within ten (10) days of receipt of
such notice if he wishes to include the Warrant Securities in said registration
statement. Notwithstanding anything to the contrary contained in this
subsection (c), the Company shall not be obligated to effect any such
registration hereunder if (i) in any underwritten public offering the
underwriter objects to the inclusion of the Warrant Securities therein or (ii)
all the Warrant Securities may be sold at one time pursuant to Rule 144 under
the Act.
(d) If no such registration statement is filed within one (1)
year after the date of this Warrant, Holder may elect, at any time thereafter,
to require the Company to register the Warrant Securities on any available form
with the SEC. In order to make such election, the Holder must notify the
Company in writing. The Company shall then file the registration statement with
the SEC within thirty (30) days after receipt of such written notice and shall
use its best efforts to cause such registration statement to become effective
and remain effective under the Act.
(e) In connection with the registration of any Warrant
Securities pursuant to this Warrant (i) the cost thereof will be borne by the
Company, except for any applicable underwriting discounts and commissions or any
counsel employed by the Holder and (ii) the indemnification provisions set forth
in Exhibit C attached hereto will apply.
(f) Nothing contained in this Warrant shall be construed as
requiring any Holder to exercise his Warrants prior to the initial filing of any
registration statement or the effectiveness thereof.
8. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of all or any part of this
Warrant. With respect to any fraction of a share of any security called for
upon any exercise of this Warrant, the Company shall pay to the Holder an amount
in money equal to that fraction multiplied by the current market value of that
share. The current market value shall be determined as follows:
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<PAGE>
(i) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
quoted on the Nasdaq quotation service, the current value shall be the last
reported sale price of that security on such exchange or system on the last
business day prior to the date of the applicable exercise of this Warrant or, if
no such sale is made on such day, the average of the highest closing bid and
lowest asked price for such day on such exchange or system; or
(ii) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the current market value shall be the
average of the last reported highest bid and lowest asked prices quoted on
Nasdaq or, if not so quoted, then by the National Quotation Bureau, Inc. on the
last business day prior to the day of the applicable exercise of this Warrant;
or
(iii) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are not
reported, the current market value shall be determined in such reasonable manner
as may be prescribed from time to time by the Board of Directors of the Company,
subject to the objection and arbitration procedure as described in Section 5
above.
9. RIGHTS OF THE HOLDER. The Holder shall not be entitled to any
rights as a shareholder in the Company by reason of this Warrant, either at law
or equity, except as specifically provided for herein. The Company covenants,
however, that for so long as this Warrant is at least partially unexercised, it
will furnish any Holder of this Warrant with copies of all reports and
communications furnished to the shareholders of the Company.
10. CHARGES DUE UPON EXERCISE. The Company shall pay any and all
issue or transfer taxes, including, but not limited to, all federal or state
taxes, that may be payable with respect to the transfer of this Warrant or the
issue or delivery of Warrant Securities upon the exercise of this Warrant.
11. WARRANT SECURITIES TO BE FULLY PAID. The Company covenants that
all Warrant Securities that may be issued and delivered to a Holder of this
Warrant upon the exercise of this Warrant and payment of the Exercise Price will
be, upon such delivery, validly and duly issued, fully paid and nonassessable.
12. NOTICES. All notices, certificates, requests, or other similar
items provided for in this Warrant shall be in writing and shall be personally
delivered or deposited in the United States mail, certified or registered with
return receipt requested, postage prepaid, addressed to the respective party as
indicated in the portions of this Warrant preceding Section 1. All notices
shall be deemed to be delivered upon personal delivery or upon the expiration of
three (3) business days following deposit in the United States mail, postage
prepaid. The addresses of the parties may be changed, and addresses of other
Holders and holders of Warrant Securities may be specified, by written notice
delivered pursuant to this Section 12. The Company's principal office shall be
deemed to be the address provided pursuant to this Section 12 for the delivery
of notices to the Company.
13. APPLICABLE LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of Delaware.
14. MISCELLANEOUS PROVISIONS.
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(a) Subject to the terms and conditions contained herein, this
Warrant shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all holders
of Warrant Securities and the exercise of this Warrant in full shall not
terminate the provisions of this Warrant as it relates to holders of Warrant
Securities.
(b) If the Company fails to perform any of its obligations
hereunder, it shall be liable to the Holder for all damages, costs and expenses
resulting from the failure, including, but not limited to, all reasonable
attorney's fees and disbursements.
(c) This Warrant cannot be changed or terminated or any
performance or condition waived in whole or in part except by an agreement in
writing signed by the party against whom enforcement of the change, termination
or waiver is sought.
(d) If any provision of this Warrant shall be held to be
invalid, illegal or unenforceable, such provision shall be severed, enforced to
the extent possible, or modified in such a way as to make it enforceable, and
the invalidity, illegality or unenforceability shall not affect the remainder of
this Warrant.
(e) The Company agrees to execute such further agreements,
conveyances, certificates and other documents as may be reasonably requested by
the Holder to effectuate the intent and provisions of this Warrant.
(f) Section headings used in this Warrant are for convenience
only and shall not be taken or construed to define or limit any of the terms or
provisions of this Warrant. Unless otherwise
provided, or unless the context shall otherwise require, the use of the singular
shall include the plural and the use of any gender shall include all genders.
Dated: ENTERTAINMENT BOULEVARD, INC.
By:_________________________________
Its: President
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Shares
pursuant to a Warrant.)
The undersigned Holder of a Warrant hereby
(a) irrevocably elects to exercise the Warrant to the extent of
purchasing _______________ Shares;
(b) makes payment in full of the aggregate Exercise Price for
those Shares in the amount of $_________________ by the delivery of certified
funds or a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the securities
underlying such Shares be issued in the name of the undersigned, or, if the name
and address of some other person is specified below, in the name of such other
person:
_______________________________________________
_______________________________________________
_______________________________________________
(Name and address of person OTHER than the undersigned
in whose name Shares are to be registered)
(d) requests, if the number of Shares purchased are not all the
Shares purchasable pursuant to the unexercised portion of the Warrant, that a
new Warrant of like tenor for the remaining Shares purchasable pursuant to the
Warrant be issued and delivered to the undersigned at the address stated below.
Dated: ________________________ _____________________________________
Signature
(This signature must conform in
all respects to the name of the
Holder as specified on the face
of the Warrant.)
_______________________________ _____________________________________
Social Security Number Printed Name
or Employer ID Number
Address: _____________________________
_____________________________
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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name: _________________________________________________
(Please type or print in block letters)
Address: ______________________________________________
______________________________________________
the right to purchase _________________ Shares of Entertainment Boulevard, Inc.
(the "Company") pursuant to the terms and conditions of the Warrant held by the
undersigned. The undersigned hereby authorizes and directs the Company (i) to
issue and deliver to the above-named assignee at the above address a new Warrant
pursuant to which the rights to purchase being assigned may be exercised, and
(ii) if there are rights to purchase Shares remaining pursuant to the
undersigned's Warrant after the assignment contemplated herein, to issue and
deliver to the undersigned at the address stated below a new Warrant evidencing
the right to purchase the number of Shares remaining after issuance and delivery
of the Warrant to the above-named assignee. Except for the number of Shares
purchasable, the new Warrants to be issued and delivered by the Company are to
contain the same terms and conditions as the undersigned's Warrant. To complete
the assignment contemplated by this Assignment Form, the undersigned hereby
irrevocably constitutes and appoints ___________________________ as the
undersigned's attorney-in-fact to transfer the Warrants and the rights
thereunder on the books of the Company with full power of substitution for these
purposes.
Dated: ________________________ _____________________________________
Signature
(This signature must conform in
all respects to the name of the
Holder as specified on the face
of the Warrant.)
_____________________________________
Printed Name
Address: _____________________________
_____________________________
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EXHIBIT C
C1. The Company shall indemnify any holder of the Warrant Securities
to be sold pursuant to any registration statement filed pursuant to this Warrant
("Registration Statement") and any underwriter or person deemed to be an
underwriter under the Act and each person, if any, who controls such holder or
underwriter or person deemed to be an underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act") from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material fact contained in
the Registration Statement, any other registration statement filed by the
Company under the Act, any post-effective amendment to such registration
statements, or any prospectus included therein required to be filed or furnished
by reason of this Warrant, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished or
required to be furnished in writing to the Company by the Holder expressly for
use therein; which indemnification shall include each person, if any, who
controls any such Holder within the meaning of the Act and each officer,
director, employee and agent of such Holder.
C2. Each holder of the Warrant Securities to be sold pursuant to any
Registration Statement shall indemnify the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material fact contained in
the Registration Statement, any other registration statement filed by the
Company under the Act, any post-effective amendment to such registration
statements, or any prospectus included therein required to be filed or furnished
by reason of this Agreement, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent and only to the extent as
such losses, claims, damages or liabilities are caused by any such untrue
statement or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Company by
the Holder expressly for use therein; which indemnification shall include each
person, if any, who controls the Company within the meaning of the Act and each
officer, director, employee and agent of the Company; PROVIDED, however, that
the holder shall not be obligated to indemnify any indemnified person pursuant
to the foregoing indemnity, or to make any contribution pursuant to subsection
C4 below, in an amount in excess of the net proceeds received by such holder
with respect to the sale of the Shares.
C3. Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against any indemnifying
party under this Exhibit C, the indemnified party will notify the indemnifying
party in writing of the commencement thereof, and the indemnifying party will,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of expenses) insofar as such action relates to an alleged
liability in respect of which indemnity may be sought against the indemnifying
party. After notice from the indemnifying party of its election to assume the
defense of such claim or action, the indemnifying party shall no longer
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<PAGE>
be liable to the indemnified party under this Exhibit C for any legal or
other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation. Any
party against whom indemnification may be sought under this Exhibit C shall
not be liable to indemnify any person that might otherwise be indemnified
pursuant hereto for any settlement of any action effected without such
indemnifying party's consent, which consent shall not be unreasonably
withheld.
C4. If for any reason the indemnification provided for in this
Exhibit C is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations.
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WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ENTERTAINMENT BOULEVARD, INC.
Warrant to Purchase ____________ Shares
(subject to adjustment as set forth herein)
Exercise Price $1.00 Per Share
(subject to adjustment as set forth herein)
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR REGISTERED OR QUALIFIED UNDER ANY OTHER
APPLICABLE FEDERAL OR STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR QUALIFICATION FILED IN ACCORDANCE WITH THE ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
ENTERTAINMENT BOULEVARD, INC., a Nevada Corporation (the "Company"),
hereby certifies that, for value received, _____________________ ("Holder") is
entitled, subject to the terms and conditions set forth below, to purchase from
the Company at any time before 5:00 p.m., Los Angeles time, on August 1, 2004
(the "Expiration Date"), up to ______________ shares (the "Shares") of the
Company's Common Stock at a purchase price per share of $1.00 (the "Exercise
Price"), subject to adjustment as provided for below.
The number and character of the securities purchasable upon exercise
of this Warrant and the Exercise Price are subject to adjustment as provided
below. The term "Warrant" as used herein shall include this Warrant and any
Warrants issued in substitution for or replacement of this Warrant, or any
Warrants into which this Warrant may be divided or exchanged. The securities
purchasable upon the exercise of this Warrant are hereinafter referred to as
"Warrant Securities." As used herein, "Holder" shall mean the Holder
described above and any valid transferee thereof.
This Warrant may be assigned, transferred, sold, offered for sale, or
exercised by the Holder only upon compliance with all the pertinent
provisions hereof.
<PAGE>
1. EXERCISE OF WARRANT.
(a) Subject to the other terms and conditions of this
Warrant, the purchase rights evidenced by this Warrant may be exercised in
whole or in part at any time, and from time to time, before 5:00 p.m., Los
Angeles time, on the Expiration Date, by the Holder's presentation and
surrender of this Warrant to the Company at its principal office or at the
office of the Company's stock transfer agent, accompanied by a duly executed
Notice of Exercise, in the form attached to, and by this reference
incorporated in, this Warrant as Exhibit A, and by payment of the aggregate
Exercise Price, in certified funds or a bank cashier's check, for the number
of Shares specified in the Notice of Exercise. In the event this Warrant is
exercised in part only, as soon as is practicable after the presentation and
surrender of this Warrant to the Company for exercise, the Company shall
execute and deliver to the Holder a new Warrant, containing the same terms
and conditions as this Warrant, evidencing the right of the Holder to
purchase the number of Shares as to which this Warrant has not been
exercised.
(b) Upon receipt of this Warrant by the Company as described
in subsection (a) above, the Holder shall be deemed to be the holder of
record of the Warrant Securities issuable upon such exercise, notwithstanding
that the transfer books of the Company may then be closed or that
certificates representing such Warrant Securities may not have been prepared
or actually delivered to the Holder.
2. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
(a) All sales, transfers, assignments or hypothecations of
this Warrant must be in compliance with Section 7 hereof. Any assignment or
transfer of this Warrant shall be made by the presentation and surrender of
this Warrant to the Company at its principal office or the office of its
transfer agent accompanied by a duly executed Assignment Form, in the form
attached to, and by this reference incorporated in, this Warrant as Exhibit
B. Upon the presentation and surrender of these items to the Company, the
Company, at its sole expense, shall execute and deliver to the new Holder or
Holders a new Warrant or Warrants, containing the same terms and conditions
as this Warrant, in the name of the new Holder or Holders as named in the
Assignment Form, and this Warrant shall be canceled at that time.
(b) This Warrant, alone or with other Warrants containing
substantially the same terms and conditions and owned by the same Holder, is
exchangeable at the option of the Holder but at the Company's sole expense,
at any time prior to its expiration either by its terms or by its exercise in
full upon presentation and surrender to the Company at the Company's
principal office or at the office of its transfer agent, if any, for another
Warrant or other Warrants, of different denominations but containing the same
terms and conditions as this Warrant, entitling the Holder to purchase the
same aggregate number of Warrant Securities that were purchasable pursuant to
the Warrant or Warrants presented and surrendered. At the time of
presentation and surrender by the Holder to the Company, the Holder also
shall deliver to the Company a written notice, signed by the Holder,
specifying the denominations in which new Warrants are to be issued to the
Holder.
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<PAGE>
(c) The Company will execute and deliver to the Holder a new
Warrant containing the same terms and conditions as this Warrant upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, provided that (i) in the case of
loss, theft or destruction, the Company receives from the Holder a reasonably
satisfactory indemnification, and (ii) in the case of mutilation, the Holder
presents and surrenders this Warrant to the Company for cancellation. Any
new Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company regardless of whether the Warrant that
was lost, stolen, destroyed or mutilated shall be enforceable by anyone at
any time.
3. ADJUSTMENTS: PUBLIC OFFERING, STOCK DIVIDENDS,
RECLASSIFICATION, REORGANIZATION, MERGER AND ANTI-DILUTION PROVISIONS.
(a) If the Company increases or decreases the number of its
issued and outstanding shares of Common Stock, or changes in any way the
rights and privileges of such shares, by means of (i) the payment of a stock
dividend or the making of any other distribution on such shares payable in
its Common Stock, (ii) a stock split or reverse stock split or other
subdivision of shares, (iii) a consolidation or combination involving its
Common Stock, or (iv) a reclassification or recapitalization involving its
Common Stock, then the Exercise Price in effect at the time of such action
and the number of Warrant Securities purchasable pursuant to this Warrant at
that time shall be proportionately adjusted so that the numbers, rights, and
privileges relating to the Warrant Securities then purchasable pursuant to
this Warrant shall be increased, decreased or changed in like manner, for the
same aggregate purchase price as set forth in this Warrant, as if the Warrant
Securities purchasable pursuant to this Warrant immediately prior to the
event at issue had been issued, outstanding, fully paid and nonassessable at
the time of that event. As an example, if the Company were to declare a
two-for-one stock split or a 100 percent stock dividend, then the unpurchased
number of Warrant Securities subject to this Warrant would be doubled and the
Exercise Price for all unpurchased Warrant Securities would be reduced by 50
percent. These adjustments would result in the Holder's rights under this
Warrant not being diluted by the stock split or stock dividend and the Holder
paying the same aggregate exercise price.
If the Company shall declare a dividend payable in money on its Common
Stock and at substantially the same time shall offer to its shareholders a
right to purchase new shares of Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
Common Stock so issued shall, for purposes of this Warrant, be deemed to have
been issued as a stock dividend.
(b) If the Company pays or makes any dividend or other
distribution upon its Common Stock payable in securities or other property,
excluding money or the Company's Common Stock but including (without limitation)
shares of any other class of the Company's stock or stock or other securities
convertible into or exchangeable for shares of Common Stock or any other class
of the Company's stock or other interests in the Company or its assets
("Convertible Securities"), a proportionate part of those securities or that
other property shall be set aside by the Company and delivered to the Holder in
the event that the Holder exercises this Warrant. The securities and other
property then deliverable to the Holder upon the exercise of this Warrant shall
be in the same ratio to the total securities and property set aside for the
Holder as the number of Warrant Securities with respect to which the Warrant is
then exercised is to
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<PAGE>
the total Warrant Securities purchasable pursuant to this Warrant at the time
the securities or property were set aside for the Holder.
If the Company shall declare a dividend payable in money on its Common
Stock and at substantially the same time shall offer to its shareholders a
right to purchase new shares of a class of stock (other than Common Stock),
Convertible Securities, property or other interests from the proceeds of such
dividend or for an amount substantially equal to the dividend, all shares of
stock, Convertible Securities, property or other interests so issued or
transferred shall, for purposes of this Warrant, be deemed to have been
issued as a dividend or other distribution subject to this subsection (b).
(c) If at any time the Company grants to its shareholders
rights to subscribe pro rata for additional securities of the Company,
whether Common Stock, Convertible Securities, or other classifications, or
for any other securities, property or interests that the Holder would have
been entitled to subscribe for if, immediately prior to such grant, the
Holder had exercised this Warrant, then the Company shall also grant to the
Holder the same subscription rights that the Holder would be entitled to if
the Holder had exercised this Warrant in full immediately prior to such grant.
(d) The Company shall cause effective provision to be made
so that the Holder shall have the right after any event described below, by
the exercise of this Warrant, to purchase for the aggregate Exercise Price
described in this Warrant the kind and amount of shares of stock and other
securities, and property and interests, as would be issued or payable with
respect to or in exchange for the number of Warrant Securities of the Company
that are then purchasable pursuant to this Warrant as if such Warrant
Securities had been issued to the Holder immediately before the occurrence of
any of the following events: (i) the reclassification, capital
reorganization, or other similar change of outstanding shares of Common Stock
of the Company, other than as described and provided for in subsection (a)
above; (ii) the merger or consolidation of the Company with one or more other
corporations or other entities, other than a merger with a subsidiary or
affiliate pursuant to which the Company is the continuing entity and the
outstanding shares of Common Stock, including the Warrant Securities
purchasable pursuant to this Warrant, are not converted or exchanged; or
(iii) the spin-off of assets to a subsidiary or an affiliated entity, or the
sale, lease, or exchange of a significant portion of the Company's assets, in
a transaction pursuant to which the Company's shareholders of record are to
receive securities or other interests in another entity. Any such provision
made by the Company for adjustments with respect to this Warrant shall be as
nearly equivalent to the adjustments otherwise provided for in this Warrant
as is reasonably practicable. The foregoing provisions of this subsection
(d) shall similarly apply to successive reclassifications, capital
reorganizations and similar changes of shares of Common Stock and to
successive consolidations, mergers, spin-offs, sales, leases or exchanges.
(e) If any sale, lease or exchange of all, or substantially
all, of the Company's assets or business or any dissolution, liquidation or
winding up of the Company (a "Termination of Business") shall be proposed, the
Company shall deliver written notice to the Holder or Holders of this Warrant in
accordance with Section 4 below as a condition precedent to the consummation of
that Termination of Business. If the result of the Termination of Business is
that shareholders of the Company are to receive securities or other interests of
another entity, the provisions of subsection (d) above shall apply. However,
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<PAGE>
if the result of the Termination of Business is that shareholders of the
Company are to receive money or property other than securities or other
interests in another entity, the Holder or Holders of this Warrant shall be
entitled to exercise this Warrant prior to the consummation of the event at
issue and, with respect to any Warrant Securities so purchased, shall be
entitled to all of the rights of the other shareholders of Common Stock with
respect to any distribution by the Company in connection with the Termination
of Business. In the event no other entity is involved and subsection (d)
does not apply, all purchase rights under this Warrant shall terminate at the
close of business on the date as of which shareholders of record of the
Common Stock shall be entitled to participate in a distribution of the assets
of the Company in connection with the Termination of Business; provided, that
in no event shall that date be less than 30 days after delivery to the Holder
or Holders of this Warrant of the written notice described above and in
Section 4. If the termination of purchase rights under this Warrant is to
occur as a result of the event at issue, a statement to that effect shall be
included in that written notice.
(f) The provisions of this Section 3 shall apply to
successive events that may occur from time to time but shall only apply to a
particular event if it occurs prior to the expiration of this Warrant either
by its terms or by its exercise in full. All adjustments required hereby
shall be calculated or verified by the Company's independent public
accountants.
(g) Unless the context requires otherwise, whenever
reference is made in this Section 3 to the issue or sale of shares of Common
Stock, the term "Common Stock" shall mean (i) the common stock of the
Company, (ii) any other class of stock ranking on a parity with, and having
substantially similar rights and privileges as the Company's common stock,
and (iii) any Convertible Security convertible into either (i) or (ii).
However, subject to the provisions of subsections (d) and (e) above, Warrant
Securities issuable upon exercise of this Warrant shall include only shares
of the common stock designated as common stock of the Company as of the date
of this Warrant and Warrants to purchase such common stock.
(h) For purposes of subsections (a) and (b) above, shares of
Common Stock owned or held at any relevant time by, or for the account of,
the Company, in its treasury or otherwise, shall not be deemed to be
outstanding for purposes of the calculations and adjustments described.
4. NOTICE TO HOLDERS. If, prior to the expiration of this Warrant
either by its terms or by its exercise in full, any of the following shall
occur:
(i) the Company shall declare a dividend or authorize any
other distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the
shareholders of its Common Stock of rights to subscribe for or purchase any
securities or any other similar rights; or
(iii) any reclassification, reorganization or similar change
of the Common Stock, or any consolidation or merger to which the Company is a
party, or the sale, lease, or exchange of any significant portion of the
assets of the Company; or
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<PAGE>
(iv) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) any purchase, retirement or redemption by the Company of
its Common Stock;
then, and in any such case, the Company shall deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following:
(i) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the shareholders of Common Stock of record to
be entitled to such dividend, distribution or rights are to be determined;
(ii) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up
or purchase, retirement or redemption is expected to become effective, and
the date, if any, as of which the Company's shareholders of Common Stock of
record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up,
purchase, retirement or redemption; and
(iii) if any matters referred to in the foregoing clauses (i)
and (ii) are to be voted upon by shareholders of Common Stock, the date as of
which those shareholders to be entitled to vote are to be determined.
5. OFFICERS' CERTIFICATE. Whenever the Exercise Price or the
aggregate number of Warrant Securities purchasable pursuant to this Warrant
shall be adjusted as required by the provisions of Section 3 above, the
Company shall promptly file with its Secretary or an Assistant Secretary at
its principal office, and with its transfer agent, an officers' certificate
executed by the Company's President and Secretary or Assistant Secretary,
describing the adjustment and setting forth, in reasonable detail, the facts
requiring such adjustment and the basis for and calculation of such
adjustment in accordance with the provisions of this Warrant. Each such
officers' certificate shall be made available to the Holder or Holders of
this Warrant for inspection at all reasonable times, and the Company, after
each such adjustment, shall promptly deliver a copy of the officers'
certificate relating to that adjustment to the Holder or Holders of this
Warrant. The officers' certificate described in this Section 5 shall be
deemed to be conclusive as to the correctness of the that adjustment
reflected therein if, and only if, no Holder of this Warrant delivers written
notice to the Company of an objection to the adjustment within 90 days after
the officers' certificate is delivered to the Holder or Holders of this
Warrant. The Company will make its books and records available for
inspection and copying during normal business hours by the Holder so as to
permit a determination as to the correctness of the adjustment. If written
notice of an objection is delivered by a Holder to the Company and the
parties cannot reconcile the dispute, the Holder and the Company shall submit
the dispute to arbitration. Failure to prepare or provide the officers'
certificate shall not modify the parties' rights hereunder.
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6. RESERVATION OF WARRANT SECURITIES. The Company hereby agrees
that at all times prior to the Expiration Date it will have authorized, and
will reserve and keep available for issuance and delivery to the Holder, that
number of shares of its Common Stock that may be required from time to time
for issuance and delivery upon the exercise of the then-unexercised portion
of this Warrant and all other similar Warrants then outstanding and
unexercised and upon the exercise of any Warrant Securities.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
(a) This Warrant, the Warrant Securities, and all other
securities issued or issuable upon exercise of this Warrant, may not be
offered, sold or transferred, in whole or in part, except in compliance with
the Act, and except in compliance with all applicable state securities laws.
(b) The Company may cause substantially the following
legend, or its equivalent, to be set forth on each certificate representing
the Warrant Securities, or any other security issued or issuable upon
exercise of this Warrant:
"The shares represented by this Certificate have not
been registered under the Securities Act of 1933
("the Act") and are "restricted securities" as that
term is defined in Rule 144 under the Act. The
shares may not be offered for sale, sold or
otherwise transferred except pursuant to an
effective registration statement under the Act or
pursuant to an exemption from registration under the
Act, the availability of which is to be established
to the satisfaction of the Company."
8. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of all or any part of
this Warrant. With respect to any fraction of a share of any security called
for upon any exercise of this Warrant, the Company shall pay to the Holder an
amount in money equal to that fraction multiplied by the current market value
of that share. The current market value shall be determined as follows:
(i) if the security at issue is listed on a national
securities exchange or admitted to unlisted trading privileges on such an
exchange or quoted on the Nasdaq quotation service, the current value shall
be the last reported sale price of that security on such exchange or system
on the last business day prior to the date of the applicable exercise of this
Warrant or, if no such sale is made on such day, the average of the highest
closing bid and lowest asked price for such day on such exchange or system; or
(ii) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the current market value shall be
the average of the last reported highest bid and lowest asked prices quoted
on Nasdaq or, if not so quoted, then by the National Quotation Bureau, Inc.
on the last business day prior to the day of the applicable exercise of this
Warrant; or
(iii) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are not
reported, the current market value shall be determined in such reasonable
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<PAGE>
manner as may be prescribed from time to time by the Board of Directors of
the Company, subject to the objection and arbitration procedure as described
in Section 5 above.
9. RIGHTS OF THE HOLDER. The Holder shall not be entitled to any
rights as a shareholder in the Company by reason of this Warrant, either at
law or equity, except as specifically provided for herein. The Company
covenants, however, that for so long as this Warrant is at least partially
unexercised, it will furnish any Holder of this Warrant with copies of all
reports and communications furnished to the shareholders of the Company.
10. CHARGES DUE UPON EXERCISE. The Company shall pay any and all
issue or transfer taxes, including, but not limited to, all federal or state
taxes, that may be payable with respect to the transfer of this Warrant or
the issue or delivery of Warrant Securities upon the exercise of this Warrant.
11. WARRANT SECURITIES TO BE FULLY PAID. The Company covenants
that all Warrant Securities that may be issued and delivered to a Holder of
this Warrant upon the exercise of this Warrant and payment of the Exercise
Price will be, upon such delivery, validly and duly issued, fully paid and
nonassessable.
12. NOTICES. All notices, certificates, requests, or other similar
items provided for in this Warrant shall be in writing and shall be
personally delivered or deposited in the United States mail, certified or
registered with return receipt requested, postage prepaid, addressed to the
respective party as indicated in the portions of this Warrant preceding
Section 1. All notices shall be deemed to be delivered upon personal
delivery or upon the expiration of three (3) business days following deposit
in the United States mail, postage prepaid. The addresses of the parties may
be changed, and addresses of other Holders and holders of Warrant Securities
may be specified, by written notice delivered pursuant to this Section 12.
The Company's principal office shall be deemed to be the address provided
pursuant to this Section 12 for the delivery of notices to the Company.
13. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Nevada.
14. MISCELLANEOUS PROVISIONS.
(a) Subject to the terms and conditions contained herein,
this Warrant shall be binding on the Company and its successors and shall
inure to the benefit of the original Holder, its successors and assigns and
all holders of Warrant Securities and the exercise of this Warrant in full
shall not terminate the provisions of this Warrant as it relates to holders
of Warrant Securities.
(b) If the Company fails to perform any of its obligations
hereunder, it shall be liable to the Holder for all damages, costs and
expenses resulting from the failure, including, but not limited to, all
reasonable attorney's fees and disbursements.
8
<PAGE>
(c) This Warrant cannot be changed or terminated or any
performance or condition waived in whole or in part except by an agreement in
writing signed by the party against whom enforcement of the change,
termination or waiver is sought.
(d) If any provision of this Warrant shall be held to be
invalid, illegal or unenforceable, such provision shall be severed, enforced
to the extent possible, or modified in such a way as to make it enforceable,
and the invalidity, illegality or unenforceability shall not affect the
remainder of this Warrant.
(e) The Company agrees to execute such further agreements,
conveyances, certificates and other documents as may be reasonably requested
by the Holder to effectuate the intent and provisions of this Warrant.
(f) Section headings used in this Warrant are for
convenience only and shall not be taken or construed to define or limit any
of the terms or provisions of this Warrant. Unless otherwise provided, or
unless the context shall otherwise require, the use of the singular shall
include the plural and the use of any gender shall include all genders.
Dated: , 1999 ENTERTAINMENT BOULEVARD, INC.
--------------------
By:
-------------------------
Its: President
9
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Shares
pursuant to a Warrant.)
The undersigned Holder of a Warrant hereby
(a) irrevocably elects to exercise the Warrant to the extent of
purchasing _______________ Shares;
(b) makes payment in full of the aggregate Exercise Price for
those Shares in the amount of $_________________ by the delivery of certified
funds or a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the securities
underlying such Shares be issued in the name of the undersigned, or, if the name
and address of some other person is specified below, in the name of such other
person:
_______________________________________________
_______________________________________________
_______________________________________________
(Name and address of person OTHER than the undersigned
in whose name Shares are to be registered)
(d) requests, if the number of Shares purchased are not all the
Shares purchasable pursuant to the unexercised portion of the Warrant, that a
new Warrant of like tenor for the remaining Shares purchasable pursuant to the
Warrant be issued and delivered to the undersigned at the address stated below.
Dated:
---------------------------------- ------------------------------
Signature
(This signature must conform in
all respects to the name of the
Holder as specified on the face
of the Warrant.)
- ---------------------------- ------------------------------------
Social Security Number Printed Name
or Employer ID Number
Address:
----------------------------
----------------------------
10
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name: _________________________________________________
(Please type or print in block letters)
Address: ______________________________________________
______________________________________________
the right to purchase _________________ Shares of Entertainment Boulevard,
Inc. (the "Company") pursuant to the terms and conditions of the Warrant held
by the undersigned. The undersigned hereby authorizes and directs the
Company (i) to issue and deliver to the above-named assignee at the above
address a new Warrant pursuant to which the rights to purchase being assigned
may be exercised, and (ii) if there are rights to purchase Shares remaining
pursuant to the undersigned's Warrant after the assignment contemplated
herein, to issue and deliver to the undersigned at the address stated below a
new Warrant evidencing the right to purchase the number of Shares remaining
after issuance and delivery of the Warrant to the above-named assignee.
Except for the number of Shares purchasable, the new Warrants to be issued
and delivered by the Company are to contain the same terms and conditions as
the undersigned's Warrant. To complete the assignment contemplated by this
Assignment Form, the undersigned hereby irrevocably constitutes and appoints
___________________________ as the undersigned's attorney-in-fact to transfer
the Warrants and the rights thereunder on the books of the Company with full
power of substitution for these purposes.
Dated:
---------------------------------- ------------------------------
Signature
(This signature must conform in
all respects to the name of the
Holder as specified on the face
of the Warrant.)
------------------------------------
Printed Name
Address:
----------------------------
----------------------------
11
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
ENTERTAINMENT BOULEVARD, INC.
Expires
No. W-
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, ENTERTAINMENT BOULEVARD, INC., a Nevada corporation (together
with its successors and assigns, the "Issuer"), hereby certifies that
or its registered assigns is entitled to subscribe for and purchase, during
the period specified in this Warrant, up to shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable common stock of the Issuer (the "Common
Stock"), at an exercise price per share equal to the Warrant Price then in
effect, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in
Section 7 hereof.
1. TERM. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence one year after the Original Issue
Date of this Warrant and shall expire at p.m., New York City time, on
(such period being the "Term"). Prior to the end of the Term, the
Issuer will not take any action which would terminate the Warrants.
2. METHOD OF EXERCISE PAYMENT: ISSUANCE OF NEW WARRANT;
REGISTRATION, TRANSFER AND EXCHANGE.
(a) TIME OF EXERCISE. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
<PAGE>
(b) METHOD OF EXERCISE. The Holder hereof may exercise this Warrant,
in whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by
the payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number
of shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official
bank check, (ii) by surrender to the Issuer for cancellation of a portion of
this Warrant representing the difference between the total number of shares
of Warrant Stock in respect of which the Warrants are being exercised minus
the amount determined by multiplying the number of shares of Warrant Stock in
respect of which the Warrants are being exercised by a fraction, the
numerator of which is an amount equal to the Current Market Price per share
of Warrant Stock as of the date of such exercise less the Warrant Price, and
the denominator of which is the Current Market Price, or (iii) by a
combination of the foregoing methods of payment selected by the Holder of
this Warrant. In any case where the consideration payable upon such exercise
is being paid in whole or in part pursuant to the provisions of clause (ii)
of this Section 2(b), such exercise shall be accompanied by written notice
from the Holder of this Warrant specifying the manner of payment thereof, and
in the case of an application of clause (ii), containing a calculation
showing the number of shares of Warrant Stock with respect to which rights
are being surrendered thereunder and the net number of shares to be issued
after giving effect to such surrender.
(c) ISSUANCE OF STOCK CERTIFICATES. In the event of any exercise of
the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock
so purchased shall be dated the date of such exercise and delivered to the
Holder hereof within a reasonable time, not exceeding three Trading Days
after such exercise, and the Holder hereof shall be deemed for all purposes
to be the Holder of the shares of Warrant Stock so purchased as of the date
of such exercise, and (ii) unless this Warrant has expired, a new Warrant
representing the number of shares of Warrant Stock, if any, with respect to
which this Warrant shall not then have been exercised (less any amount
thereof which shall have been canceled in payment or partial payment of the
Warrant Price as hereinabove provided) shall also be issued to the Holder
hereof at the Issuer's expense within such time.
(d) REGISTRATION. The Warrants shall be numbered and shall be
registered in a Warrant register (the "Warrant Register"). The Issuer shall
be entitled to treat the registered holder of any Warrant on the Warrant
Register (the "Holder") as the owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for
any registration of transfer of Warrants which are registered or are to be
registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration of transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
The Warrants shall be registered initially in the name of in such
denominations as may request in writing to the
Issuer.
(e) TRANSFER OF WARRANT. The Warrants will not be sold, transferred,
assigned or hypothecated, in part or in whole (other than by will or pursuant
to the laws of descent and distribution), except to registered assigns of the
Holder and thereafter only upon delivery thereof duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all
cases of transfer by an attorney, the original power of attorney, duly
approved, or an official copy thereof, duly certified, shall be deposited
with the Issuer. In case of transfer by executors, administrators, guardians
or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Issuer in its discretion. Upon any registration of transfer, the Issuer
shall deliver a new Warrant or
<PAGE>
Warrants to the persons entitled thereto. The Warrants may be exchanged at
the option of the Holder thereof for another Warrant, or other Warrants, of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Common Shares upon surrender to the Issuer
or its duly authorized agent. Notwithstanding the foregoing, the Issuer shall
have no obligation to cause Warrants to be transferred on its books to any
person if such transfer would violate the Securities Act.
(f) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be issued
upon exercise hereof are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Warrant Stock to be issued upon exercise hereof except pursuant to
an effective registration statement, or an exemption from registration, under
the Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock issued
upon exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
(iii) The restrictions imposed by this subsection (f) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act or (C) upon the Issuer's
receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall
cease and terminate as to any such securities, the Holder thereof shall
be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legends
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(g) CONTINUING RIGHTS OF HOLDER. The Issuer will, at the time of or
at any time after each exercise of this Warrant, upon the request of the
Holder hereof or of any shares of Warrant Stock issued upon such exercise,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
PROVIDED that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford
such rights to such Holder.
<PAGE>
3. STOCK FULLY PAID: RESERVATION AND LISTING OF SHARES: COVENANTS.
(a) STOCK FULLY PAID. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise
of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of
shares of Common Stock to provide for the exercise of this Warrant.
(b) PAYMENT OF TAXES. The Issuer will pay all documentary stamp taxes,
if any, attributable to the issuance of Warrant Stock; provided, however,
that the Issuer shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates for Warrant Stock in a name other than that of the Holder of
Warrants in respect of which such Warrant Stock is issued.
(c) RESERVATION. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under
any federal or state law before such shares may be so issued, the Issuer will
in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. American
Securities Transfer & Trust, Inc., transfer agent for the Common Shares (the
"Transfer Agent"), and every subsequent transfer agent, if any, for the
Warrant Stock will be irrevocably authorized and directed at all times until
the end of the Term to reserve such number of authorized and unissued Common
Shares as shall be required for such purpose. The Issuer will keep a copy of
this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for of the Issuer's securities issuable upon the exercise of
the Warrants. The Issuer will supply the Transfer Agent or any subsequent
transfer agent with duly executed certificates for such purpose and will
itself provide or otherwise make available any cash which may be
distributable as provided in Section 6 of this Agreement. All Warrants
surrendered in the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of
the number of Shares that have been issued upon the exercise of such
Warrants. No Common Shares shall be subject to reservation in respect of
unexercised Warrants subsequent to the end of the Term. If the Issuer shall
list any shares of Common Stock on any securities exchange or market it will,
at its expense, list thereon, maintain and increase when necessary such
listing, of, all shares of Warrant Stock from time to time issued upon
exercise of this Warrant or as otherwise provided hereunder, and, to the
extent permissible under the applicable securities exchange rules, all
unissued shares of Warrant Stock which are at any time issuable hereunder,
so long as any shares of Common Stock shall be so listed. The Issuer will
also so list on each securities exchange or market, and will maintain such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange or
market by the Issuer.
(d) COVENANTS. The Issuer shall not by any action including, without
limitation, amending the Articles of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to
the extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any provision of the Articles of Incorporation or by-laws of
the Issuer in any manner
<PAGE>
that would adversely affect in any way the powers, preferences or relative
participating, optional or other special rights of the Common Stock or which
would adversely affect the rights of the Holders of the Warrants, (iii) take
all such action as may be reasonably necessary in order that the Issuer may
validly and legally issue fully paid and nonassessable shares of Common
Stock, free and clear of any liens, claims, encumbrances and restrictions
(other than as provided herein) upon the exercise of this Warrant, and (iv)
use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may
be reasonably necessary to enable the Issuer to perform its obligations under
this Warrant.
(e) LOSS, THEFT, DESTRUCTION OF WARRANTS. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to
the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same number of shares of
Common Stock. An applicant for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges
as the Issuer may prescribe.
(f) RIGHTS AND OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT.
This Warrant and the Warrant Stock are entitled to the benefits and subject
to the terms of the Registration Rights Agreement dated as of even date
herewith between the Issuer and the Holders listed on the signature pages
thereof (as amended from time to time, the "Registration Rights Agreement").
The Issuer shall keep or cause to be kept a copy of the Registration Rights
Agreement, and any amendments thereto, at its chief executive office and
shall furnish, without charge, copies thereof to the Holder upon request.
4. ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARE NUMBER. The number
and kind of Securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) RECAPITALIZATION, REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE.
(i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event") (a) consolidate with
or merge into any other Person and the Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) permit any other Person to consolidate with or merge into the Issuer
and the Issuer shall be the continuing or surviving Person but, in
connection with such consolidation or merger, any Capital Stock
(excluding cash paid out on account of fractional shares) of the Issuer
shall be changed into or exchanged for Securities of any other Person or
cash or any other property, or (c) transfer all or substantially all of
its properties or assets to any other Person, or (d) effect a capital
reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled (x) upon the
exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such
Triggering Event, or is redeemed in connection with such Triggering
Event, to receive at the Warrant Price in effect at the time immediately
prior to the consummation of such Triggering Event in lieu of the Common
Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such
Holder would have been entitled upon the consummation of such Triggering
Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto, subject to adjustments and increases
(subsequent to such corporate action) as nearly equivalent
<PAGE>
as possible to the adjustments provided for in Section 4 hereof or (y)
to sell this Warrant (or, at such Holder's election, a portion hereof)
to the Person continuing after or surviving such Triggering Event, or to
the Issuer (if Issuer is the continuing or surviving Person) at a sales
price equal to the amount of cash, property and/or Securities to which a
holder of the number of shares of Common Stock which would otherwise
have been delivered upon the exercise of this Warrant would have been
entitled upon the effective date or closing of any such Triggering Event
(the "Event Consideration"), less the amount or portion of such Event
Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior
to the consummation thereof, each Person (other than the Issuer) which
may be required to deliver any Securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (A) the obligations of the Issuer under this Warrant (and
if the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the
Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such shares of
Securities, cash or property as, in accordance with the foregoing
provisions of this subsection (a), such Holder shall be entitled to
receive, and such Person shall have similarly delivered to such Holder
an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such Holder, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall
be applicable to the Securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the exercise
of any rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a
portion thereof, the Issuer agrees that as a condition to the
consummation of any such Triggering Event the Issuer shall secure such
right of Holder to sell this Warrant to the Person continuing after or
surviving such Triggering Event and the Issuer shall not effect any such
Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause
(y) are delivered to the Holder of this Warrant. The obligation of the
Issuer to secure such right of the Holder to sell this Warrant shall be
subject to such Holder's cooperation with the Issuer, including, without
limitation, the giving of customary representations and warranties to
the purchaser in connection with any such sale. Prior notice of any
Triggering Event shall be given to the Holder of this Warrant in
accordance with Section 11 hereof.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Issuer, at any time while
this Warrant is outstanding, shall subdivide or combine any shares of Common
Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of
so subdividing, as at the applicable record date, whichever is earlier) to
reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Warrant Price shall be proportionately increased
(as at the effective date of such combination or, if the Issuer shall take a
record of Holders of its Common Stock for the purpose of so combining, as at
the applicable record date, whichever is earlier) to reflect the reduction in
the total number of shares of Common Stock outstanding as a result of such
combination.
<PAGE>
(c) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) STOCK DIVIDENDS. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the date
the Issuer shall take a record of the Holders of the Issuer's Capital Stock
for the purpose of receiving such dividend or other distribution (or if no
such record is taken, as at the date of such payment or other
distribution), to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date (or if no such record is
taken, then immediately prior to such payment or other distribution), by a
fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution, and (2) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution (plus in the event that the Issuer paid cash for fractional
shares, the number of additional shares which would have been outstanding
had the Issuer issued fractional shares in connection with said dividends);
or
(ii) OTHER DIVIDENDS. Pay a dividend on, or make any distribution of
its assets upon or with respect to (including, but not limited to, a
distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than
as described in clause (i) of this subsection (c)), or in the event that
the Issuer shall offer options or rights to subscribe for shares of Common
Stock, or issue any Common Stock Equivalents, to all of its holders of
Common Stock, then on the record date for such payment, distribution or
offer or, in the absence of a record date, on the date of such payment,
distribution or offer, the Holder shall receive what the Holder would have
received had it exercised this Warrant in full immediately prior to the
record date of such payment, distribution or offer or, in the absence of a
record date, immediately prior to the date of such payment, distribution or
offer.
(d) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 4.
The following provisions shall be applicable to the making of adjustments in
the Warrant Price hereinbefore provided in Section 4:
(i) COMPUTATION OF CONSIDERATION. The consideration received by the
Issuer shall be deemed to be the following: to the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents shall be
issued for a cash consideration, the consideration received by the Issuer
therefor, or if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription
price, or, if such Additional Shares of Common Stock or Common Stock
Equivalents are sold to underwriters or dealers for public offering without
a subscription offering, the public offering price, in any such case
excluding any amounts paid or receivable for accrued interest or accrued
dividends and without deduction of any compensation, discounts,
commissions, or expenses paid or incurred by the Issuer for or in
connection with the underwriting thereof or otherwise in connection with
the issue thereof; to the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the fair market value of such consideration at the, time of such
issuance as determined in good faith by the Board. The consideration for
any Additional Shares of Common Stock issuable pursuant to any Common Stock
Equivalents shall be the consideration received by the Issuer for issuing
such Common Stock Equivalents, plus the additional consideration payable to
the Issuer upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional Shares
of
<PAGE>
Common Stock or Common Stock Equivalents in payment or satisfaction of any
dividend upon any class of Capital Stock of the Issuer other than Common
Stock, the Issuer shall be deemed to have received for such Additional
Shares of Common Stock or Common Stock Equivalents a consideration equal to
the amount of such dividend so paid or satisfied. In any case in which the
consideration to be received or paid shall be other than cash, the Board
shall notify the Holder of this Warrant of its determination of the fair
market value of such consideration prior to payment or accepting receipt
thereof. If, within thirty days after receipt of said notice, the Majority
Holders shall notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be made by an Independent Appraiser selected by the
Majority Holders with the approval of the Board (which approval shall not
be unreasonably withheld), whose fees and expenses shall be paid by the
Issuer.
(ii) READJUSTMENT OF WARRANT PRICE. Upon the expiration or
termination of the right to convert, exchange or exercise any Common Stock
Equivalent the issuance of which effected an adjustment in the Warrant
Price, if such Common Stock Equivalent shall not have been converted,
exercised or exchanged in its entirety, the number of shares of Common
Stock deemed to be issued and outstanding by reason of the fact that they
were issuable upon conversion, exchange or exercise of any such Common
Stock Equivalent shall no longer be computed as set forth above, and the
Warrant Price shall forthwith be readjusted and thereafter be the price
which it would have been (but reflecting any other adjustments in the
Warrant Price made pursuant to the provisions of this Section 4 after the
issuance of such Common Stock Equivalent) had the adjustment of the Warrant
Price been made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon conversion, exchange
or issuance of such Common Stock Equivalent and thereupon only the number
of Additional Shares of Common Stock actually so issued shall be deemed to
have been issued and only the consideration actually received by the Issuer
(computed as in clause (i) of this subsection (d)) shall be deemed to have
been received by the Issuer.
(iii) OUTSTANDING COMMON STOCK. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof then
directly or indirectly owned or held by or for the account of the Issuer or
any of its Subsidiaries, and (B) be deemed to include all shares of Common
Stock then issuable upon conversion, exercise or exchange of any then
outstanding Common Stock Equivalents or any other evidences of Indebtedness
(including, without limitation, dividends on the preferred stock), shares
of Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for shares of Common Stock or Other Common
Stock.
(e) OTHER ACTION AFFECTING COMMON STOCK. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (d)
of this Section 4, inclusive, and the failure to make any adjustment would
not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principle of this Section 4, then
the Warrant Price shall be adjusted in such manner and at such time as the
Board may in good faith determine to be equitable in the circumstances.
(f) ADJUSTMENT OF WARRANT SHARE NUMBER. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4,
the Warrant Share Number shall be adjusted, to the nearest one hundredth of a
whole share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving
effect to such adjustment and the denominator of which shall be the Warrant
Price immediately after giving effect to such adjustment.
<PAGE>
If the Issuer shall be in default under any provision contained in Section 3
of this Warrant so that shares issued at the Warrant Price adjusted in
accordance with this Section 4 would not be validly issued, the adjustment of
the Warrant Share Number provided for in the foregoing sentence shall
nonetheless be made and the Holder of this Warrant shall be entitled to
purchase such greater number of shares at the lowest price at which such
shares may then be validly issued under applicable law. Such exercise shall
not constitute a waiver of any claim arising against the Issuer by reason of
its default under Section 3 of this Warrant.
(g) FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number
and kind of Securities purchasable upon the exercise of this Warrant.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of
the basis on which the Board made any determination hereunder), and the
Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between
the Issuer and the Holder of this Warrant with respect to the matters set
forth in such certificate may at the option of the Holder of this Warrant be
submitted to one of the national accounting firms currently known as the "big
four" selected by the Holder, PROVIDED that the Issuer shall have ten days
after receipt of notice from such Holder of its selection of such firm to
object thereto, in which case such Holder shall select another such firm and
the Issuer shall have no such right of objection. The firm selected by the
Holder of this Warrant as provided in the preceding sentence shall be
instructed to deliver a written opinion as to such matters to the Issuer and
such Holder within thirty days after submission to it of such dispute. Such
opinion shall be final and binding on the parties hereto. The fees and
expenses of such accounting firm shall be paid by the Issuer, unless the
Issuer prevailed in the dispute.
6. FRACTIONAL SHARES. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value
then in effect.
7. DEFINITIONS. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common Stock
issued by the Issuer after the Original Issue Date, and all shares of Other
Common, if any, issued by the Issuer after the Original Issue Date, except
(i) Warrant Stock and (ii) any shares of Common Stock issuable upon
exercise of the Stock Options.
"Articles of Incorporation" means the Articles of Incorporation of the
Issuer as in effect on the Original Issue Date and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the
terms hereof and thereof and pursuant to applicable law.
"Board" shall mean the Board of Directors of the Issuer.
<PAGE>
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any
other type.
"Common Stock" means the Common Stock, $0.001 par value, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares of
Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for Additional Shares of Common Stock. The
term "Convertible Security" means one of the Convertible Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly engaged
in the business of appraising the Capital Stock or assets of corporations
or other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means Entertainment Boulevard, Inc., a Nevada corporation,
and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Issue Date" means September 3, 1999.
"Other Common" means any other Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this Warrant
(other than Common Stock) and which shall have the right to participate in
the distribution of earnings and assets of the Issuer without limitation as
to amount.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
<PAGE>
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the OTC Bulletin
Board, the Nasdaq Small Cap Market, the Nasdaq National Market, or other
registered national stock exchange on which the Common Stock is then traded
or listed or if there is no such price on such date, then the closing bid
price on such exchange or quotation system on the date nearest preceding
such date, or (b) if the Common Stock is not traded or listed then on the
OTC Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market
or any registered national stock exchange, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by NASDAQ
or in the National Quotation Bureau Incorporated or similar organization or
agency succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported by
the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the average
of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the
Majority Holders; PROVIDED, HOWEVER, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select
an additional Independent Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such
Independent Appraiser; and PROVIDED, FURTHER that all determinations of the
Per Share Market Value shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such period.
The determination of fair market value by an Independent Appraiser shall be
based upon the fair market value of the Issuer determined on a going
concern basis as between a willing buyer and a willing seller and taking
into account all relevant factors determinative of value, and shall be
final and binding on all parties. In determining the fair market value of
any shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.
"Registration Rights Agreement" has the meaning specified in Section
3(f) hereof.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. "Security" means one of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Stock Options" means options to purchase up to 600,000 shares of
Common Stock issued by the Issuer shortly after the Original Issue Date to
directors, officers and employees of the Issuer and consultants providing
services to the Issuer, as the same may from time to time be amended,
modified or supplemented in accordance with their terms.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is traded on
the OTC Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National
Market or other registered
<PAGE>
national stock exchange on which the Common stock has been traded or
listed, or (b) if the Common Stock is not traded or listed on the OTC
Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market or
any registered national stock exchange, a day or which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
PROVIDED, HOWEVER, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday
or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of the
Board of Directors (or other governing body) of such corporation, other
than Capital Stock having such power only by reason of the happening of a
contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Securities Purchase Agreement, including, without limitation, this Warrant,
and any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c) or 2(e) hereof or of
any of such other Warrants.
"Warrant Price" means initially an amount equal to 100% of the average
of the Per Share Market Value on the five trading days prior to the Initial
Closing Date, as such price may be adjusted from time to time as shall
result from the adjustments specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all prior adjustments and increases
to such number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
8. OTHER NOTICES. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to subscribe
for or purchase any shares of Capital Stock of any
class or of any Common Stock Equivalents or
Convertible Securities or other rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
<PAGE>
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or
other disposition of all or substantially all of
the Issuer's property, assets or business (except
a merger or other reorganization in which the
Issuer shall be the surviving corporation and its
shares of Capital Stock shall continue to be
outstanding and unchanged and except a
consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary);
or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Issuer or any partial liquidation of the issuer or
distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by
the Issuer and the Majority Holders; PROVIDED, HOWEVER, that no such
amendment or waiver shall reduce the Warrant Share number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 9 without the consent of the Holder
of this Warrant.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earlier of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time,
on a Business Day, (ii) the Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., New York City
time, on any
<PAGE>
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
Entertainment Boulevard, Inc.
4052 Del Rey Avenue - Suite 108
Marina Del Rey, California 90292
Attention: Stephen Brown
Telephone No.: (310)578-5404
Facsimile No.: (310)578-6304
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
Susan O. Posen, Esq., facsimile no.: (212)806-6006. Copies of notices to the
Issuer shall be sent to Richman, Lawrence, Mann, Chizever & Phillips, 9601
Wilshire Boulevard, Penthouse Suite, Beverly Hills, California 90210, Attention:
Gerald M. Chizever, Esq., facsimile no.: (310)205-5348.
12. WARRANT AGENT. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (e) of Section 2 hereof or replacing this Warrant pursuant to
subsection (e) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. REMEDIES. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
14. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
15. MODIFICATION AND SEVERABILITY. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. HEADINGS. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE>
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
---------------------
Name: Stephen Brown
Title: Chief Executive Officer
<PAGE>
EXERCISE FORM
ENTERTAINMENT BOULEVARD, INC.
The undersigned _____________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
ENTERTAINMENT BOULEVARD, INC. covered by the within Warrant.
Dated:________________ Signature _______________________
Address ___________________
___________________
ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto
______________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _______________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated:________________ Signature _______________________
Address ___________________
___________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto
______________ the right to purchase _______ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and
does irrevocably constitute and appoint _______________, attorney, to
transfer that part of the said Warrant on the books of the within named
corporation.
Dated:________________ Signature _______________________
Address ___________________
___________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____
day of ____________, ______, shares of Common Stock issued therefor in the
name of _____________. Warrant No. W-_____ issued for ____ shares of Common
Stock in the name of ________________.
<PAGE>
EXHIBIT 10.1
STANDARD OFFICE LEASE-MODIFIED NET
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions").
1.1 PARTIES: This Lease, dated, for reference purposes only,
August 18, 1999, is made by and between WESTBROOK MARINA OFFICE, LLC, a
Delaware limited liability company (herein called "Lessor"), ENTERTAINMENT
BOULEVARD, a Nevada corporation (herein called "Lessee").
1.2 PREMISES: Suite Number 1 on the Building's 1st floor,
consisting of approximately 11,857 rentable square feet, more or less, as
defined in paragraph 2 and as shown on Exhibit "A" hereto (the "Premises").
1.3 BUILDING: Commonly described as being located at 12910
Culver Boulevard, in the City of Los Angeles, County of Los Angeles, State of
California, and as defined in paragraph 2.
1.4 PERMITTED USE: General office and multi-media related use,
subject to paragraph 6.
1.5 TERM: Five (5) years and Three (3) months commencing
on upon September 1, 1999 (the "Commencement Date") and ending on
December 31, 2004.
1.6 BASE RENT: Twenty Six Thousand Six Hundred Seventy Eight and
25/100 Dollars ($26,678.25) per month, payable on the 1st day of each month,
in advance, per paragraph 4.1, subject to increase as provided below.
1.7 BASE RENT INCREASE: On each annual anniversary of
Commencement Date during the term hereof, the monthly Base Rent payable under
paragraph 1.6 above shall be adjusted as provided in paragraph 4.3 below.
1.8 RENT PAID UPON EXECUTION: Twenty Six Thousand Six Hundred
Seventy Eight and 25/100 Dollars ($26,678.25).
1.9 SECURITY DEPOSIT: Twenty Six Thousand Seven Hundred Dollars
($26,700).
1.10 LESSEE'S SHARE OF OPERATING EXPENSES: 12.098%, as defined
in paragraph 4.2, based on total of 98,005 rentable square feet in the Building.
1.11 OPERATING EXPENSE STOP: Forty Thousand Three Hundred Thirteen
and 80/100 ($40,313.80) per year, based on the total of 11,857 rentable square
feet of the Premises multiplied by $3.40 per rentable square foot.
1.12 LETTER OF CREDIT: Within thirty (30) days of Lease
execution, Lessee shall deliver to Lessor an irrevocable Letter of Credit in
favor of Lessor in the amount of $240,000 from a financial institution
acceptable to Lessor pursuant to paragraph 5.1 hereof.
1.13 OPTION TO RENEW. One (1) option to renew for a five (5)
year period pursuant to paragraph 39.5 hereof.
<PAGE>
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building, herein
sometimes referred to as the "Building" identified in paragraph 1.3 of the Basic
Lease Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Building
Project." Lessor hereby leases to Lessee and Lessee leases from Lessor for the
term, at the rental, and upon all of the conditions set forth herein, the real
property referred to in the Basic Lease Provisions, paragraph 1.2, as the
"Premises," including rights to the Common Areas as hereinafter specified.
2.2 VEHICLE PARKING: So long as Lessee is not in default, and
subject to the rules and regulations attached hereto as Exhibit B, and as
established by Lessor or its parking operator from time to time, Lessee shall
be required to lease Thirty (30) uncovered, unreserved parking spaces at a
monthly rate of Thirty Dollars ($30) per parking space, and one (1) covered,
reserved parking space at a monthly rate of Fifty Dollars ($50) per parking
space. Lessee shall have the option of renting up to twenty six (26)
additional uncovered, unreserved parking spaces at the then current rates as
provided under the Lease by providing Lessor thirty (30) days written notice.
2.2.1 The monthly rate for parking spaces shall increase by
Four Percent (4%) of the then current rate on each annual anniversary of the
Commencement Date (as defined in paragraph 4.1 hereof) during the Term.
Provided that Lessee exercises its option to extent in accordance with
paragraph 39.5 hereof, the monthly rate for parking spaces shall be adjusted
to the fair market rate as of the fifth (5th) anniversary of the Rent
Commencement Date, and shall increase thereafter on each annual anniversary
of the Rent Commencement Date in accordance with the increase in base rent
during such option period. Any increase in the monthly rate shall be
inclusive of any applicable City of Los Angeles or other municipal parking
taxes.
2.2.2 Monthly parking fees shall be payable at the same time
as Base Rent.
2.2.3 Ten (10) spaces at the front of the Office Building
Project shall be designated as non-exclusive visitor parking for the Building.
2.2.4 If Lessee commits, permits or allows any of the
prohibited activities, described in the Lease or the rules then in effect, then
Lessor or its parking operator shall have the right, without notice, in addition
to such other rights and remedies that it may have, to remove or tow away the
vehicle involved and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor or its parking operator.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Building Project that are provided and designated by the Lessor from
time to time for the general non-exclusive use of Lessor, Lessee and of other
lessees of the Building Project and their respective employees, suppliers,
shippers, customers and invitees, including, but not limited to, common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, outdoor eating areas, parking areas to the extent not
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Building Project and Common Areas, and to cause its employees, suppliers,
shippers, customers, and invitees to so abide and conform; provided, however,
that the terms of this Lease shall control if there is an inconsistency between
the terms of this Lease and the terms of any such rules and regulations. Lessor
or such other person(s) as Lessor may appoint shall have the exclusive control
and management of the Common Areas and shall have the
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right, from time to time, to modify, amend and enforce said rules and
regulations. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees, their agents, employees and
invitees of the Building Project.
2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the location, size,
shape, number and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, discretion of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law and by the specific terms of this Lease;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land and improvements outside the
boundaries of the Building Project to be a part of the Common Areas, provided
that such other land and improvements have a reasonable and functional
relationship to the Building Project;
(d) To add additional buildings and improvements to
the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building Project, or any portion
hereof;
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Building Project as
Lessor may, in the exercise of sound business judgment deem to be appropriate.
3. TERM
3.1 TERM. The term and Commencement Date of this Lease shall
be as specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 EARLY POSSESSION. If Lessee occupies a portion of the Premises
prior to said Commencement Date, such occupancy shall be subject to all
provisions of this Lease, such occupancy shall not change the termination
date, and Lessee shall pay rent and other expenses for that portion of the
Premises so occupied.
4. RENT
4.1 BASE RENT. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this
Lease, Lessee shall pay to Lessor the Base Rent for the Premises set forth in
paragraph 1.6 of the Basic Lease Provisions, without offset or deduction.
Lessee shall pay Lessor upon execution hereof the advance Base Rent described
in paragraph 1.8 of the Basic Lease Provisions. Rent for any period during
the term hereof which is for less than one month shall be prorated based upon
the actual number of days of the calendar month involved. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may
designate in writing.
4.2 OPERATING EXPENSES. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of all Operating Expenses, as hereinafter defined,
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during each calendar year of the terms of this Lease, to the extent the
Operating Expenses for any such calendar year exceeds the Operating Expense
Stop, in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease,
as the percentage set forth in paragraph 1.10 of the Basic Lease Provisions,
which percentage has been determined by dividing the approximate rentable square
footage of the Premises by the total approximate square footage of the rentable
space contained in the Building Project. It is understood and agreed that the
square footage figures set forth in the Basic Lease Provisions are
approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premiss or a change in the space available for lease in the Building
Project.
(b) "Operating Expenses" include all costs, if any, incurred
by Lessor in the exercise of its reasonable discretion, for:
(i) The operation, repair, maintenance, and
replacement, in neat, clean, safe, good order and condition, of the Building
Project, including, but not limited to, the following:
[aa] The Common Areas, including their
surfaces, coverings, decorative items, carpets, drapes and window
coverings, and including parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, stairways, parkways, driveways,
landscaped areas, striping bumpers, irrigation systems, Common Area lighting
facilities, building exteriors and roofs, fences and gates;
[bb] All heating, air conditioning,
plumbing, electrical systems, life safety equipment, telecommunication and
other equipment used in common by, or for the benefit of, lessees or
occupants of the Building Project, including elevators and escalators, lessee
directories, fire detection systems including sprinkler system maintenance
and repair.
(ii) Trash disposal, janitorial and security
services for the Common Areas;
(iii) Any other service to be provided by Lessor
that is elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the
liability and property insurance policies to be maintained by Lessor under
paragraph 8 hereof;
(v) The amount of the real property taxes to be
paid by Lessor under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity,
and other publicly mandated services to the Building Project;
(vii) Labor, salaries and applicable fringe
benefits and costs, materials, supplies and tools, used in maintaining and/or
cleaning the Building Project and accounting and a management fee of five
(5%) percent of base rental income attributable to the operation of the
Building Project.
(viii) Replacing and/or adding improvements
mandated by any governmental agency and any repairs or removals necessitated
thereby amortized over its useful life according to Federal income tax
regulations or guidelines for depreciation thereof (including interest on the
unamortized balance as is then reasonable in the judgment of Lessor's
accountants);
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(ix) Replacements of equipment or
improvements, as amortized over such equipment or improvement's useful life
for depreciation purposes according to federal income tax guidelines;
(x) Environmental Damages (as hereinafter
defined) to the extent not recovered by Lessor directly from any lessees of
the Office Building Project or environmental insurance policies;
(c) Operating Expenses shall not include any of the
following expenses:
(i) All costs associated with the
operation of the business of the ownership or entity which comprises Lessor,
as distinguished from the costs associated with the Office Building Project,
including, but not limited to, costs of partnership accounting and legal
matters, cost of defending any lawsuits with any mortgagees (except as the
actions of Lessee may be in issue) costs of selling, syndicating, financing,
mortgaging or hypothecating any of the Lessor's interest in the Building
and/or Common Areas, costs of any disputes between Lessor and its employees,
or costs of disputes of Lessor with the management of the Office Building
Project;
(ii) All costs (including permit, license and
inspection fees) incurred in renovating or otherwise improving or decorating,
painting or redecorating space for tenants or other occupants or in
renovating or redecorating vacant space, including the cost of alterations or
improvements of Lessee's Premises or to the premises of any other tenant or
occupant of the Office Building Project.
(iii) Any cash or other consideration paid by
Lessor on account of, with respect to, or in lieu of the tenant improvement
work or alterations described in the clause (ii) above;
(iv) Costs incurred by Lessor in connection
with the construction of the Office Building Project and related
facilities, the correction of defects in construction or in the discharge of
Lessor's obligations under the Work Letter attached to the Lease;
(v) Any expenses which under generally accepted
accounting principles and practice would not be considered a normal
maintenance or operating expense, subject to Lessor's right to amortize
capital improvements as set forth in paragraph 4.2(b)(viii);
(vi) Costs of any services sold or provided to
tenants or other occupants for which Lessor or its project manager is
entitled to be reimbursed by such tenants or other occupants as an additional
charge or rental over and above the base rent set forth in the tenants'
leases (and escalations thereof);
(vii) Expenses in connection with services or other
benefits of a type which are not provided to Lessee but which are provided to
another tenant or occupant;
(viii) Costs for all items and services for which
Lessee reimburses Lessor or pays to third parties or which Lessor provides
selectively to one or more tenants or occupants of the Office Building
Project (other than Lessee) without reimbursement;
(ix) Interest on debt or amortization payments
on any mortgages or deeds of trust;
(x) Costs incurred due to violation by
Lessor or project manager or any tenant (other than Lessee) of the terms and
conditions of any lease;
(xi) Payments in respect to overhead or
profit to subsidiaries or affiliates of Lessor, or to any party as a
result of a non-competitive selection process, for management or other
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services in or to the Office Building Project, or for supplies or other
materials, in each case to the extent that the costs of such services, supplies,
or materials exceed the costs that would have been paid had the services,
supplies or materials been provided by parties unaffiliated with the Lessor on a
competitive basis;
(xii) Except for the accounting and management fee
set forth in paragraph 4.2(b)(vii), Lessor's or project manager's general
corporate overhead and general administrative expenses;
(xiii) Advertising and promotional costs if such
costs do not benefit Lessee;
(xiv) The cost of repairs or other work incurred
by reason of fire, windstorm or other casualty (except that deductibles paid
pursuant to any insurance shall be included as Operating Expenses) or by the
exercise of the right of eminent domain to the extent that Lessor is
compensated therefore through proceeds of insurance or condemnation awards or
would have been so reimbursed if Lessor had in force all of the insurance
required to be carried by Lessor under the provisions of this Lease;
(xv) Leasing commissions, attorney fees, costs and
disbursements and other expenses incurred in connection with negotiations or
disputes with tenants or other occupants or prospective tenants or other
occupants, or associated with the enforcement of any leases or the defense of
Lessor's title to or interest in the Office Building Complex or any part
hereof or Common Areas or any part thereof;
(xvi) "Takeover" expenses, including, but not
limited to, the expenses incurred by Lessor with respect to space located in
another building of any kind or nature in connection with the leasing of
space in the Office Building Project;
(xvii) Except for the accounting and management
fee set forth in paragraph 4.2(b)(vii), all administrative and other costs
related to the leasing, marketing and construction of the Office Building
Project, including, but not limited to, the reasonable allocation of the
wages, salaries, employee benefits and taxes for all personnel involved in
the management office, expenses such as office supplies, office equipment and
telephone expenses, and all other miscellaneous administrative expenses in
excess of the accounting and management fee set forth in paragraph
4.2(b)(vii);
(xviii) Lessor's gross receipts taxes, personal
and corporate income taxes, inheritance and estate taxes, and other business
taxes and assessments, franchise, gift and transfer taxes;
(xix) Costs of repair or replacement for any item
covered by a warranty;
(xx) Costs of which Lessor is reimbursed by
its insurance carrier or by Lessee's insurance carrier or by any other
entity;
(xxi) Any fines, costs, penalties, or interest
resulting from the negligence or willful misconduct of the Lessor or its
agents, contractors or employees;
(xxii) Rental payments of any related costs
pursuant to any ground lease of land underlying all or any portion of the
Office Building Project and the Common Areas;
(xxiii) Any reserves for equipment or capital
replacement;
(xxiv) Any bad debt loss, rent loss, or reserves
for bad debt or rent loss;
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(xxv) Costs in excess of $5,000 per year for
sculpture, paintings or other objects of art;
(xxvi) Except for the amortization set forth
in paragraph 4.2(b)(viii), any depreciation or amortization of capital
improvements;
(xxvii) Any costs, fees, dues, contributions or
similar expenses for political, charitable, or similar organization;
(xxviii) Any costs, fees, dues, contributions or
similar expenses for industry association or similar organization if such
expenses do not benefit the tenants of the Office Building Project;
(xxix) Any compensation paid to clerks,
attendants, concierges or other persons working in or managing commercial
concessions operated by Lessor or Lessor's project manager; and
(xxx) Any real estate taxes to the extent paid by
Lessee or any other tenant in the Office Building Project under the
applicable provisions in their respective Leases.
(d) Lessee's Share of Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time of Lessee's
Share of annual Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each calendar year of the Lease
term, on the same day as the Base Rent is due hereunder. In the event that
Lessee pays Lessor's estimate of Lessee's Share of Operating Expenses as
aforesaid, Lessor shall deliver to Lessee within ninety (90) days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee's Share of the actual Operating Expenses incurred during the preceding
year. If Lessee's payments under this paragraph 4.2(e) during said preceding
calendar year exceed Lessee's Share as indicated on said statement, Lessee
shall be entitled to credit the amount of such overpayment against Lessee's
Share of Operating Expenses next falling due. If Lessee's payments under this
paragraph during said preceding calendar year were less than Lessee's Share
as indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement.
(e) If the Building Project is less than ninety-five (95%)
percent occupied during all or a portion of any Expense Year, Lessor shall
make an appropriate adjustment to the variable components of Operating
Expenses for such year or applicable portion thereof, employing sound
accounting and management principles, to determine the amount of Operating
Expenses that would have been paid had the Building Project been ninety-five
(95%) percent occupied; and the amount so determined shall be deemed to have
been the amount of Operating Expenses for such year, or applicable portion
thereof.
4.3 RENT INCREASE. At the times set forth in paragraph 1.7 of the
Basic Lease Provisions, the monthly Base Rent payable under paragraph 4.1 of
this Lease shall increase at a fixed rate of Three and One-Half Percent
(3.5%).
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions
as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may
use, apply or retain all or any portion of said deposit for the payment of
any rent or other charge in default for the payment of any other sum to which
lessor may become obligated by reason of Lessee's default, or to compensate
Lessor for any loss or damage which lessor may suffer thereby. If Lessor so
uses or applies all or any portion of said deposit, Lessee shall within ten
(10) days after written demand therefor deposit cash with Lessor in an amount
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sufficient to restore said deposit to the full amount then required of Lessee.
Lessor shall not be required to keep said security deposit separate from its
general accounts. If Lessee performs all of the Lessee's obligations hereunder,
said deposit, or so much thereof as has not heretofore been applied by Lessor,
shall be returned, without payment of interest or other increment for its use,
to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated the Premises. No trust relationship is created herein between Lessor and
Lessee with respect to said Security Deposit, and under no circumstances shall
Lessor be required to keep the Security Deposit separate from its other funds or
in an interest-bearing account, nor shall Lessee be entitled to any interest on
such amounts regardless of whether or not the Security Deposit is deposited in
an interest-bearing account.
5.1 LETTER OF CREDIT. Lessee shall, on execution of this Lease, deliver
to Lessor and cause to be in effect during the Term an unconditional,
irrevocable letter of credit (the "Letter of Credit") in the amount of Two
Hundred Forty Thousand Dollars ($240,000). The Letter of Credit shall be issued
by a bank selected by Lessee and acceptable to Lessor, shall permit multiple
draws and shall be reasonably acceptable to Lessor. Lessee shall pay all
expenses, points, or fees incurred by Lessee in obtaining the Letter of Credit.
Lessor shall hold the Letter of Credit as security for the performance of
Lessee's obligations under the lease. If Lessee does not renew the Letter of
Credit within thirty (30) days before its expiration, Lessor may, without
prejudice to any other remedy it has, draw on all of the Letter of Credit, deem
Lessor's failure to renew a default hereunder, and terminate this lease pursuant
to the provisions of paragraph 13.2. If Lessee fails to pay rent or other
charges due hereunder, or otherwise defaults with respect to any provision of
this Lease. Lessor may, without prejudice to any other remedy it has, draw on
that portion of the Letter of Credit necessary for the payment of any rent or
other charge in default for the payment of any other sum to which Lessor may
become obligated by reason of Lessee's default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. Any amount of the Letter of
Credit that is drawn on by Lessor but not applied by Lessor shall be held by
Lessor as a security deposit (the "Letter of Credit Security Deposit"). If the
monthly Base Rent shall, from time to time, increases during the Term of this
Lease as set forth in paragraph 5.1, or if Lessor raws on any portion of the
Letter of Credit and so uses or applies all or any portion of said portion in
accordance with the provisions of this Lease or applicable law, Lessee shall,
within 5 business days after demand by Lessor, either (a) deposit cash with
Lessor in an amount that, when added to the amount remaining under the Letter of
Credit and the amount of any Letter of Credit Security Deposit, shall equal the
amount required under this paragraph 5, or (b) deliver written documentation
executed by the bank that issued the Letter of Credit confirming that the Letter
of Credit has been reinstated to the amount required under this paragraph 5.
Notwithstanding anything to the contrary in this paragraph 5.1, should Lessee
increase its stockholders' equity in the publicly held entity to at least $10
million (subject to verification by Lessor), Lessee may decrease the Letter of
Credit to $200,000; should Lessee increase its stockholders' equity in the
publicly held entity to at least $25 million (subject to verification by
Lessor), Lessee may decrease the Letter of Credit to $150,000; should Lessee
increase its stockholders' equity in the publicly held entity to at least $25
million and have positive pre-tax earnings from operations (subject to
verification by Lessor), Lessee's obligation under this paragraph 5.1 to
maintain the Letter of Credit shall terminate; provided, however, that such
obligation shall be reinstated if Lessee's financial condition returns to its
prior condition.
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6. PERMITTED USE.
6.1 PERMITTED USE. The Premises shall be used only for the Permitted
Use set forth in the Basic Lease Information and for no other uses. Lessee shall
not commit waste, overload the floors or structure of the Building Project,
subject the Premises, the Building Project, or the Common Areas to any use which
would damage the same or increase the risk of loss or violate any insurance
coverage, permit any unreasonable odors, smoke, dust, gas, substances, noise or
vibrations to emanate from the Premises, take any action which would constitute
a nuisance or would disturb, obstruct or endanger any other Lessees, take any
action which would abrogate any warranties, or use or allow the Premises to be
used for any unlawful purpose. Lessee shall have the right in common with other
Lessees of Lessor to use the parking facilities of the Building Project. Lessee
agrees not to overburden the parking facilities and agrees to cooperate with
Lessor and other Lessees in the use of parking facilities.
6.2 COMPLIANCE WITH LAW.
(a) To the best of Lessor's knowledge, as of the execution
date of the Lease, Lessor represents that the building shell and core and
Lessor's Work set forth in paragraph 6.3(a) below are in compliance with the
American Disabilities Act of 1990 ("ADA") and other building codes, as evidenced
by the Lessor's Certificate of Occupancy on the building, and Lessor represents
that the building shell and core are in compliance with all applicable local,
state and federal earthquake laws in effect as of the execution date of the
Lease. Should it be discovered that said building shell and core are not in
compliance with said codes as of the execution date of the Lease, Lessor shall
correct the same at Lessor's sole cost and expense.
(b) Lessor does not make any representation or warranties with
respect to whether or not the use for which lessee will occupy the Premises will
violate any covenants or restrictions of record, or any applicable building
code, regulation, law or ordinance in effect on the Lease term Commencement Date
or at any other time.
(c) Lessee shall, Lessee's expense, promptly comply with all
applicable statutes, ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance underwriters or
rating bureaus, now in effect or which may hereafter come into effect, whether
or not they reflect a change in policy from that now existing, during the term
or any part of the term hereof, relating in any manner to the occupation and use
by Lessee of the Premises. Lessee shall conduct its business in a lawful manner
and shall not use or permit the use of the Premises or the Common Areas in any
manner that will tend to create waste or a nuisance or shall tend to disturb
other occupants of the Building Project. Lessee's aforesaid obligation regarding
compliance with covenants and restrictions of record is subject to Lessee's
receipt and reasonable approval of such covenants and restrictions; provided
that Lessee shall be deemed to have approved such conditions and restrictions if
it does not notify Lessor in writing of its specific objections thereto within
five (5) days of its receipt thereof.
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6.3 CONDITION OF PREMISES.
Lessor shall deliver the Premises to Lessee upon execution of the
Lease in "as is" condition. Except as otherwise provided in this Lease,
Lessee hereby accepts the Premises and the Building Project in their
condition existing as of the Lease execution date (provided that Lessee shall
have until thirty (30) days after such date to object to the presence of any
latent defects in the portion of the Premises constructed by Lessor or under
Lessor's control by notifying Lessor thereof in writing within such time
period), subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use of the
Premises, and any easements, covenants or restrictions of record, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that it has satisfied itself by
its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made
any representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Building Project for the conduct of Lessee's
business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Building Project,
including the Building's exterior walls, roof, and common areas, in good
condition and repair; provided, however, Lessor shall not be obligated to
paint, repair or replace wall coverings, or to repair or replace any
improvements that are not ordinarily a part of the Building or are above then
Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Building Project or any part
thereof, or on account of any interruption of services or of access to the
Premises, Building or Building Project; provided, however, that if the
Premises are unusable by an event other than damage or destruction,
condemnation or an act or omission of Lessee or Lessee's agents, contractors,
invitees or employees, or any delays attributable to war, riot, insurrection,
labor or material shortage or other matters beyond Lessor's reasonable control
(each a "Force Majeure Delay"), and if such condition persists for more than
(a) ten (10) consecutive business days, then Monthly Base Rent hereunder (but
not other rent) shall be abated, on a day-by-day basis, for every business
day thereafter that such condition continues, and (b) ninety (90) consecutive
business days, then Lessee may terminate this Lease as of such ninetieth
consecutive (90) business day by providing Lessor with irrevocable written
notice of its election within ten (10) days thereafter. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the Premises in
good condition and repair, Lessee shall be responsible for payment of the
cost thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is
attributable to causes beyond normal wear and tear. Lessee shall be
responsible, at its sole cost and expense, for painting, repairing or
replacing wall coverings, repairing and maintaining the interior of the
Premises (other than equipment which is part of, and affects, the Building's
overall systems, such as HVAC, which shall be Lessor's obligation) and to
repair or replace any Premises improvements that are not ordinarily a part of
the Building or that are above then Building standards. Lessor may, at its
option, upon reasonable notice, elect to have Lessee perform any particular
such maintenance or repairs the cost of which is otherwise Lessee's
responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear
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and tear if the same could have been prevented by good maintenance practices
by Lessee. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings
and equipment; provided that Lessee shall not have to remove any Tenant
Improvements or subsequent modifications, alterations or additions thereof.
Except as otherwise stated in this Lease, and subject to the terms and
conditions of this Lease, Lessee shall leave the air lines, power panels,
electrical distribution systems, lighting fixtures, air conditioning, window
coverings, wall coverings, carpets, wall paneling, ceilings and plumbing on
the Premises and in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent,
which shall not be unreasonably withheld, make any alterations, improvements
additions, Utility Installations or repairs in, on or about the Premises, or
the Building Project. As used in this paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window and wall coverings, power panels,
electrical distribution systems, lighting fixtures, air conditioning,
plumbing, and telephone and telecommunication wiring and equipment. At the
expiration of the term, Lessor may require the removal of any or all of said
alterations, improvements, additions or Utility Installations, and the
restoration of the Premises and the Building Project to their prior
condition, at Lessee's expense; provided that Lessee shall not be required to
remove alterations, improvements, additions or Utility Installations made
pursuant to the terms of the Work Letter and, provided further that, with
respect to alterations, improvements, additions or Utility Installations for
which Lessee has requested (and was required pursuant to the terms of the
Lease to request) Lessor's consent to install, Lessor shall be required to
request their removal at the time Lessor grants its consent if Lessor wishes
to require their removal upon the termination of the Lease. Should Lessor
permit Lessee to make its own alterations, improvements, additions or Utility
Installations, Lessee shall use only such contractor as has been expressly
approved by Lessor, and Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal
to one hundred twenty-five percent (125%) of the estimated cost of such
improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use a contractor not expressly approved by
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Building Project that Lessee
shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee's making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior
to the commencement of the work, and compliance by Lessee with all conditions
of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use
in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. Lessee shall at all times keep
the Premises, the Building and the Building Project free and clear of liens
attributable in any way to a work of improvement commissioned by Lessee, or
to the acts or omissions of Lessee, any of Lessee's employees, agents, or
contractors, or any of their employees, agents or sub-contractors. If Lessee
shall, in good faith, contest the validity of any such lien, claim or demand,
then Lessee shall, at its sole expense defend itself and Lessor against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against Lessor or the Premises, the
Building or the
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Building Project, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount not
less than one hundred fifty percent (150%) of the amount of such contested
lien claim or demand indemnifying Lessor against liability for the same and
holding the Premises, the Building and the Building Project free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's reasonable attorneys' fees and costs in participating in such
action if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility
installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including
but not limited to, floor coverings, panelings, doors, drapes, built-ins,
moldings, sound attenuation, and lighting, conduit, wiring and outlets, shall
be made and done in a good and workmanlike manner and of good and sufficient
quality and materials and shall be the property of Lessor and remain upon and
be surrendered with the Premises at the expiration of the lease term, unless
Lessor requires their removal pursuant to paragraph 7.3(a). Provided Lessee
is not in default, notwithstanding the provisions of this paragraph 7.3(e),
Lessee's personal property and equipment, other than that which is affixed to
the Premises so that it cannot be removed without material damage to the
Premises or the Building, and other than Utility Installations; shall remain
the property of Lessee and may be removed by Lessee subject to the provisions
of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
(g) Should Lessee construct additional improvements in the
Premises which increase the usable and rentable square footage of the
Premises, such additional square footage shall not be added to the square
footage of the Premises as set forth in paragraph 1.2 herein and shall not
increase Lessee's Share of Operating Expenses as set forth in paragraph 1.10
herein. In addition to complying with the requirements set forth in this
paragraph 7, any such additional improvements that increase the square
footage of the Premises shall be constructed at Lessee's sole cost and
expense and shall comply with any and all governmental and other building
codes, including the ADA.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new
or additional utility facilities throughout the Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Building Project,
including, but not by way of limitation, such utilities as plumbing,
electrical systems, security systems, communication systems, and fire
protection and detection systems, so long as such installations do not
unreasonably interfere with Lessee's use of the Premises.
7.5 ROOF TOP EQUIPMENT. Subject to Lessor's approval, which shall
not be unreasonably withheld, Lessee shall have the right to install
communications equipment on the roof of the Building including, but not
limited to, satellite dishes and antennae. So long as Lessee's communication
equipment is solely for Lessee's use, Lessor shall not be entitled to charge
additional rent for the use of the rooftop for said purpose; provided that
should the scope of said equipment exceed eight (8) cubic feet, Lessor shall
reserve the right to charge a monthly rental fee for the use thereof. Lessee
shall be responsible for the maintenance and repair for such equipment, as
well as for any repairs required to the roof and structural work to support
said equipment, at its sole cost and expense.
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8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Commercial
General Liability insurance utilizing an Insurance Services Office standard
form with Broad Form General Liability Endorsement (GL0404), or equivalent,
in an amount of not less than $2,000,000 per occurrence of bodily injury and
property damage combined or in a greater amount as reasonably determined by
Lessor and shall insure Lessee with Lessor as an additional insured against
liability arising out of the use, occupancy or maintenance of the Premises.
Compliance with the above requirement shall not, however, limit the
liability of Lessee hereunder.
8.2 LIABILITY INSURANCE-LESSOR. Although Lessor shall not be
required to maintain any liability insurance, any premiums for liability
insurance maintained by Lessor relating to the Premises, the Building or the
Building Project shall be Operating Expenses hereunder.
8.3 PROPERTY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost all-risks insurance, including without limitation
fire and extended coverage insurance, with vandalism and malicious mischief,
sprinkler leakage and earthquake sprinkler leakage endorsements, in an amount
sufficient to cover not less than 100% of the full replacement costs, as the
same may exist from time to time, of all of Lessee's personal property,
fixtures, equipment and tenant improvements.
8.4 PROPERTY INSURANCE-LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Building Project improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the
full replacement cost thereof, as the same may exist from time to time,
utilizing Insurance Services Office standard form, or equivalent providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, plate glass, and such other
perils as Lessor deems advisable or may be required by a lender having a lien
on the Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall
contain such deductibles as Lessor or the aforesaid lender may determine. In
the event that the Premises shall suffer an insured loss as defined in
paragraph 9.1(f) hereof, the deductible amounts under the applicable
insurance policies shall be deemed an Operating Expense. Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
carried by Lessor. Lessee shall pay the entirety of any increase in the
property insurance premium for the Building Project over what it was
immediately prior to the commencement of the term of this Lease if the
increase is specified by Lessor's insurance carrier as being caused by the
nature of Lessee's occupancy or any act or omission of Lessee.
8.5 INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease.
Each policy required to be obtained by Lessee hereunder shall: (a) be
issued by insurers authorized to do business in the state in which the
Building is located and rated not less than financial class X, and not less
than policyholder rating A, in the most recent version of Best's Key Rating
Guide, or the equivalent rating in any other comparable guide selected by
Lessor (provided that, in any event, the same insurance company shall provide
the coverages described in paragraphs 8.1 and 8.3 above); (b) be in form
reasonably satisfactory from time to time to Lessor; (c) name Lessee as named
insured thereunder and shall name Lessor and, at Lessor's request, Lessor's
mortgagees and ground lessors of which Lessee has been informed in writing, as
additional insureds; (d) not have a deductible amount exceeding Five Thousand
Dollars ($5,000.00); (e) specifically provide that the insurance afforded by
such policy for the benefit of Lessor and Lessor's mortgagees and ground
lessors shall be primary, and any
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insurance carried by Lessor or Lessor's mortgagees and ground lessors shall
be excess and non-contributing; (f) except for worker's compensation
insurance, contain an endorsement that the insurer waives its right to
subrogation as described in paragraph 8.6 below; and (g) contain an
undertaking by the insurer to notify Lessor (and the mortgagees and ground
lessors of Lessor who are named as additional insureds) in writing not less
than thirty (30) days prior to any material change, reduction in coverage,
cancellation or other termination thereof. Lessee agrees to deliver to
Lessor, as soon as practicable after the placing of the required insurance,
but in no event later than ten (10) days after the date Lessee takes
possession of all or any part of the Premises, certified copies of each such
insurance policy (or certificates from the insurance company evidencing the
existence of such insurance and Lessee's compliance with the foregoing
provisions of this paragraph 8). Lessee shall cause replacement policies or
certificates to be delivered to Lessor not less than thirty (30) days prior
to the expiration of any such policy or policies. If any such initial or
replacement policies or certificates are not furnished within the time(s)
specified herein, Lessee shall be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided
herein, and Lessor shall have the right, but not the obligation, to procure
such policies and certificates at Lessee's expense.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the
other, for direct or consequential loss or damage arising out of or incident
to the perils covered by property insurance carried by such party, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. If necessary all property insurance policies
required under this Lease shall be endorsed to so provide.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and
its agents, Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Building Project, or from the
conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims, costs and expenses arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee, or any of
Lessee's agents, contractors, employees or invitees and from and against all
costs, attorneys' fees, expenses and liabilities incurred by Lessor as the
result of any such use, conduct, activity, work, things done, permitted or
suffered, breach, default or negligence, and in dealing reasonably therewith,
including but not limited to the defense or pursuit of any claim or any
action or proceeding involved therein; and in case any action or proceeding
be brought against Lessor by reason of any such matter, Lessee upon notice
from Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Building Project arising from any cause and Lessee
hereby waives all claims in respect thereof against Lessor, except to the
extent such damages or claims result from Lessor's gross negligence or
willful misconduct.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for loss of or damage to the goods, wares, merchandise or
other property of Lessee, Lessee's employees, invitees, customers, or any
other person in or about the Premises or the Building Project, nor shall
Lessor be liable for injury to the person of Lessee, Lessee's employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether said damage or injury results from conditions arising
upon the Premises or upon other portions of the Building Project, or from
other sources or places, or from new construction or the repair, alteration
or improvement of any part of the Building Project, or of the equipment,
fixtures or appurtenances applicable thereto, and regardless of whether the
cause of such damage or injury or the means of repairing the same is
inaccessible, Lessor shall not be liable for any
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damages arising from any act or neglect of any other lessee, occupant or user
of the Building Project, nor from the failure of Lessor to enforce the
provisions of any other lease of any other lessee of the Building Project;
provided that this paragraph 8.8 shall not apply to the extent of damage or
loss resulting directly from Lessor's gross negligence or willful misconduct.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is less than fifty percent (50%) of the then
Replacement Cost of the Building.
(c) "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent (50%) or more of the then
Replacement Cost of the Building.
(d) "Building Project Buildings" shall mean all of the buildings
on the Building Project site.
(e) "Building Project Buildings Total Destruction" shall mean if
the Building Project Buildings are damaged or destroyed to the extent that
the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary
to be spent in order to repair or rebuild the damaged area to the condition
that existed immediately prior to the damage occurring, excluding all
improvements made by lessees, other than those installed by Lessor at
Lessee's expense.
(h) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by a
Hazardous Substance in, on, or under the Premises.
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which
is an Insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent insurance proceeds are available and
the required materials and labor are readily available through usual
commercial channels, at Lessor's expense, repair such damage (but not Lessee's
fixtures, equipment or tenant improvements originally paid for by Lessee) to
its condition existing at the time of the damage, and this Lease shall
continue in full force and effect.
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(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which
is not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), which damage prevents Lessee from making any substantial
use of the Premises, Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate this Lease as of
the date of the occurrence of such damage, in which event this Lease shall
terminate as of the date of the occurrence of such damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION; BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Building Project Total Destruction, then
Lessor may at Lessor's option either (i) repair such damage or destruction as
soon as reasonably possible at Lessor's expense (to the extent the required
materials are readily available through usual commercial channels) to its
condition existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements, and this Lease shall continue in full force
and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of occurrence of such damage of Lessor's intention to cancel
and terminate this Lease, in which case this Lease shall terminate as of the
date of the occurrence of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to
the Premises, Lessor may at Lessor's option cancel and terminate this Lease
as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of
Premises Damage during the last twelve (12) months of the term of this Lease.
If Lessee duly exercises such option during said twenty (20) day period,
Lessor shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of Lessor's election
to do so within ten (10) days after the expiration of said twenty (20) day
period, notwithstanding any term or provision in the grant of option to the
contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) If, in the event of Premises Damage, Lessor repairs or
restores the Building or Premises pursuant to the provisions of this
paragraph 9, and any part of the Premises are not usable (including loss of
use due to loss of access or essential services), the rent payable hereunder
(including Lessee's Share of Operating Expenses) for the period during which
such damage, repair or restoration continues shall be abated, provided (1)
the damage was not the result of the negligence of Lessee, and (2) such
abatement shall only be to the extent the operation and profitability of
Lessee's business as operated from the Premises is adversely affected. Except
for said abatement of rent, if any, Lessee shall have no claim against
Lessor for any damage suffered by reason of any such damage, destruction,
repair or restoration.
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(b) If Lessor shall elect or shall be obligated to repair or
restore the Premises or the Building under the provisions of this paragraph 9
and shall not commence such repair or restoration within ninety (90) days
after such occurrence, or if Lessor shall not complete the restoration and
repair within six (6) months after such occurrence, Lessee may at Lessee's
option cancel and terminate this Lease by giving Lessor written notice of
Lessee's election to do so at any time prior to the commencement or
completion, respectively, of such repair or restoration. In such event this
Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with
the provisions of paragraph 4.2, except as otherwise provided in paragraph
10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in real property tax specific in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Building Project or any
portion thereof by any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the Building
Project or in any portion thereof, as against Lessor's right to rent or other
income therefrom, and as against Lessor's business of leasing the Building
Project. The term "real property tax" shall also include any tax, fee,
levy, assessment or charge (i) in substitution of, partially or totally, any
tax, fee, levy, assessment or charge hereinabove included within the
definition of "real property tax," or (ii) the nature of which was
hereinabove included within the definition of "real property tax," or (iii)
which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv)
which is imposed as a result of a change in ownership, as defined by
applicable local statutes for property tax purposes, of the Building Project
or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such change of ownership, or (v)
which is imposed by reason of this transaction, any modifications or changes
hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are
not separately assessed, Lessee's portion of that
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tax shall be equitably determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information (which may
include the cost of construction) as may be reasonably available. Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use, and replacement
light bulbs and/or florescent tubes and ballasts for standard overhead
fixtures. Janitorial service shall be as requested by Lessee. Costs incurred
by Lessor in providing such services shall be Operating Expenses, Costs
incurred by Lessor in providing such services shall be Operating Expenses,
except for electricity (which shall be individually metered) and janitorial
services (which shall be contracted directly), both of which shall be paid by
Lessee as additional rent.
11.2 SERVICES EXCLUSIVE TO LESSEE. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.
11.3 HOURS OF SERVICE. Any utilities provided by Lessor pursuant to
Section 11.1 shall be provided 24 hours per day, seven (7) days per week. Any
services provided by Lessor pursuant to Section 11.1 (exclusive of janitorial
services, which shall be contracted directly by Lessee) shall be provided
from 8:00 a.m. to 6:00 p.m., Monday through Friday (excluding generally
observed national, state or local holidays). Services required at other
times shall be subject to advance request and reimbursement by Lessee to Lessor
of the cost thereof.
11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services,
over standard office usage for the Building Project; provided that Lessee
shall be entitled to make connections necessary for excess usage if it does
so at its own cost and expense, in compliance with all laws and regulations
and without detriment to the Leased Premises or the balance of the Building
Project. Lessor shall require Lessee to reimburse Lessor for any excess
expenses or costs that may arise out of a breach of this subparagraph by
Lessee. Lessor may, in its sole discretion, install at its own expense
supplemental equipment and/or separate metering applicable to Lessee's
excess usage or loading.
11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service, regardless of
whether or not the cause thereof was within Lessor's control; provided,
however, that if the Premises are rendered unusable by an event other than
damage or destruction, condemnation or an act
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or omission of Lessee or Lessee's agents, contractors, invitees or employees,
or a Force Majeure Delay, and if such condition persists for more than (a)
ten (10) consecutive business days, then Monthly Base Rent hereunder (but not
other rent hereunder) shall be abated, on a day-by-day basis, for every
business day thereafter that such condition continues, and (b) ninety (90)
consecutive business days, then Lessee may terminate this Lease as of such
ninetieth (90) consecutive business day by providing Lessor with irrevocable
written notice of its election within ten (10) days thereafter.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the
Premises, without Lessor's prior written consent, which Lessor may grant or
withhold in its sole and absolute discretion, but which cannot be
unreasonably withheld. Lessor shall respond to Lessee's request for consent
hereunder within ten (10) business days following Lessor's receipt of
Lessee's written request for consent, and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a material default and breach of this Lease without the need
for notice to Lessee under paragraph 13.1; provided that if Lessor respond to
Lessee's written request for consent within ten (10) business days, Lessor
shall be deemed to have consented to such assignment, transfer, mortgage,
encumbrance or subletting. "Transfer" within the meaning of this paragraph 12
shall include the transfer or transfers, after the Commencement Date,
aggregating: (a) if Lessee is a corporation, more than fifty percent (50%) of
the voting stock of such corporation or (b) if Lessee is a partnership, more
than fifty percent (50%) of the profit and loss participation in such
partnership. Neither the use by, nor the subletting to, any majority owned or
controlled (whether directly or indirectly) subsidiary or affiliate (an
"Affiliate") of Lessee of all or a portion of the Premises shall be deemed to
be an assignment or subletting.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Lessee shall have the right to assign the lease to any entity
which acquires all, or substantially all, of Lessee's assets or voting
securities (the "New Owner"), and all terms and conditions shall remain the
same for the Term of the Lease. In the event that a New Owner, Affiliate, or
other proposed assignee has a BBB (investment grade) or equivalent credit
rating, Lessor shall automatically consent to the assignment. For any
proposed assignee not meeting this criteria, if Lessor evaluates the
financial condition of the New Owner, Affiliate or other proposed assignee
and reasonably determines that the financial stability to be the same or
better than that of Lessee on the date the Lease is executed or the date of
the assignment (the date on which the financial worth of the proposed
assignor is greater), then the Lessor shall not unreasonably withhold its
consent to the release of Lessee from its obligations under the Lease. In all
other cases, regardless of Lessor's consent to any assignment, no assignment
or subletting shall release Lessee of Lessee's obligations hereunder or alter
the primary liability of Lessee to pay the rent and other sums due Lessor
hereunder, including the payment of Lessee's Share of Operating Expenses, and
to perform all other obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment without being deemed to have
consented thereto.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the breach
of any of the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said Guarantor give their written consent to
such sublease and the terms thereof.
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(e) The consent by Lessor (including any deemed consent by Lessor
pursuant to paragraph 12.1) to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee
or anyone else liable on the Lease or sublease and without obtaining their
consent and such action shall not relieve such persons from liability under
this Lease or said sublease; provided, however, such persons shall not be
responsible to the extent any such amendment or modification enlarges or
increases the obligations of the Lessee or sublessee under this Lease or such
sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any Guarantor or anyone else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee (or any deemed consent by Lessor pursuant to paragraph
12.1) shall not constitute an acknowledgment that no default then exists
under this Lease of the obligations to be performed by Lessee nor shall such
consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its express consent to an assignment or subletting
was materially false shall, at Lessor's election, render Lessor's said
express consent null and void.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING/ASSIGNMENT.
Regardless of Lessor's consent, the following terms and conditions shall
apply to any subletting (and in the case of subparagraph (f), assignment) by
Lessee of all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however,
that until a default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a default exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents due and to become due under the
sublease. Lessee agrees that such sublessee shall have the right to rely upon
any such statement and request from Lessor, and that such sublessee shall pay
such rents to Lessor without any obligation or right to inquire as to whether
such default exists and notwithstanding any notice from or claim from Lessee
to the contrary. Lessee shall have no right or claim against said sublessee
or Lessor for any such rents so paid by said sublessee to Lessor.
(b) Except as set forth in paragraph 12.1, no sublease entered into
by Lessee shall be effective unless and until it has been approved in writing
by Lessor. In entering into any sublease, Lessee shall use only such form of
sublease as is satisfactory to Lessor, and once approved by Lessor, such
sublease shall not be changed or modified without Lessor's prior written
consent. Any sublessee shall, by reason of entering into a sublease under
this Lease, be deemed, for the benefit of Lessor, to have assumed and agreed
to conform and comply with each and every obligation herein to be performed
by Lessee other than such obligations as are contrary to or inconsistent with
provisions contained in a sublease to which Lessor has expressly consented in
writing.
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(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease
from the time of the exercise of said option to the termination of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents
or security deposit paid by such sublessee to Lessee or for any other prior
defaults of Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented
(whether such consent was in writing or deemed pursuant to paragraph 12.1),
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
(f) Notwithstanding anything to the contrary in the foregoing, should
Lessee plan to sublease or assign the Lease to an entity that is not an
Affiliate of Lessee, as defined in paragraph 12.1 above, seventy-five
percent (75%) of any rent or other economic consideration received by Lessee
as a result of an assignment or subletting which exceeds, in the aggregate,
(i) the total rent which Lessee is obligated to pay to Lessor under the Lease
(prorated to reflect obligations allocable to any portion of the Premises
subleased), plus (ii) any reasonable and customary brokerage commissions (not
to exceed five percent (5%) of base rent payable under the assignment or
sublease), and attorneys' fees (not to exceed $750 per assignment or
subletting), and reasonable, customary and necessary tenant improvement costs
actually paid by Lessee in connection with such assignment or subletting,
shall be paid to Lessor within ten (10) days after receipt thereof as
additional rent hereunder, without altering or reducing any other obligations
of Lessee hereunder.
(g) Notwithstanding anything to the contrary in the foregoing,
should Lessee plan to sublease or assign the Lease to an entity that is not
an Affiliate of Lessee, as defined in paragraph 12.1 above, Lessor shall have
the right, but not the obligation, to recapture that portion of the Premises
which is covered by said planned subletting or assignment. To exercise the
recapture right, Lessor must notify Lessee in writing within ten (10)
business days from that date which Lessee submits said planned subletting or
assignment to Lessor for Lessor's consent. The provisions of paragraph
12.3(f) shall still apply to the proposed subletting or assignment. In the
event that Lessor exercises its recapture rights under this paragraph, the
obligations of Lessee under this Lease regarding the portion of the Premises
so recaptured shall be terminated as of the date of recapture.
12.4 LESSOR'S EXPENSES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or
if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including without limitation attorneys', architects',
engineers' and other consultants' fees.
12.5 CONDITIONS TO CONSENT. With respect to transfers for which Lessor's
approval is required pursuant to this paragraph 12, Lessor reserves the right
to condition any approval to assign or sublet upon Lessor's determination
that (a) the proposed assignee or sublessee shall conduct a business on the
Premises of a quality substantially equal to that of Lessee and consistent
with the general character of the other occupants of the Building Project and
not in violation of any exclusives or rights then held by other lessees, and
(b) the proposed assignee or sublessee be at least as financially responsible
as Lessee was expected to be at the time of the execution of this Lease or of
such assignment or subletting, whichever is greater.
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13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee.
Vacation of the Premises shall include the failure to occupy the Premises for
a continuous period of ninety (90) days or more, whether or not the rent is
paid, unless Lessee has sublet or assigned the Premises.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 13.1(a) (vacation or abandonment), 13.1(e)
(insolvency), 13.1(f) (false statement), 33 (auctions), or 41.1 (easements),
all of which are hereby deemed to be material, non-curable defaults without
the necessity of any notice by Lessor to Lessee thereof; the breach by Lessee
of any of the covenants, conditions or provisions of paragraphs (7.3(a), (b)
or (d) (alterations), 12.1 (assignment or subletting), 16(a) (estoppel
certificate), 30(b) (subordination), or 41.1 (easements), where such breach
shall continue for a period of ten (10) days after written notice thereof
from Lessor to Lessee.
(c) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written
notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee
with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days. In the event that any provision of this
paragraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 LESSOR'S REMEDIES.
(a) Termination. In the event of any default by Lessee, in
addition to any other remedies available to Lessor under this Lease, at law
or in equity, Lessor shall have the immediate option to terminate this Lease
and all rights of Lessee hereunder. In the event that Lessor shall elect to
so terminate this Lease, then Lessor may recover from Lessee:
(i) the worth at the time of award of any unpaid rent which
had been earned
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at the time of such termination; plus
(ii) the worth at the time of the award of the amount by
which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
Lessee proves could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Lessee proves could be
reasonable avoided; plus
(iv) any other amount necessary to compensate Lessor for all
the detriment proximately caused by Lessee's failure to perform
its obligations under this Lease or which, in the ordinary course
of things, would be likely to result therefrom including, but not
limited to: "Unreimbursed Leasehold Improvement and Rental
Abatement Costs" (as defined below); attorneys' fees; brokers'
commissions; the costs of refurbishment, alterations, renovation
and repair of the Premises; and removal (including the repair of
damage caused by such removal) and storage (or disposal) of
Lessee's personal property, equipment, fixtures, Lessee's
alterations, additions, leasehold improvements and any other items
which Lessee is required under this Lease to remove but does not
remove. As used herein, the term "Unreimbursed Leasehold
Improvement and Rental Abatement Costs" shall mean the product
when multiplying (i) the sum of any leasehold improvement
allowance plus any other costs provided, paid or incurred by
Lessor in connection with the design and construction of the
initial leasehold improvements installed in the Premises on or
prior to the Commencement Date pursuant to the Work Letter,
together with the amount, if any, of Abated Rent provided for in
Paragraph 4.1 hereof, by (ii) the fraction, the numerator of which
is the number of months of the term of this Lease not yet elapsed
as of the date on which this Lease is terminated (excluding any
unexercised renewal options), and the denomination of which is the
total number of months of the term of this Lease (excluding any
unsecured renewal options). For example, if the total costs paid
or incurred by Lessor with respect to the initial leasehold
improvements, plus the amount of Abated Rent, was $100,000.00, the
Lease term was sixty (60) months, and the Lease was terminated by
reason of Lessee's default at the end of twelve (12) months, the
Unreimbursed Leasehold Improvement and Rental Abatement Costs
would be equal to $80,000,000 (I.E., $80,000.00 equals $100,000.00 x
48/60).
As used in subparagraphs (i) and (ii), above, the "worth at the
time of award" is computed by allowing interest at the maximum interest rate
which Lessor is permitted by law to charge to Lessee (the "Lease Rate"). As
used in subparagraph (iii), above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(b) Re-Entry Rights. In the event of any default by Lessee, in
addition to any other remedies available to Lessor under this Lease, at law
or in equity, Lessor shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises; such property may be removed, stored and/or disposed of
pursuant to this Lease or any other procedures permitted by applicable law.
No re-entry or taking possession of the Premises by Lessor pursuant to this
paragraph 13.2(b), and no acceptance of surrender of the Premises or other
action on Lessor's part, shall be construed as an election to terminate this
Lease unless a written notice of such intention be given to Lessee or unless
the termination thereof be decreed by a court of competent jurisdiction.
(c) Continuation of Lease. In the event of any default by
Lessee, in addition to any other remedies available to Lessor under this
Lease, at law or in equity, Lessor shall have the right to continue this
Lease in full force and effect, whether or not Lessee shall have abandoned
the Premises.
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The foregoing remedy shall also be available to Lessor pursuant to California
Civil Code Section 1951.4 and any successor statute thereof in the event
Lessee has abandoned the Premises. In the event Lessor elects to continue
this Lease in full force and effect pursuant to this paragraph 13.2(c), then
Lessor shall be entitled to enforce all of its rights and remedies under this
Lease, including the right to recover rent as it becomes due. Lessor's
election not to terminate this Lease pursuant to this paragraph 13.2(c) or
pursuant to any other provision of this Lease, at law or in equity, shall not
preclude Lessor from subsequently electing to terminate this Lease or
pursuing any of its other remedies.
(d) Rights and Remedies Cumulative. All rights, options and
remedies of Lessor contained in this paragraph 13.2 and elsewhere in this
Lease shall be construed and held to be cumulative, and no one of them shall
be exclusive of the other, and Lessor shall have the right to pursue any one
or all of such remedies or any other remedy or relief which may be provided
by law or in equity, whether or not stated in this Lease. Nothing in this
paragraph 13.2 shall be deemed to limit or otherwise affect Lessee's
indemnification of Lessor pursuant to any provision of this Lease.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Lessee in writing, specifying wherein Lessor has failed to perform such
obligation; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance then Lessor
shall not be in default if Lessor commences performance within such 30-day
period and thereafter diligently pursues the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed on Lessor by the terms of any
mortgage or trust deed covering the Building Project. Accordingly, if any
installment of Base Rent, Operating Expenses, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to ten (10%)
percent of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Lessor will
incur by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's default with respect
to such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Building
Project are taken under the power of eminent domain, or sold under the threat
of the exercise of said power (all of which are herein called "condemnation"),
this Lease shall terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever first occurs;
provided that if so much of the Premises or the Building Project are taken by
such condemnation as would substantially and adversely affect the operation
and profitability of Lessee's business conducted from the Premises, Lessee
shall have the option, to be exercised only in writing within thirty (30)
days after Lessor shall have given Lessee written notice of such taking (or
in the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to terminate this Lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent and Lessee's Share of Operating Expenses shall be
reduced in the proportion that the floor area of the Premises taken bears to
the total floor area of the Premises. Common Areas taken shall be excluded
from the Common Areas usable by Lessee and no reduction of rent shall occur
with respect thereto or by reason thereof. Lessor shall have the option in
its sole discretion to terminate this Lease as of the taking of possession by
the condemning authority, by giving written notice to Lessee of such election
within thirty
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(30) days after receipt of notice of a taking by condemnation of any part of
the Premises or the Building Project. Any award for the taking of all or any
part of the Premises or the Building Project under the power of eminent
domain or any payment made under threat of the exercise of such power shall
be the property of Lessor, whether such award shall be made as compensation
for diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
separate award for loss of or damage to Lessee's trade fixtures, removable
personal property and unamortized tenant improvements that have been paid for
by Lessee. For that purpose the cost of such improvements shall be amortized
over the original term of this Lease excluding any options. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to
the extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the
condemning authority.
15. BROKER'S FEE.
(a) The broker involved in this transaction are Lee & Associates
as "broker", licensed real estate broker. Upon execution of this Lease by
both parties, Lessor shall pay broker a fee as set forth in a separate
agreement between Lessor and said broker for brokerage services rendered by
said broker to Lessor in this transaction.
(b) Lessor agrees to pay said fee not only on behalf of Lessor
but also on behalf of any person, corporation, association, or other entity
having an ownership interest in said real property or any part thereof, when
such fee is due hereunder. Any transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed
to have assumed Lessor's obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the provisions of
this paragraph 15 to the extent of their interest in any commission arising
under this Lease and may enforce that right directly against Lessor;
provided, however, that all brokers having a right to any part of such total
commission shall be a necessary party to any suit with respect thereto.
(c) Lessee and Lessor each represents and warrants to the other
that neither has had any dealings with any person, firm, broker or finder
(other than the person(s), if any, whose names are set forth in paragraph
15(a), above) in connection with the negotiation of this Lease and/or the
consummation of the transaction contemplated hereby, and no other broker or
other person, firm or entity is entitled to any commission or finder's fee in
connection with said transaction and Lessee and Lessor do each hereby
indemnify and hold the other harmless from and against any costs, expenses,
attorneys' fees or liability for compensation or charges which may be claimed
by any such unnamed broker, finder or other similar party by reason of any
dealings or actions of the indemnifying party.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party
("requesting party") execute, acknowledge and deliver to the requesting party
a statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, in in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to the responding
party's knowledge, any uncured defaults on the part of the requesting party,
or specifying such defaults if any are claimed, and (iii) in the case of
Lessee, certify as to such other matters as may be requested by Lessor or by
a prospective purchaser or encumbrancer of all or any part of the Building
Project. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Building Project or of the
business of Lessee.
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(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it
shall be conclusive upon such party that (i) this Lease is in full force and
effect, without modification except as may be represented by the requesting
party, (ii) there are no uncured defaults in the requesting party's
performance, (iii) if Lessor is the requesting party, not more than one
month's rent has been paid in advance, and (iv) if Lessor is the requesting
party, there are no remaining obligations of the requesting party under this
Lease yet to be performed.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners, at the time in question, of the fee title or a Lessee's
interest in a ground lease of the Building Project, and, in the event of
any transfer of such title or interest, Lessor herein named (and in case of
any subsequent transfers then the grantor) shall be relieved from and after
the date of such transfer of all liability as respects Lessor's obligations
thereafter to be performed, provided that any funds in the hands of Lessor or
the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in
this Lease to be performed by Lessor shall, subject as aforesaid, be binding
on Lessor's successors and assigns, only during their respective periods of
ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at
the maximum rate then allowable by law or judgments from the date due.
Payment of such interest shall not excuse or cure any default by Lessee
under this Lease; provided, however, that interest shall not be payable on
late charges incurred by Lessee nor on any amounts upon which late charges
are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under
the terms of this Lease, including but not limited to Lessee's Share of
Operating Expense and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of the Premises or the Building
Project and Lessee acknowledges that Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability
of the Premises and the compliance thereof with all applicable laws and
regulations in effect during the term of this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and may be given by personal delivery or by certified or
registered mail, and shall be deemed sufficiently given if delivered or
addressed to Lessee or to Lessor at the address noted below or adjacent to
the signature of the respective parties, as the case may be. Mailed notices
shall be deemed given upon actual receipt at the address required, or
forty-eight hours following deposit in the mail, postage prepaid, whichever
first occurs. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of
the Premises, the Premises shall constitute Lessee's address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
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24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent
to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee
of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of
this Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
of this Lease pertaining to the obligations of Lessee, except that the rent
payable shall be one hundred fifty percent (150%) of the rent payable
immediately preceding the termination date of this Lease, and all Options, if
any, granted under the terms of this Lease shall be deemed terminated and be
of no further effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee and Lessor shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions
of paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California applicable to contracts to be wholly
performed within such State.
30. SUBORDINATION.
(a) This Lease, and any Option or right of first refusal granted
hereby, at Lessor's option, shall, without the necessity of Lessee or any
other party executing any additional documentation, be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation or security
now or hereafter placed upon the Building Project and to any and all advances
made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. If any mortgagee,
trustee or ground lessor shall elect to have this Lease and any Options
granted hereby prior to the lien of its mortgage, deed of trust or ground
lease, and shall give written notice thereof to Lessee, this Lease and such
Options shall be deemed prior to such mortgage, deed of trust or ground lease
whether this Lease or such Options are dated prior or subsequent to the date
of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to
effectuate an attornment, a subordination, or to make this Lease or any
Option granted herein prior to the lien of any mortgage, deed of trust or
ground lease, as the case may be. Lessee's failure to execute such documents
within ten (10) days after written demand shall constitute a material default
by Lessee hereunder without further notice to Lessee or, at Lessor's option,
Lessor shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to
execute such documents in accordance with this paragraph 30(b).
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31. ATTORNEYS' FEES.
31.1 If either party or the broker(s) named herein bring an
action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, trial or appeal thereon, shall be
entitled to his reasonable attorneys' fees to be paid by the losing party as
fixed by the court in the same or a separate suit, and whether or not such
action is pursued to decision or judgment. The provisions of this paragraph
shall inure to the benefit of the broker named herein who seeks to enforce a
right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and
all other costs and expenses incurred in the preparation and service of
notices of default and consultations in connection therewith, whether or not
a legal action is subsequently commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1 Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Lessor, showing the same to prospective
purchasers, lenders, or lessees (provided that the interior of the Premises
will not be shown to prospective lessees until no more than 120 days remain
in the scheduled term of the Lease), taking such safety measures, erecting
such scaffolding or other necessary structures, making such alterations,
repairs, improvements or additions to the Premises or to the Building Project
as Lessor may reasonably deem necessary or desirable and the erecting, using
and maintaining of utilities, services, pipes and conduits through the
Premises and/or other premises as long as there is no material adverse effect
to Lessee's use of the Premises. Lessor may at any time place on or about the
Building (but not in the interior of the Premises) any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for
the same.
32.3 Lessor shall have the right to retain keys to the Premises
and to unlock all doors in or upon the Premises other than to files, vaults
and safes, and in the case of emergency to enter the Premises by any
reasonably appropriate means, and any such entry shall not be deemed a
forceable or unlawful entry or detainer of the Premises or an eviction.
Lessee waives any charges for damages or injuries or interference with
Lessee's property or business in connection therewith.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises or the
Common Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent. The holding of any auction on the Premises or Common
Areas in violation of this paragraph shall constitute a material default of
this Lease.
34. SIGNS. All signs and graphic of every kind visible in or from public
view or corridors, the Common Areas or the exterior of the Premises shall be
constructed by Lessor at sole cost of Lessee and shall be subject to all
applicable laws and in compliance with Lessor's signage program set forth on
Exhibit "D". Lessee shall remove all such signs and graphic prior to the
termination of this Lease. Such installations and removals shall be made in
such manner as to avoid injury or defacement of the Premises; and Lessee
shall repair any injury or defacement, including, without limitation,
discoloration caused by such installation or removal.
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35. MERGER. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, as
named in Section 1.12 hereof, said guarantor shall have the same obligations
as Lessee under this Lease, and shall execute a guaranty in the form and
substance of Exhibit "E" attached hereto, contemporaneous with Lessee's
execution of this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Building Project.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the work "Option" has
the following meaning: (1) the right or option to extend the term of this
Lease or to renew this Lease or to extend or renew any lease that Lessee has
on other property of Lessor; (2) the option or right of first refusal to
lease the Premises or the right of first offer to lease the Premises or the
right of first refusal to lease other space within the Building Project or
other property of Lessor or the right of first offer to lease other space
within the Building Project or other property of Lessor; (3) the right or
option to purchase the Premises or the Building Project, or the right of
first refusal to purchase the Premises or the Building Project or the right
or first offer to purchase the Premises or the Building Project, or the right
or option to purchase other property of Lessor, or the right of first refusal
to purchase other property of Lessor or the right of first offer to purchase
other property of Lessor.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this
Lease is personal to the original Lessee and may be exercised only by the
original Lessee while occupying the Premises (or Lessee's majority-owned
affiliate or a new owner of Lessee) who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, except to an
assignee which is a majority-owned Affiliate or a new owner of Lessee. The
Options, if any, herein granted to Lessee are not assignable separate and
apart from this Lease, nor may any Option be separated from this Lease in any
manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised
unless the prior option to extend or renew this Lease has been so exercised.
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39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary,
(i) during the time commencing from the date Lessor gives to Lessee a notice
of default pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to
Lessee) and continuing until the obligation is paid, or (iii) in the event
that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(c), or paragraph 13.1(d), whether or not the defaults are
cured, during the 12-month period of time immediately prior to the time that
Lessee attempts to exercise the subject Option, (iv) if Lessee has committed
any non-curable breach, including without limitation those described in
paragraph 13.1(b), or is otherwise in default of any of the terms, covenants
or conditions of this Lease.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability
to exercise an Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an
Option shall terminate and be of no further force of effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such obligation
becomes due (without any necessity of Lessor to give notice thereof to
Lessee), or (ii) Lessee fails to commence to cure a default specified in
paragraph 13.1(d) within thirty (30) days after the date that Lessor gives
notice to Lessee of such default and/or Lessee fails thereafter to diligently
prosecute said cure to completion, (iii) Lessor gives to Lessee three or more
notices of default under paragraph 13.1(c), or paragraph 13.1(d), whether or
not the defaults are cured, or (iv) if Lessee has committed any non-curable
breach, including without limitation those described in paragraph 13.1(b), or
is otherwise in default of any of the terms, covenants and conditions of this
Lease.
39.5 OPTION TO RENEW. Lessee shall have one (1) five (5) year
option to renew the Lease by providing Lessor written notice no later than
six (6) months but not more than nine (9) months prior to the expiration of
the initial Lease Term. The base rent during the renewal period for all space
then under the Lease shall be equal to the greater of (1) Base Rent during
the last month of the Term plus an increase of Three and One-Half Percent
(3.5%) thereof, or (2) Ninety-Eight Percent (98%) of the then current fair
market rental rate for space of comparable size, quality, finish and location
taking into consideration rental abatement, tenant improvement allowance,
parking and any other tenant inducements (including, if Lessee has not
utilized the services of a broker at the time of renewal, brokerage
commissions) then given to tenants in comparable class office buildings, but
discounting such fair market rental rate by the value of the Tenant
Improvements.
40. SECURITY MEASURES--LESSOR'S RESERVATIONS.
40.1 Lessee hereby acknowledges that Lessor shall have no
obligation whatsoever to provide guard service or other security measures for
the benefit of the Premises or the Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Building Project or any
part thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Without limiting its rights at law or elsewhere under this
Lease, Lessor shall have the following rights:
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(a) To change the name, address or title of the Building
Project or building in which the Premises are located upon not less than 90
days' prior written notice;
(b) To, at Lessee's expense, provide and install
Building standard graphics on the door of the Premises and such portions of
the Common Areas as Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct
any business as long as such exclusive does not conflict with any rights
expressly given herein;
(d) To place such signs, notices or displays as Lessor
reasonably deems necessary or advisable upon the roof, exterior of the
buildings or the Building Project or on pole signs in the Common Areas.
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of
the Building or the Building Project or their name(s) in connection with
Lessee's business;
(b) Suffer or permit anyone, except in emergency, to go
upon the roof of the Building.
41. EASEMENTS.
41.1 Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure
to do so shall constitute a material default of this Lease by Lessee without
the need for further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any
structure erected in the vicinity of the Building, whether by Lessor or third
parties, shall in no way affect this Lease or impose any liability upon
Lessor.
42. LESSOR'S RIGHT TO PERFORM. Except as specifically provided otherwise
in this Lease, all covenants and agreements by Lessee under this Lease shall
be performed by Lessee at Lessee's sole cost and expense and without any
abatement or offset of rent. If Lessee shall fail to pay any sum of money
(other than Basic Rent) or perform any other act on its part to be paid or
performed hereunder and such failure shall continue for three (3) days with
respect to monetary obligations (or ten (10) days with respect to
non-monetary obligations) then, notwithstanding anything to the contrary
provided elsewhere herein, after Lessee's receipt of written notice thereof
from Lessor, Lessor may, without waiving or releasing Lessee from any of
Lessee's obligations, make such payment or perform such other act on behalf
of Lessee. All sums so paid by Lessor and all necessary incidental costs
incurred by Lessor in performing such other acts, together with interest at
the Lease Rate, shall be payable by Lessee to Lessor within five (5) days
after demand therefor as additional rent. The foregoing rights are in
addition to any and all remedies available to Lessor upon Lessee's default as
described in paragraph 13.2.
43. LIMITATION ON LESSOR'S LIABILITY. Notwithstanding anything contained
in this Lease to the contrary, the obligations of Lessor under this Lease
(including any actual or alleged breach or default by Lessor) do not
constitute personal obligations of the individual partners, directors,
officers or shareholders of Lessor or Lessor's partners, and Lessee shall not
seek recourse against the individual partners, directors, officers or
shareholders of Lessor or Lessor's partners, or any of their personal assets
for satisfaction of any liability with respect to this Lease. In addition, in
consideration of the benefits accruing
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hereunder to Lessee and notwithstanding anything contained in this Lease to
the contrary, Lessee hereby covenants and agrees for itself and all of its
successor and assigns that the liability of Lessor for its obligations under
this Lease (including any liability as a result of any actual or alleged
failure, breach or default hereunder by Lessor), shall be limited solely to,
and Lessee's and its successors' and assigns' sole and exclusive remedy
shall be against, Lessor's interest in the Building Project and proceeds
therefrom, and no other assets of Lessor.
44. TOXIC MATERIALS.
(a) Definitions.
For purposes of this paragraph 44, "Hazardous Material"
shall mean any substance:
(i) the presence of which requires
investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action or policy; or
(ii) which is or becomes defined as a
"hazardous waste" or "hazardous substance" under any federal, state or local
statute, regulation, ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. section 9601 et seq.) and or the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.); or
(iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, the State of California or any political subdivision thereof; or
(iv) the presence of which on the Premises,
Building or Building Project causes or threatens to cause a nuisance upon the
Premises, Building or Building Project or to adjacent properties or poses or
threatens to pose a hazard to the Premises, Building or Building Project or
to the health or safety of persons on or about the Premises, Building or
Building Project; or
(v) without limitation which contains
gasoline, diesel fuel or other petroleum hydrocarbons; or
(vi) without limitation which contains
polychlorinated bipheynols (PCBs), asbestos or urea formaldehyde foam
insulation; or
(vii) which is or becomes defined as "medical
waste" under the Medical Waste Management Act (Health & Safety Code Sections
25015-25099.3).
For purposes of this paragraph 44, "Environmental
Requirements" means all applicable present and future statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items, of all
governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial and administrative and regulatory
decrees, judgments and orders relating to the protection of human health or
the environment, including without limitation:
(i) all requirements, including but not
limited to those pertaining to reporting, licensing, permitting,
investigation and remediation of emissions, discharges, releases or
threatened releases of "Hazardous Materials," chemical substances,
pollutants, contaminants or hazardous or toxic substances, materials or
wastes whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage,
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disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials, or wastes, whether
solid, liquid or gaseous in nature; and
(ii) all requirements pertaining to the
protection of the health and safety of employees or the public.
For purposes of this paragraph 44, "Environmental Damages"
means all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs and expenses of
investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement of judgment, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' fees, any of which are
incurred at any time as a result of the existence on or after the date upon
which Lessee takes possession of the Premises (the "Possession Date") of
"Hazardous Material" upon, about, beneath the Premises, Building or Building
Project or migrating or threatening to migrate to or from the Premises,
Building or Building Project or the existence of a violation of
"Environmental Requirements" pertaining to the Premises, Building or Building
Project, regardless of whether the existence of such "Hazardous Material" or
the violation of "Environmental Requirements" arose prior to the present
ownership or operation of the Premises, Building or Building Project, and
including without limitation:
(i) damages for personal injury, or injury to
property or natural resources occurring upon or off of the Premises, Building
or Building Project, foreseeable or unforeseeable, including, without
limitation, lost profits, consequential damages, the cost of demolition and
rebuilding of any improvements on real property, interest and penalties
including but not limited to claims brought by or on behalf of employees of
Lessee, with respect to which Lessee waives any immunity to which it may be
entitled under any industrial or worker's compensation laws;
(ii) fees incurred for the service of
attorneys, consultants, contractors, experts, laboratories and all other
costs incurred in connection with the investigation or remediation of such
"Hazardous Materials" or violation of "Environmental Requirements" including,
but not limited to, the preparation of any feasibility studies or reports or
the performance of any cleanup, remedial, removal, response, abatement,
containment, closure, restoration or monitoring work required by any federal,
state or local governmental agency or political subdivision, or reasonably
necessary to make full economic use of the Premises, Building or Building
Project or any other property or otherwise expended in connection with such
conditions, and including without limitation any attorneys' fees, costs and
expenses incurred in enforcing this Lease or collection of any sums due
hereunder;
(iii) liability to any third person or
governmental agency to indemnify such person or agency for costs expended in
connection with the items referenced in subparagraph (ii) herein; and
(iv) diminution in the value of the Premises,
Building or Building Project, and damages for the loss of business and
restriction on the use of or adverse impact on the marketing of rentable or
usable space or of any amenity of the Premises, Building or Building Project.
(b) Lessee's Obligations.
Lessee, at its sole cost and expense, shall comply with all
Environmental Requirements relating to the storage, use and disposal of all
Hazardous Materials, including those materials identified in Sections 66680
through 66685 of Title 22 of the California Administrative Code, Division 4,
Chapter 30 ("Title 22") as the same may be amended from time to time. If
Lessee does store, use or dispose of any Hazardous Materials, Lessee shall
notify Lessor in writing at least ten (10) days prior to the first appearance
of such materials on the Premises, Building or Building Project, and Lessor
shall have the right to disapprove of Lessee's use thereof on the Premises
(provided that Lessor's failure to disapprove
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thereof shall not constitute Lessor's approval thereof or excuse Lessee from
complying with the terms of this paragraph 44), and Lessee's failure to so
notify Lessor shall constitute a default under this Lease. Lessee shall be
solely responsible for and shall protect, defend, indemnify, and hold Lessor,
it agents and contractors harmless from and against all Environmental Damages
arising out of or in connection with the storage, use and disposal of
Hazardous Materials by Lessee, its officers, employees, agents,
representatives, servants, sublessees, concessionaires, licensees,
contractors, invitees or permittees. If the presence of Hazardous Materials
on the Premises, Building or Building Project caused or permitted by Lessee
results in contamination or deterioration of water or soil resulting in a
level of contamination greater than the levels established by any
governmental agency having jurisdiction over such contamination, then Lessee
shall, at its sole cost and expense, promptly take any and all action
necessary to clean up such contamination if required by law or as a condition
to the issuance or continuing effectiveness of any governmental approval
which relates to the use of the Premises, Building or Building Project. If at
any time prior to the expiration of the Lease term, Lessor shall reach a
reasonable good faith determination that Lessee or its officers, employees,
agents, representatives, servants, sublessees, concessionaires, licensees,
contractors, invitees or permittees have at any time violated any
Environmental Requirements, discharged any Hazardous Material onto the
Premises, Building or Building Project, or surrounding areas or otherwise
subjected Lessor or the Building Project to liability for Environmental
Damages, then Lessor shall have the right to require Lessee to conduct
appropriate tests of water and soil and to deliver to Lessor the result of
such tests to demonstrate that no contamination in excess of legally
permitted levels has occurred as a result of Lessee's use of the Premises,
Building or Building Project. If the presence of Hazardous Materials on the
Premises, Building or Building Project is caused or permitted by Lessee or
its officers, employees, agents, representatives, servants, sublessees,
concessionaires, licensees, contractors, invitees or permittees such that
Lessor or Lessee becomes obligated to conduct the necessary clean-up of such
contamination as required above, then, Lessee shall further be solely
responsible for, and shall protect, defend, indemnify and hold Lessor, its
agents and contractors harmless from and against all claims, costs and
liabilities, including actual attorneys' fees, expert witness fees and costs,
arising out of or in connection with any removal, cleanup and restoration
work and materials required hereunder to return the Premises, Building or
Building Project and any other property of whatever nature to conditions
which existed prior to Lessee's use thereof and which are within acceptable
levels according to all Environmental Requirements or any other Federal,
State or local governmental requirements. Lessee's obligations hereunder
shall survive the termination of this Lease.
45. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of
such entity, represent and warrant that such individual is duly authorized to
execute and deliver this Lease on behalf of said entity. If Lessee is a
corporation, trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
46. CONFLICT. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the computer-generated, typewritten or handwritten
provisions, if any, shall be controlled by the computer-generated,
typewritten or handwritten provisions.
47. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully
executed by both parties.
48. LENDER MODIFICATION. Lessee agrees to make such reasonable
modifications to this Lease as may be reasonably required by an institutional
lender in connection with the obtaining of normal financing or refinancing of
the Building Project, provided that the term and net rental hereunder shall
not be affected thereby.
49. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee,
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respectively.
50. LEASE CONTINGENT. Execution of this Lease by Lessor is contingent on
Lessor executing a lease termination agreement with Paramount Pictures, the
current lessee of the Premises. If Lessor has not executed said lease
termination agreement by September 1, 1999, this Lease shall terminate and
neither party shall have any further obligation hereunder.
51. WORK LETTER. This Lease is supplemented by that certain Work Letter of
even date executed by Lessor and Lessee attached hereto as Exhibit C and
incorporated herein by this reference.
52. ATTACHMENTS. Attached hereto are the following documents which
constitute a part of this Lease:
Exhibit A: Description of the Premises
Exhibit B: Rules and Regulations
Exhibit C: Work Letter
Exhibit D: Signage Program for Office Building Project
Exhibit E: Lessee's Space Plan and Working Drawings
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
LESSOR LESSEE
WESTBROOK MARINA OFFICE, LLC, a Delaware ENTERTAINMENT BOULEVARD, a Nevada
limited liability company corporation
By /s/ Steaven K. Jones By /s/ Stephen Brown
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Steaven K. Jones, General Partner, STEPHEN BROWN
Bayside Studios Associates, --------------------------------
Administrative Member Its CEO
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Executed at: Santa Monica, CA Executed at: Marina Del Rey
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on on 8-23-99
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Address: 2932 Wilshire Address: 4052 Del Rey Ave. #108
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Santa Monica Marina Del Rey
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CA 90403 CA 90292
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EXHIBIT A
DESCRIPTION OF THE PREMISES
[floor plan depicting description of the premises]
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EXHIBIT B
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated: August 18, 1999
By and Between WESTBROOK MARINA OFFICE, LLC, as Lessor,
and ENTERTAINMENT BOULEVARD, a Nevada corporation, as Lessee
GENERAL RULES--IN ALL CASES, CONTRARY PROVISIONS
IN THE LEASE SHALL GOVERN OVER INCONSISTENT
PROVISIONS IN THESE RULES AND REGULATIONS
1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor
in good faith judges to be a threat to the safety, reputation, or property of
the Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Building
Project.
4. Lessee shall not keep animals or birds within the Building
Project, and shall not bring bicycles, motorcycles or other vehicles into
areas not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in
appropriate receptacles for that purpose.
6. Except as is specifically permitted by the terms of the Lease, no
sign, advertisement of notice shall be displayed, printed or affixed on or to
the Premises or to the outside or inside of the Building or so as to be
visible from outside the Premises or Building without Lessor's prior written
consent. Lessor shall have the right to remove any non-approved sign,
advertisement or notice, without notice to and at the expense of Lessee, and
Lessor shall not be liable in damages for such removal. All approved signs or
lettering on doors and walls shall be printed, painted, affixed or inscribed
at the expense of Lessee by Lessor or by a person selected by Lessor and in a
manner and style acceptable to Lessor.
7. The sidewalks, halls, passages, exits, entrances, elevators and
stairways and other portions of the common areas shall not be obstructed by
Lessee or used for any purpose other than for ingress and egress from
Lessee's Premises.
8. Toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein.
9. Lessee shall not overload the floor of the Premises or mark,
drive nails, screw or drill into the partitions, ceilings or floor or in any
way deface the Premises nor shall Lessee suffer or permit any thing in or
around the Premises or Building that causes excessive vibration or floor
loading in any part of the Building Project.
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10. Lessor shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building.
The times and manner of moving the same in and out of the Building shall be
prescribed by Lessor, and all such moving must be done under the supervision
of Lessor. Lessor may exclude from the Building any such heavy or bulky
equipment or articles, the weight of which may exceed the floor load for
which the Building is designed, or such equipment or articles as may violate
any provisions of the Lease of which these rules and regulations are a part.
Lessee shall not use any machinery or other bulky articles on the Premises,
even though its installation may have been permitted, which may cause any
noise, or jar, or tremor in the floors or walls, or which by its weight might
injure the floor of the Building. Safes or other heavy equipment shall, as
considered necessary by Lessor, stand on a platform of such thickness as is
necessary to properly distribute the weight.
11. Lessee shall not use or keep in the Premises, Building or
Building Project any kerosene, gasoline or inflammable, explosive or
combustible fluid or material, or use any method of heating or
air-conditioning other than that supplied by Lessor.
12. Lessee shall not lay linoleum, tile, carpet or other similar
floor covering so that the same shall be affixed to the floor of the Premises
in any manner except as approved by Lessor.
13. Lessee shall cooperate with Lessor in obtaining maximum
effectiveness of the cooling system by closing drapes when the sun's rays
fall directly on windows of the Premises. Lessee shall not obstruct, alter,
or in any way impair the efficient operation of Lessor's heating, ventilating
and air-conditioning system. Lessee shall not tamper with or change the
setting of any thermostats or control valves.
14. The Premises shall not be used for manufacturing or for the
storage of merchandise. Lessee shall not, without Lessor's prior written
consent, occupy or permit any portion of the Premises to be occupied or used
for the manufacture or sale of liquor or tobacco in any form, or as a barber
or manicure shop, or as an employment bureau. The Premises shall not be used
for lodging or sleeping or for any improper, objectionable or immoral
purpose. No auction shall be conducted on the Premises.
15. Lessee shall not make, or permit to be made, any unseemly or
disturbing noises, or disturb or interfere with occupants of the Building,
the Building Project or neighboring buildings or premises or those having
business with it by the use of any musical instrument, radio, phonographs or
unusual noise, or in any other way.
16. No bicycles, vehicles or animals of any kind shall be brought
into or kept in or about the Premises, and no cooking shall be done or
permitted by any lessee in the Premises, except that the preparation of
coffee, tea, hot chocolate and similar items, and the use of a microwave for
reheating items and cooking popcorn and the like, for lessees, their
employees and visitors shall be permitted. No lessee shall cause or permit
any unusual or objectionable odors to be produced in or permeate from or
throughout the Premises.
17. The sashes, sash doors, skylights, windows and doors that reflect
or admit light and air into the halls, passageways or other public places in
the Building shall not be covered or obstructed by any lessee, nor shall any
bottles, parcels or other articles be placed on the windowsills.
18. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any lessee, nor shall any changes be made in
existing locks or the mechanisms thereof unless Lessor is first notified
thereof, gives written approval, and is furnished a key therefor. Each lessee
must, upon the termination of its tenancy, give the Lessor all keys of
stores, offices, or toilet rooms, either furnished to, or otherwise procured
by, such lessee, and in the event of the loss of any keys so furnished, such
lessee shall pay Lessor the cost of replacing the same or of changing the
lock or locks opened by such key if Lessor shall deem it necessary to make
such change.
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19. Lessor shall have the right to prohibit any advertising by any
lessee which, in Lessor's opinion, tends to impair the reputation of the
Building or the Building Project or its desirability as an office building
and upon written notice from Lessor any lessee shall refrain from and
discontinue such advertising.
20. Any person employed by any lessee to do janitorial work shall,
while in the building or the Building Project and outside of the Premises, be
subject to and under the control and direction of the office of the Building
Project (but not as an agent or servant of Lessor, and the lessee shall be
responsible for all acts of such persons).
21. No air conditioning unit or other similar apparatus shall be
installed or used by any lessee without the prior written consent of Lessor.
Lessee shall pay the cost of all electricity used for air conditioning in the
Premises if such electrical consumption exceeds normal office requirements or
is attributable to after hours use, regardless of whether additional
apparatus is installed pursuant to the preceding sentence.
22. There shall not be used in any space, or in the public halls of
the Building, either by any lessee or others, any hand trucks except those
equipped with rubber tires and side guards.
23. All electrical ceiling fixtures hung in offices or spaces along
the perimeter of the Building must be florescent and/or of a quality, type,
design and bulb color approved by Lessor. Lessee shall not permit the
consumption in the Premises or more than 2-1/2 watts per net usable square
foot in the Premises in respect of office lighting nor shall Lessee permit
the consumption in the Premises of more than 1-1/2 watts per net usable
square foot of space in the Premises in respect of the power outlets therein,
at any one time. In the event that such limits are exceeded, Lessor shall
have the right to remove any lighting fixture or any florescent tube or bulb
therein as it deems necessary and/or to charge Lessee for the cost of the
additional electricity consumed.
24. Lessee shall be responsible for the inappropriate use of any
toilet rooms, plumbing or other utilities. No foreign substances of any kind
are to be inserted therein.
25. Lessee shall not deface the walls, partitions or other surfaces of
the Premises or Building Project.
26. Furniture, significant freight and equipment shall be moved into
or out of the Building only with Lessor's knowledge and consent, and subject
to such reasonable limitations, techniques and timing, as may be designated
by Lessor. Lessee shall be responsible for any damage to the Building Project
arising from any such activity.
27. Lessee shall not employ any service or contractor for services or
work to be performed in the Building, except as approved by Lessor.
28. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of
8 P.M. and 6:30 A.M. of the following day, or such other hours as Lessor may
determine. If Lessee uses the Premises during such periods, Lessee shall be
responsible for securely locking any doors it may have opened for entry.
29. No window coverings, shades or awnings shall be installed or used
by Lessee.
30. No Lessee, employee or invitee shall go upon the roof of the
Building.
31. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by
applicable governmental agencies as non-smoking areas.
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32. Lessee shall not use any method of heating or air conditioning
other than as provided by Lessor.
33. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
34. The Premises shall not be used for lodging or manufacturing.
35. Lessee shall comply with all safety, fire protection and
evacuation regulations established by Lessor or any applicable governmental
agency.
36. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall
not constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
37. Lessee assumes all risks from theft or vandalism and agrees to
keep its Premises locked as may be required.
38. Lessor reserves the right to make such other reasonable
non-discriminatory rules and regulations, not in conflict with Lessee's
rights and obligations under the Lease, as it may from time to time deem
necessary for the appropriate operation and safety of the Building Project
and its occupants. Lessee agrees to abide by these and such rules and
regulations.
39. All doors opening onto public corridors shall be kept closed,
except when being used for ingress and egress.
40. The requirements of lessees will be attended to only upon
application to the Office of the Building.
41. Canvassing, soliciting and peddling in the Building are prohibited
and each lessee shall cooperate to prevent the same.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles are herein referred to
as "Oversized Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
3. Parking stickers or identification devices shall be the property
of Lessor and be returned to Lessor by the holder thereof upon termination of
the holder's parking privileges. Lessee will pay such replacement charge as
is reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to
comply with the applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking
spaces from floor to floor, within one floor, and/or to reasonably adjacent
offsite locations(s), and to reasonably allocate them between compact and
standard size spaces, as long as the same complies with applicable laws,
ordinances and regulations.
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6. Users of the parking area will obey all posted signs and park only
in the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area
is required to park and lock his own vehicle. Lessor will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such
method or methods as Lessor and/or its licensee may establish at rates
generally applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations,
laws and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.
13. Lessor or its agent may tow or otherwise remove any vehicles which
are parked illegally in the parking areas, which are parked in the parking
areas for more than seventy-two (72) consecutive hours without Lessor's prior
written consent or which constitute a nuisance or annoyance to other users of
the Building Project or parking areas. Such towing shall be at the sole cost
and expense of the lessee which is in any way responsible for the presence of
such vehicle in the parking area (for example, if the vehicle is parked by
any particular lessee's invitee, customer or employer, such lessee shall be
responsible for the cost of towing such vehicle).
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EXHIBIT C
WORK LETTER TO STANDARD OFFICE LEASE
Dated: August 18, 1999
By and Between: WESTBROOK MARINA OFFICE, LLC, as Lessor,
and ENTERTAINMENT BOULEVARD, a California corporation, as Lessee
1. The Premises shall be constructed by Lessee, with Lessor's contribution
of a Tenant Improvement Allowance, as outlined below.
2. COMPLETION OF TENANT IMPROVEMENTS.
Lessee shall construct and complete the Premises substantially in
accordance with the plans and specifications prepared by Lessee's space
planner, which shall be submitted to Lessor no later than September 30, 1999.
When approved by Lessor, said space plans shall be attached hereto (the
"Tenant Improvements").
3. PREPARATION OF PLANS AND SPECIFICATIONS
Lessee shall contract directly with a space planner to prepare space
plans for the Tenant Improvements. All space planning costs (including but
not limited to working drawings, engineering plan costs and permit fees)
shall be part of the Tenant Improvement Allowance outlined below. Lessee
shall submit the completed working drawings to Lessor no later than October
31, 1999. Lessor shall approve or disapprove of said drawings within five (5)
business days. Upon Lessor's approval, said drawings shall be attached hereto
as Exhibit E.
4. CONSTRUCTION.
Lessor shall contribute a Tenant Improvement Allowance of One Hundred
Eleven Thousand One Hundred Dollars ($111,100) toward the cost of the Tenant
Improvements, of which $3,000 shall be credited toward the purchase of an
HVAC unit and electrical transformer which Lessee is purchasing from the
previous tenant. Lessor shall have the right to use any portion of the Tenant
improvement Allowance for the hard cost of tenant improvements, space
planning and design, construction fee, built-in furniture (not to exceed
Fifty Five Thousand Dollars ($55,000)) and telecommunications/computer
cabling. Lessee shall be responsible for any and all costs exceeding the
Tenant Improvement Allowance. Lessee will submit bi-weekly draws to Lessor
and, upon Lessor's approval, Lessor will pay the draw, less a ten (10%)
percent reserve until the lien period has expired, out of the Tenant
Improvement Allowance within fourteen working days, based on the percentage
of the Tenant Improvements completed. Lessor will pay Lessee the remaining
reserve funds upon expiration of the lien period. Lessee shall not be
entitled to receive, as a cash payment, credit against rent or otherwise, any
portion of the Tenant Improvement Allowance not actually expended for the
cost of the Tenant Improvements.
Lessor shall approve the final plans and specifications, then Lessee
shall construct said Tenant Improvements in a good and workmanlike manner of
good and sufficient materials and in accordance with said approved final
plans and specifications, a building permit from the City of Los Angeles, and
all applicable rules, regulations, laws or ordinances.
Lessee shall cause Lessee's contractor(s) to provide with certificate(s)
of insurance showing an insurance policy with liability and workmen's
compensation insurance of no less than $2 million and
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naming Lessor as additional insured. Lessee shall pay all invoices promptly
and shall cause no liens to be placed on the Building Project.
Unless engaged as project manager for Lessee, Lessor shall not charge
Lessee any fee or other charges for the supervision and/or overhead
associated with the Tenant Improvements. Lessee shall have the right to use
designers, architects, contractors, subcontractors and engineers of Lessee's
selection, subject to Lessor's reasonable approval, for the design and
construction of any and all Tenant Improvements.
Lessee's contractors and subcontractors shall receive free parking
during the construction of the Tenant Improvements. However, Lessor reserves
the right to restrict the area in which said contractors might park and to
limit the number of available spaces.
5. COMPLETION.
5.1 Lessee shall obtain a building permit to construct the Tenant
Improvements as soon as possible.
5.2 Lessee shall complete the construction of the Tenant Improvements
as soon as reasonably possible after the obtaining of necessary building
permits.
5.3 The term "Completion," as used in this Work Letter, is hereby
defined to mean the date the building department of the municipality having
jurisdiction of the Premises shall have made a final inspection of the Tenant
Improvements and authorized a final release of restrictions on the use of
public utilities in connection therewith and the same are in a broom-clean
condition.
5.4 Lessee shall use its best efforts to achieve Completion of the
Tenant Improvements on or before December 1, 1999.
6. TAKING OF POSSESSION OF PREMISES.
Lessee shall be in possession of the Premises during the construction
of the Tenant Improvements, and such construction shall not delay or
eliminate Lessee's obligation to pay rent or perform its other obligations in
accordance with the Lease.
7. WARRANTIES.
To the extent permitted thereunder, Lessee shall allow Lessor to avail
itself of the benefit of any warranties given to Lessee in connection with
work to the Leased Premises performed by, or at the direction of, Lessee.
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EXHIBIT D
SIGNAGE PROGRAM FOR THE OFFICE BUILDING PROJECT
MEDIAWORKS SIGNAGE PROGRAM
All signs must be in compliance with the City of Los Angeles building code.
Any copy other than that designated below must be approved by Lessor in
writing. Non-comforming signs must be removed by Lessee at Lessee's sole cost
and expense.
Signage Pillars
At the front of the office building project there are three free-standing
signage pillars, to the right of the gatehouse. The large blue pillar is the
monument sign for the existing 98,000 sq. ft. office building. Each tenant
will be allocated a percentage of said pillar, based on the square footage it
occupies in the project. The location on said pillar will be dictated by
suite letter (i.e. Suite A will be at the top and Suite J or K will be at the
bottom). The building address (12910) is located at the top, in yellow
letters. The signage pillars are lit at night by spotlights located at the
foot of each pillar. Lessor will provide letters for each suite stainless
steel or galvanized metal, 9" letters). Each tenant may place metal letters
(painted or sealed), not exceeding 9" in height, in its designated area,
designating the name(s) of the company and/or its logo.
Monument Sign
One monument sign is permitted in the grass area in front of the Office
Building Project. It shall be constructed from either concrete block covered
in smooth plaster or poured-in-place concrete with a smooth finish. Said
monument sign may be lit at night either with spotlights or with back-lit
letters. The letters on said sign may not exceed 9" in height. Said monument
sign may not be greater than four (4) feet high or four (4) feet wide. The
copy on the monument sign may either be the tenant's name or its logo.
Building Signage
Tenant Signage: Adjacent to each tenant's front door, mounted approx. 4"
underneath the entry light beside the door, Lessor will provide a stainless
steel square measuring 16" x 16", with finished edges and a satin finish,
with the suite letter (e.g. "Suite A") painted in charcoal gray 4" letters.
Each tenant may paint the tenant's name, a "d.b.a." approved by Lessor,
and/or its logo underneath in the tenant's colors. Letters of a company's
name shall not be larger than 2" in height; logos shall not be larger than 6"
high.
Exterior Signage: There shall be three (3) exterior building signs ("wall
signs") permitted on the parapet above the second story window line, one
facing Culver Boulevard, one facing the Marina Freeway and one on the rear of
the building (facing the outdoor eating area). Said wall signs shall not
extend more than eight (8") inches from the wall, shall be parallel with the
wall, shall not project above the top of the wall or parapet. Said signs may
not be larger than three (3) feet in height nor more than nine (9) feet in
length. Said signs may be back-lit, but may not contain copy or lighting on
any surface parallel with the wall other than the sign face. The copy for
wall signs may either be the tenant's name, a "d.b.a." approved by Lessor, or
the tenant's logo.
Prohibited Signs:
Animated signs; Balloon signs; Emitting signs (with sound communications);
Miscellaneous signs and posters tacked, painted, posted or otherwise affixed
on the walls of a building, or on a tree, pole, fence or other structure;
Paper, cloth or plastic streamers and bunting, except holiday decorations and
special event signs; Portable signs; Projecting signs; Roof signs.
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EXHIBIT E
LESSEE'S SPACE PLAN AND WORKING DRAWINGS
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
this 1st day of November, 1999, by and between ENTERTAINMENT BOULEVARD, INC.
("Company"), a Nevada corporation, and STEPHEN BROWN ("Employee"), with
reference to the following facts:
WHEREAS, Company wishes to employ Employee as a full-time employee
of Company, and Employee wishes to accept such employment, upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions and
the mutual agreements and covenants set forth herein, the parties hereto
agree as follows:
1. SCOPE OF EMPLOYMENT.
1.1 CAPACITY. Company hereby agrees to employ Employee, and
Employee hereby accepts such employment, as President and Chief Executive
Officer of Company during the term of this Agreement. Employee shall report
to the Board of Directors of Company and perform the services and duties
customarily incident to such office and as otherwise decided upon by the
Board of Directors.
1.2 DEVOTION OF SERVICES. Employee shall be a full-time
employee of Company during the term of this Agreement. Employee shall not
participate in any activities which may interfere with his duties hereunder
and/or which are competitive with Employer's activities (except as the owner
of less than 2% of the issued and outstanding capital stock of a publicly
traded corporation). Employee shall perform and discharge well and
faithfully those duties assigned him by Company.
2. TERM. Subject to Section 6 herein, the term of this Agreement
shall commence as of November 1, 1999, and shall continue and remain in full
force and effect for a period of two (2) years. However, in the event that
Company thereafter continues to employ Employee, this Agreement shall be
deemed automatically renewed upon the same terms and conditions set forth
herein except (a) that the parties may mutually agree to revise any of the
terms set forth herein, and (b) the employment relationship will be on an "at
will" basis, which means that, subject to Section 6.4 herein, either Company
or Employee may elect to terminate the employment relationship at any time
for any reason whatsoever, with or without cause. Employee acknowledges that
no representation has been made by Company as to any minimum or specified
term or length of employment following the term set forth above.
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3. COMPENSATION.
3.1 SALARY AND BONUS. In consideration of the services to be
rendered by Employee hereunder, including without limitation any services
rendered as an officer or director of Company or any subsidiary or affiliate
thereof, during the term of this Agreement Company shall pay to Employee the
following:
(a) A salary in the amount of $240,000.00 per annum. The
Board of Directors may, at its sole and absolute discretion, increase
Employee's salary; provided, however, Employee's annual salary shall be
increased at the end of each twelve (12) month period by at least 15% over
the previous year.
(b) The Company's Board of Directors may, but shall not be
obligated to, award bonuses to Employee based upon his performance and the
Company's profitability.
(c) All payments to Employee shall be subject to the regular
withholding requirements of all appropriate governmental taxing authorities.
3.2 OTHER BENEFITS. Employee shall be entitled to
participate in any medical and insurance plan which Company is presently
providing or may provide to its senior executives. Employee acknowledges
that the terms of such plans may change from time to time.
3.3 EXPENSES. Company will advance to or reimburse Employee
for all reasonable travel and entertainment required by Company and other
reasonable expenses incurred by Employee in connection with the performance
of his services under this Agreement in accordance with Company policy as
established from time to time. In addition, Employee shall receive an
automobile lease allowance of $1,500.00 per month and, in addition, Company
shall pay for gas, maintenance and repairs of said automobile.
3.4 OPTIONS. At the end of each twelve (12) month period,
Company shall grant a minimum of 50,000 options to Employee pursuant to
Company's Stock Option Plan.
4. INVENTIONS.
4.1 RIGHT TO INVENTIONS. Employee agrees that any
discoveries, inventions or improvements of whatever nature (collectively
"Inventions") made or conceived by Employee, solely or jointly with others,
during the term of his employment with Company, that relate, at the time of
conception of or reduction to practice, to the business of Company or
Company's actual or demonstrably anticipated research or development; or that
result from any work performed by Employee for Company, shall belong to
Company. Employee also agrees that Company shall have the right to keep any
such Inventions as trade secrets, if Company so chooses.
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4.2 ASSIGNMENT OF INVENTIONS AND PATENTS. In furtherance of,
and not in contravention, limitation and/or in place of, the provisions of
Section 4.1 above, Company hereby notifies Employee of California Labor Code
Section 2870, which provides:
"Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in
an invention to his or her employer shall not apply to an invention
for which no equipment, supplies, facility, or trade secret
information of the employer was used and which was developed entirely
on the employee's own time, and (a) which does not relate (1) directly
or indirectly to the business of the employer or (2) to the employer's
actual or demonstrably anticipated research or development, or (b)
which does not result from any work performed by the employee for the
employer. Any provision which purports to apply to such an invention
is to that extent against the public policy of this state and is to
that extent void and unenforceable."
Employee acknowledges that he has been notified by the Company of
this law, and understands that this Agreement does not apply to Inventions
which are otherwise fully protected under the provisions of said Labor Code
Section 2870. Therefore, Employee agrees to promptly disclose in writing to
the Company all Inventions, whether Employee personally considers them
patentable or not, which Employee alone, or with others, conceives or makes
during his employment with Company or as is otherwise required and set forth
under Section 4.1 above. Company shall hold said information in strict
confidence to determine the applicability of California Labor Code Section
2870 to said Invention and, to the extent said Section 2870 does not apply,
Employee hereby assigns and agrees to assign all his right, title and
interest in and to those Inventions which relate to business of the Company
and Employee agrees not to disclose any of these Inventions to others without
the prior written express consent of Company. Employee agrees to notify
Company in writing prior to making any disclosure or performing any work
during the term of his employment with Company which may conflict with any
proprietary rights or technical know-how claimed by Employee as his property.
In the event Employee fails to give Company notice of such conflict,
Employee agrees that Employee shall have no further right or claim with
respect to any such conflicting proprietary rights or technical know-how.
5. CONFIDENTIALITY.
5.1 RESTRICTIONS ON USE OF TRADE SECRETS AND RECORDS. During
the term of his employment, Employee will have access to and become acquainted
with various trade secrets of Company, consisting of formulas, patterns,
devices, secret Inventions, processes, compilations of information, records and
specifications (collectively "Trade Secrets"), all of which are owned by Company
and used in the operation of Company's business. Additionally, Employee will
have access to and may become acquainted with various files, records, customer
lists, documents, drawings, specifications, equipment and similar items relating
to the business of Company (collectively "Confidential Information"). All such
Trade Secrets and Confidential Information, whether they are designed, conceived
or prepared by Employee or come into Employee's possession
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or knowledge in any other way, are and shall remain the exclusive property of
Company and shall not be removed from the premises of Company under any
circumstances whatsoever without the prior written consent of Company.
Employee promises and agrees that he will not use for himself or for others,
or divulge or disclose to any other person or entity, directly or indirectly,
either during the term of his employment by Company or at any time
thereafter, for his own benefit or for the benefit of any other person or
entity or for any reason whatsoever, any of the Trade Secrets or Confidential
Information described herein, which he may conceive, develop, obtain or learn
about during or as a result of his employment by Company unless specifically
authorized to do so in writing by Company.
5.2 NON-INTERFERENCE. Employee recognizes that Company has
invested substantial effort in assembling its present employees and in
developing its customer base. As a result, and particularly because of
Company's many types of confidential business information, Employee
understands that any solicitation of a customer or employee of Company, in an
effort to get them to change business affiliations, would presumably involve
a misuse of Company's confidences, Trade Secrets and Confidential
Information. Employee therefore agrees that, for a period of one (1) year
from the later of the date of termination of Employee's employment with
Company for any reason whatsoever or the receipt by Employee of any
compensation paid to Employee by Company, Employee will not influence, or
attempt to influence, existing employees or customers of Company in an
attempt to divert, either directly or indirectly, their services or business
from Company.
6. TERMINATION OF AGREEMENT.
6.1 TERMINATION BY COMPANY. Company may terminate Employee's
employment hereunder at any time for cause without payment of severance or
similar benefits. For purposes of this Section 6.1, "cause" shall mean the
following events: (a) any willful breach of duty by Employee in the course of
his employment, (b) the breach of any provision of this Agreement or any
misrepresentation by Employee hereunder, (c) misconduct, neglect or negligence
in the performance of Employee's duties and obligations, (d) disloyal,
dishonest, willful misconduct, illegal, immoral or unethical conduct by
Employee, (e) such carelessness or inefficiency in the performance of his
duties that Employee is unfit to continue in the service of Company, (f)
failure of Employee to comply with the policies or directives of Company
and/or failure to take direction from Company's Board of Directors, or (g)
such other conduct which is substantially detrimental to the best interests
of Company. Any such termination shall become effective upon delivery of
written notice to Employee.
6.2 TERMINATION BY EMPLOYEE. Employee may terminate his
employment hereunder at any time for cause. For purposes of this Section
6.2, "cause" shall mean the breach of any provision of this Agreement by
Company which is not cured within thirty (30) days after Employee delivers
written notice to the Company's Board of Directors describing such breach.
If the breach is not so cured within such thirty (30) days after delivery of
such notice, the termination of employment shall become effective after the
expiration of such cure period.
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6.3 DEATH OR DISABILITY. Employee's employment with Company
shall cease upon the date of his death. In the event Employee becomes
physically or mentally disabled so as to become unable for more than one
hundred eighty (180) days in the aggregate in any twelve (12) month period to
perform his duties on a full-time basis with reasonable accommodations,
Company may, at its sole discretion, terminate this Agreement and Employee's
employment.
6.4 TERMINATION FOLLOWING AUTOMATIC RENEWAL. In the event
that this Agreement is automatically renewed pursuant to Paragraph 2 herein,
either Company or Employee may terminate Employee's employment hereunder at
any time and for any reason whatsoever, with or without cause, upon thirty
(30) days prior written notice delivered to the other party.
6.5 EFFECT OF TERMINATION. Upon the termination of
Employee's employment hereunder or the expiration or termination of the
Agreement,(a) Company shall pay Employee all compensation accrued and
outstanding as of the date of such termination or expiration, and (b)
notwithstanding anything to the contrary contained herein, the rights and
obligations of each party under Paragraphs 4, 5 and 8 herein shall survive
such termination or expiration. Notwithstanding anything to the contrary
contained in this Agreement, if, prior to the end of the initial two (2) year
term, Employer terminates this Agreement without cause, Employee shall
continue to be entitled to receive all of the compensation and other benefits
provided for in Paragraph 3 for the remainder of said two (2) year term
without any deduction or offset for any compensation earned or received by
Employee from any other sources.
7. EMPLOYEE'S REPRESENTATIONS. As an inducement for Company to
execute this Agreement, Employee represents and warrants to Company that the
negotiation, execution and delivery of this Agreement by Employee together
with the performance of his obligations hereunder does not breach or give
rise to a breach under any employment, confidentiality, non-disclosure,
non-competition or any other agreement, written or oral, to which Employee is
a party.
8. EQUITABLE REMEDIES.
8.1 INJUNCTIVE RELIEF. Employee acknowledges and agrees that
the covenants set forth in Paragraphs 4 and 5 herein are reasonable and
necessary for protection of Company's business interests, that irreparable
injury will result to Company if Employee breaches any of the terms of said
covenants and that, in the event of Employee's actual or threatened breach of
said covenants, Company will have no adequate remedy at law. Employee
accordingly agrees that in the event of actual or threatened breach of any of
such covenants, Company shall be entitled to immediate injunctive and other
equitable relief, without bond and without the necessity of showing actual
monetary damages. Nothing contained herein shall be construed as prohibiting
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovering of any damages which it is able
to prove. Each of the covenants in Paragraphs 4 and 5 shall be construed as
independent of any other covenants or provisions of this Agreement. In the
event of any judicial determination that any of the covenants set forth in
Paragraphs 4 and 5 herein
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or any other provisions of the Agreement are not fully enforceable, it is the
intention and desire of the parties that the court treat said covenants as
having been modified to the extent deemed necessary by the court to render
them reasonable and enforceable and that the court enforce them to such
extent.
8.2 SPECIFIC ENFORCEMENT. Employee agrees and acknowledges
that he is obligated under this Agreement to render services of a special,
unique, unusual, extraordinary and intellectual character, thereby giving
this Agreement peculiar value, so that the loss thereof could not be
reasonable or adequately compensated in damages in an action at law.
Therefore, in addition to other remedies provided by law, Company shall have
the right, during the term of this Agreement, to obtain specific performance
hereof by Employee and to obtain injunctive relief against the performance of
service elsewhere by Employee during the term of this Agreement.
9. GENERAL.
9.1 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto and supersedes all other oral and
written agreements or understandings between them.
9.2 AMENDMENT. This Agreement may not be modified, amended,
altered or supplemented except by written agreement between Employee and
Company.
9.3 COUNTERPARTS. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
9.4 JURISDICTION. Each party hereby consents to the
exclusive jurisdiction of the state and federal courts sitting in Los Angeles
County, California, in any action on a claim arising out of, under or in
connection with this Agreement or the transactions contemplated by this
Agreement. Each party further agrees that personal jurisdiction over him may
be effected by service of process by registered or certified mail addressed
as provided in Section 9.9 herein, and that when so made shall be as if
served upon him personally within the State of California.
9.5 EXPENSES. In the event an action at law or in equity is
required to enforce or interpret the terms and conditions of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees and
costs in addition to any other relief to which that party may be entitled.
9.6 INTERPRETATION. The headings herein are inserted only as
a matter of convenience and reference, and in no way define, limit or
describe the scope of this Agreement or the intent of any provisions thereof.
No provision of this document is to be interpreted for or against any party
because that party or party's legal representative drafted it.
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9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their heirs,
successors, assigns and personal representatives. As used herein, the
successors of Company shall include, but not be limited to, any successor by
way of merger, consolidation, sale of all or substantially all of its assets
or similar reorganization. In no event may Employee assign any rights or
duties under this Agreement.
9.8 CONTROLLING LAW; SEVERABILITY. The validity and
construction of this Agreement or of any of its provisions shall be
determined under the laws of the State of California. Should any provision
of this Agreement be invalid either due to the duration thereof or the scope
of the prohibited activity, such provision shall be limited by the court to
the extent necessary to make it enforceable and, if invalid for any other
reason, such invalidity or unenforceability shall not affect or limit the
validity and enforceability of the other provisions hereof.
9.9 NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and if personally
received by the party to whom it is sent or delivered, or if sent by
registered or certified mail, postage prepaid, to Employee's residence in the
case of notice to Employee, or to its principal office if to Company. A
notice is deemed received or delivered on the earlier of the day received or
three (3) days after being sent by registered or certified mail in the manner
described in this Section.
9.10 WAIVER OF BREACH. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
----------------------------------
Stephen Brown, President
/s/ Stephen Brown
-------------------------------------
STEPHEN BROWN
<PAGE>
EXHIBIT 10.3
1999 STOCK OPTION PLAN
OF
ENTERTAINMENT BOULEVARD, INC.
ENTERTAINMENT BOULEVARD, INC., a corporation organized under the laws of
the State of Nevada, hereby adopts this 1999 Stock Option Plan. The purposes
of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its employees,
officers, directors and consultants who have been or will be given
responsibility for the management or administration of the Company's
business, by assisting them to become owners of the Company's Common Stock
and thus to benefit directly from its growth, development and financial
success.
(2) To enable the Company to obtain and retain the services of the type
of professional, technical and managerial employees, officers, directors and
consultants considered essential to the long-range success of the Company by
providing and offering them an opportunity to become owners of the Company's
Common Stock under options, including options that are intended to qualify as
"incentive stock options" under Section 422 of the Code.
ARTICLE 1
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Board or a duly constituted Stock Option
Committee of the Board, as provided in Section 6.1.
"Common Stock" shall mean Common Stock of the Company.
"Company" shall mean Entertainment Boulevard, Inc.
<PAGE>
"CORPORATE TRANSACTION" shall mean any of the following transactions to
which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is
to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan and
all Options are assumed by the successor entity;
(b) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger or recapitalization in which the Company is
the surviving entity but in which securities possessing more than 66 2/3% of
the total combined voting power of the Company's outstanding securities are
transferred to a person or person different from those who held such
securities immediately prior to such merger.
"DIRECTOR" shall mean a member of the Board.
"EMPLOYEE" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent
Corporation or a Subsidiary, whether such employee is so employed at the time
this Plan is adopted or becomes so employed subsequent to the adoption of
this Plan.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"INCENTIVE STOCK OPTION" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option
by the Committee.
"NON-EMPLOYEE DIRECTOR" shall have the meaning provided in Rule 16b-3.
"NON-QUALIFIED OPTION" shall mean an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the
Committee.
"OFFICER" shall mean an officer of the Company, as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
"OPTION" shall mean an option to purchase Common Stock of the
Company, granted under the Plan. "Options" includes both Incentive Stock
Options and Non-Qualified Options.
"OPTIONEE" shall mean a person to whom an Option is granted under the
Plan.
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"PARENT CORPORATION" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"PLAN" shall mean this 1999 Stock Option Plan of Entertainment
Boulevard, Inc.
"RULE 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended in the future.
"SECRETARY" shall mean the Secretary of the Company.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"STOCK OPTION COMMITTEE" shall mean a committee of the Board which may
be established for the purpose of acting as the Plan Committee pursuant to
Section 6.1 and composed solely of two or more Non-Employee Directors.
"SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
"TERMINATION" shall mean the time when the employee-employer or other
applicable relationship between the Optionee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without
cause and with or without notice, including, but not by way of limitation, a
termination by resignation, discharge, death or retirement, but excluding
terminations where there is a simultaneous reemployment by the Company, a
Parent Corporation or a Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all other matters and questions
relating to Termination, including, but not by way of limitation, the
question of whether a Termination resulted from a discharge for good cause,
and all questions of whether particular leaves of absence constitute
Terminations; PROVIDED, HOWEVER, that, with respect to Incentive Stock
Options, a leave of absence shall constitute a Termination if, and to the
extent that, such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
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The shares of stock subject to Options shall be shares of the Company's
Common Stock. The aggregate number of such shares which may be issued upon
exercise of Options shall not exceed one million (1,000,000).
SECTION 2.2 -- UNEXERCISED OPTIONS
If any Option expires or is cancelled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitations of Section 2.1.
SECTION 2.3 -- CHANGES IN THE COMPANY'S SHARES
Subject to Sections 4.6 and 4.7, in the event that the outstanding
shares of Common Stock of the Company are hereafter changed into or exchanged
for a different number or kind of shares or other securities of the Company,
or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, initial public offering,
stock split-up, stock dividend or combination of shares, appropriate
adjustments shall be made by the Committee in the number and kind of shares
for the purchase of which Options may be granted, including adjustments of
the limitations in Section 2.1 on the maximum number and kind of shares which
may be issued on exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 -- ELIGIBILITY
Any employee, officer, director or consultant of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary shall be
eligible to be granted Options.
SECTION 3.2 -- GRANT OF OPTIONS
(a) The Committee shall from time to time, in its absolute discretion:
(i) Determine which Optionees (including those to whom
Options have been previously granted under the Plan or
other plans or arrangements of the Company) such of
them as in its opinion should be granted Options;
(ii) Determine, subject to the aggregate limitation of
Section 2.1, the number of shares to be subject to such
Options granted to such selected Optionees, and
determine whether such Options are to be Incentive
Stock Options or Non-Qualified Options; and
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(ii) Determine the terms and conditions of such
Options, consistent with the Plan.
(b) Upon the selection of an Optionee to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Options as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
absolute discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Optionee that:
(i) The Optionee surrender for cancellation some or all of
the unexercised Options that have been previously
granted to him, in which event such newly-granted
Option may have an option price lower (or higher) than
the option price of the surrendered Option, may cover
the same (or a lesser or greater) number of shares as
the surrendered Option, may contain such other terms as
the Committee deems appropriate and shall be
exercisable in accordance with its terms, without
regard to the number of shares, price, option period or
any other term or condition of the surrendered Option;
and
(ii) The Optionee enter into one or more other agreements
imposing restrictions on, and containing undertakings
with respect to, shares of Common Stock issuable upon
the exercise of an Option, such as transfer
restrictions, voting agreements and the terms of
registration under the Securities Act.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 -- OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine in their discretion and consistent with the Plan. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to qualify such Options as "incentive
stock options" under Section 422 of the Code.
SECTION 4.2 -- OPTION PRICE
(a) The price of the shares subject to each Option shall be set by the
Committee; PROVIDED, HOWEVER, that the price per share shall be not less than
85% of the fair market value of such shares on the date such Option is
granted; provided, further, that, in the case of an Incentive Stock Option,
the price per share shall not be less than (i) 110% of the fair market value
of such shares on the date such Option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
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than 10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation, and (ii) 100% of the fair
market value of such shares on the date such Option is granted in the case of
other individuals.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be: (i) the closing price of
a share of the Company's Common Stock on the principal exchange on which
shares of the Company's Common Stock share then trading, if any, on the day
previous to such date, or, if shares were not traded on the day previous to
such date, then on the next preceding trading day during which a sale
occurred; or (ii) if such Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, (1) the last sales price
(if the Company's Common Stock is then listed as a National Market Issue
under the Nasdaq National Market) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Company's
Common Stock on the day previous to such date as reported by Nasdaq or such
successor quotation system; or (iii) if such Common Stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the mean between the closing bid and asked prices for the Company's
Common Stock, on the day previous to such date, as determined in good faith
by the Committee; or (iv) if the Company's Common Stock is not publicly
traded, the fair market value established by the Committee acting in good
faith.
SECTION 4.3 - COMMENCEMENT OF EXERCISABILITY
- ----------- ------------------------------
(a) Subject to the provisions of Sections 4.3(b), 4.3(c) and 7.3,
Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of each
individual Option; PROVIDED, HOWEVER, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(b), 4.3(c) and 7.3,
accelerate the time at which such Option or any portion thereof may be
exercised.
(b) Except as the Committee may otherwise provide, no portion of an
Option which is unexercisable at Termination shall thereafter become
exercisable.
(c) To the extent that the aggregate fair market value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company, any
Subsidiary and any Parent Corporation) exceeds $100,000, such options shall be
taxed as, and for all purposes be deemed to constitute, Non-Qualified
Options. The rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted. For
purposes of this Section 4.3(c), the fair market value of stock shall be
determined as of the time the option with respect to such stock is granted.
SECTION 4.4 - EXPIRATION OF OPTIONS
- ----------- ---------------------
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(a) No Option may be exercised to any extent by anyone after the first
to occur of the following events:
(i) The expiration of ten years from the date the Option was granted;
(ii) With respect to an Incentive Stock Option in the case of an
Optionee owning (within the meaning of Section 424(d) of the Code), at
the time the Incentive Stock Option was granted, more than 10% of the
total combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation, the expiration of five years from
the date the Incentive Stock Option was granted;
(iii) Except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination for any reason other
than such Optionee's death unless the Optionee dies within said
three-month period;
(iv) In the case of an Optionee who is disabled (within the meaning
of Section 22(e)(3) of the Code), the expiration of one year from the
date of the Optionee's Termination for any reason other than such
Optionee's death unless the Optionee dies within said one-year period; or
(v) The expiration of one year from the date of the Optionee's
death.
(b) Subject to the provisions of Secton 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Committee may provide in the terms of individual Options that said
Options expire immediately upon a Termination for any reason.
SECTION 4.5 - CONSIDERATION
In consideration of the granting of an Option, upon the request of the
Company the Optionee shall agree, in the written Stock Option Agreement, to
remain in the employ of the Company, a Parent Corporation or a Subsidiary for
a specified period after the Option is granted. Nothing in this Plan or in
any Stock Option Agreement hereunder shall confer upon any Optionee any right
to continue in the employ of the Company, any Parent Corporation or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company, its Parent Corporations and its Subsidiaries, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without cause and with or without notice.
SECTION 4.6 - ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company
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by reason of merger, consolidation, recapitalization, reclassification,
initial public offering, stock split-up, stock dividend or combination of
shares, the Committee shall, subject to Section 4.7, make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and with any necessary corresponding adjustment
in Option price per share; PROVIDED, HOWEVER, that, in the case of Incentive
Stock Options, each such adjustment shall be made in such manner as not to
constitute a "modification" within the meaning of Section 424(h)(3) of the
Code. Any such adjustment made by the Committee shall be final and binding
upon all Optionees, the Company and all other interested persons.
SECTION 4.7 - OCCURRENCE OF A CORPORATE TRANSACTION
Notwithstanding the provisions of Section 4.6, no Option may be
exercised after the consummation of a Corporate Transaction approved by
shareholders or, in the absolute discretion of the Committee, either by the
terms of an Option or upon adoption of a resolution by the Committee prior to
the occurrence thereof, after the consummation of any similar event involving
a change in control of the Company. In addition, if the Committee so
provides, it may, in its absolute discretion, also provide, either by the
terms of an Option or by a resolution adopted prior to the occurrence of such
Corporate Transaction or similar event involving a change in control of the
Company, that, for some period of time prior to such event or in connection
with the consummation of such transaction, such Option shall be exercisable
as to all shares covered thereby, notwithstanding anything to the contrary in
Section 4.3(a) and/or any installment vesting provisions of such Option, but
subject to Section 4.3(c).
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise an Option (or
any portion thereof) granted to him. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under the Plan or
the applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; PROVIDED, HOWEVER, that
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the Company shall not be required to issue fractional shares and the
Committee may, by the terms of the Option, require any partial exercise to be
with respect to a specified minimum number of shares.
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, any be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee;
(b) (i) Full payment (in cash or by check) for the shares with respect
to which such Option or portion is thereby exercised;
(ii) With the consent of the Committee, shares of the Company's
Common Stock or Voting Common Stock owned by the Optionee duly endorsed for
transfer to the Company;
(iii) With the consent of the Committee, subject to the timing
requirements of Section 5.4, payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise of the Option
having a fair market value on the date of Option exercise equal to the
aggregate exercise price of the Option or exercised portion thereof, or
(iv) With the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and (iii);
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option;
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars;
(e) The delivery by or on behalf of Optionee of such other ancillary
agreements and under-takings as may have been provided for or referred to in
the Plan or the applicable Stock Option Agreement (including, without
limitation, as contemplated by Section 3.2(b) of the Plan); and
(f) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option or portion thereof.
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SECTION 5.4 - CERTAIN TIMING REQUIREMENTS.
At the discretion of the Committee, shares of Common Stock issuable to
the Optionee upon exercise of the Option may be used to satisfy the Option
exercise price or the tax withholding consequences of such exercise, in the
case of persons subject to Section 16 of the Exchange Act, only (i) during
the period beginning on the third business day following the date of release
of the quarterly or annual summary statement of sales and earnings of the
Company and ending on the twelfth business day following such date or (ii)
pursuant to an irrevocable written election by the Optionee to use shares of
Common Stock issuable to the Optionee upon exercise of the Option to pay all
or part of the Option price or the withholding taxes made at least six months
prior to the payment of such Option price or withholding taxes.
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise
of any Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary
or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons of
administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.
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SECTION 5.7 - TRANSFER RESTRICTIONS
Unless otherwise approved in writing by the Committee, no shares
acquired upon exercise of any Option by any Officer may be sold, assigned,
pledged, encumbered or otherwise transferred until at least six months have
elapsed from (but excluding) the date that such Option was granted. The
Committee, in its absolute discretion, may impose such other restrictions on
the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate. Any such other restriction shall be set forth or
referred to in the respective Stock Option Agreement and may be referred to
on the certificates evidencing such shares. The Committee may require the
Optionee to give the Company prompt notice of any disposition of shares of
stock, acquired by exercise of an Incentive Stock Option, within two years
from the date of granting such Option or one year after the transfer of such
shares to such Optionee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Incentive Stock Option refer to
such requirement to give prompt notice of disposition.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 - COMMITTEE
The Committee shall be the Board unless and until the Board shall duly
constitute a Stock Option Committee. Appointment of Stock Option Committee
members shall be effective upon acceptance of appointment. Stock Option
Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Stock Option Committee shall be filled by the Board.
SECTION 6.2 - DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret, amend or revoke any such rules.
Any such interpretations and rules in regard to Incentive Stock Options shall
be consistent with the basic purpose of the Plan to grant "incentive stock
options" within the meaning of Section 422 of the Code.
SECTION 6.3 - PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS; COMPENSATION
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers and
Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with
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respect to the Plan or the Options, and all members of the Committee shall be
fully protected by the Company in respect to any such action, determination
or interpretation. Should the Board act as the Committee, the members of the
Board shall receive no additional compensation for such services. Should a
Stock Option Committee be constituted, the members of such committee shall
receive such compensation for their services as may be determined by the
Board.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bakruptcy), and any attempted disposition thereof
shall be null and void and of no effect; PROVIDED, HOWEVER, that nothing in
this Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, without approval of the Company's shareholders given within 12
months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 2.3, increase any limit imposed
in Section 2.1 on the maximum number of shares which may be issued on
exercise of Options, materially modify the eligibility requirements of
Section 3.1, reduce the minimum Option price requirements of Section 4.2(a)
or extend the limit imposed in this Section 7.2 on the period during which
Options may be granted or amend or modify the Plan in a manner requiring
shareholder approval under Rule 16b-3. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the
Option, impair any rights or obligations under any Option theretofore
granted. No Option may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
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This Plan may be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption
of the Plan. Options may be granted prior to such shareholder approval;
PROVIDED, HOWEVER, that if such approval has not been obtained at the end of
said 12-month period, all Options previously granted under the Plan shall
be deemed to be Non-Qualified Options.
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise
than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options
in connection with the acquisition by purchase, lease, merger, consolidation
or otherwise, of the business, stock or assets of any corporation, firm or
association.
SECTION 7.5 - TITLES
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.
SECTION 7.6 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act, the Exchange Act and any applicable State
securities laws and any and all regulations and rules promulgated by the
Securities and Exchange Commission and any other relevant regulatory body
thereunder. Prior to the registration or qualification of the shares of stock
issuable hereunder, it is the intention that all issuances of securities
under the Plan shall be exempt from such registration or qualification by
operation of Rule 701 promulgated under the Securities Act and provisions of
applicable State law relating to the issuance of securities to a limited
number of persons having pre-existing relationships with the Company.
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and Options shall be granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
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The securities subject to issuance upon exercise of this Non-Qualified
Stock Option Agreement have not been registered under the Securities
Act of 1933 (the "Act") or state securities laws and no transfer of
these securities may be made except (a) pursuant to an effective
registration statement under the Act, or (b) pursuant to an exemption
therefrom with respect to which the issuer may, upon request, require
a satisfactory opinion of counsel for the holder that such transfer is
exempt from the requirements of the Act. Such securities are also
subject to further restrictions referred to herein.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of _____________, 1999, is made by and
between Entertainment Boulevard, Inc., a Nevada corporation, hereinafter
referred to as the "COMPANY" and _____________________, an employee, officer,
director or consultant of the Company or a Parent Corporation or Subsidiary of
the Company, hereinafter referred to as "OPTIONEE":
RECITALS
A. The Company wishes to afford the Optionee the opportunity to
purchase shares of its common stock.
B. The Company wishes to carry out the Plan (the terms of which are
hereby incorporated by reference and made a part of this Agreement).
C. The Board has determined that it would be to the advantage and best
interest of the Company and its shareholders to grant the Non-Qualified
Option provided for herein to the Optionee as an inducement to enter into or
remain in the service of the Company, its Parent Corporations or its
Subsidiaries and as an incentive for increased efforts during such service,
and has advised the Company thereof and instructed the undersigned officers
to issue said Option.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Board or a duly constituted Stock Option
Committee of the Board, appointed as provided in Section 6.1 of the Plan.
"COMMON STOCK" shall mean the Common Stock of the Company.
"COMPANY" shall mean Entertainment Boulevard, Inc.
"DIRECTOR" shall mean a member of the Board.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"OFFICER" shall mean an officer of the Company, as defined in Rule
16a-l(f) under the Exchange Act, as such Rule may be amended in the future.
"OPTION" shall mean the non-qualified option to purchase Common Stock of
the Company granted under this Agreement.
"PARENT CORPORATION" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"PLAN" shall mean the 1999 Stock Option Plan of Entertainment Boulevard,
Inc.
"RETIREMENT" shall mean the written resignation of Optionee as an
employee of the Company which is delivered at least thirty (30) days prior to
its effective date and which occurs at any time that the sum of Optionee's
age and years of service as an employee of the Company exceed seventy-five
(75).
"RULE 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended in the future.
"SECRETARY" shall mean the Secretary of the Company.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
"TERMINATION" shall mean the time when the employee-employer or other
applicable relationship between the Optionee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without
cause and with or without notice, including, but not by way of limitation, a
termination by resignation, discharge, death or Retirement, but excluding any
termination where there is a simultaneous reemployment or rehiring by the
Company, a Parent Corporation or a Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all other matters and questions
relating to Termination, including, but not by way of limitation, the
question of whether a Termination resulted from a discharge for cause, and
all questions of whether particular leaves of absence constitute Terminations.
ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
In consideration of the Optionee's agreement to remain as an
employee, officer, director or consultant of the Company, its Parent
Corporation or its Subsidiaries and for other good and valuable
consideration, on the date hereof, the Company irrevocably grants to the
Optionee the option to purchase any part or all of an aggregate of _______
shares of its Common Stock upon the terms and conditions set forth in this
Agreement.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option
shall be $______ per share without commission or other charge.
SECTION 2.3 - NO RIGHT TO CONTINUED EMPLOYMENT OR HIRE.
Nothing in this Agreement or in the Plan shall confer upon the
Optionee any right to continue in the employ or hires of the Company, any
Parent Corporation or any Subsidiary or shall interfere with or restrict in
any way the rights of the Company, its Parent Corporations and its
Subsidiaries, which are hereby expressly reserved, to discharge the Optionee
at any time for any reason whatsoever, with or without cause and with or
without notice.
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SECTION 2.4 - ADJUSTMENTS IN OPTION
In the event that the outstanding shares of the stock subject to
the Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination of shares, the Committee shall, subject to Section
4.7 of the Plan, make an appropriate and equitable adjustment in the number
and kind of shares as to which the Option, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall, be maintained as before the
occurrence of such event. Such adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such adjustment
made by the Committee shall be final and binding upon all Optionees, the
Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) The Option shall become exercisable in ____ (__) cumulative
installments as follows:
(i) The first installment shall consist of ___% of the shares
covered by the Option and shall become exercisable on the first anniversary
of the date the Option is granted.
(ii) The second installment shall consist of ___% of the shares
covered by the Option and shall become exercisable on the second
anniversary of the date the Option is granted.
(b) Except as provided in Section 3.4, no portion of the Option which
is unexercisable at Termination shall thereafter become exercisable.
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SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative. Each
such installment which becomes exercisable pursuant to Section 3.1 shall
remain exercisable until it becomes unexercisable under Section 3.3.
SECTION 3.3 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of ten years from the date the Option was granted;
or
(b) The time of the Optionee's Termination unless such Termination
results from his/her death, his/her Retirement, his/her disability or his/her
being discharged not for cause; or
(c) The expiration of three months from the date of the Optionee's
Termination as a result of Retirement or discharge not for cause; or
(d) The expiration of one year from the date of the Optionee's
Termination Employment as a result of disability (within the meaning of
Section 22(e)(3) of the Code); or
(e) The expiration of one year from the date of the Optionee's
death; or
(f) The effective date of either the merger or consolidation of
the Company with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of the Company's assets or
80% or more of the Company's then outstanding voting stock, or the
liquidation or dissolution of the Company, unless the Committee waives this
provision in connection with such transaction. At least ten days prior to
the effective date of such merger, consolidation, acquisition, liquidation or
dissolution, the Committee shall give the Optionee notice of such event if
the Option has then neither been fully exercised nor become unexercisable
under this Section 3.3.
SECTION 3.4 - ACCELERATION OF EXERCISABILITY
In the event of the death or disability of the Optionee, or the
merger or consolidation of the Company with or into another unrelated
corporation, or the acquisition by another unrelated corporation or person of
all or substantially all of the Company's assets or 80% or more of the
Company's then outstanding voting stock, or the liquidation or dissolution of
the Company, the Committee shall, upon such terms and conditions as it deems
appropriate, provide by resolution, adopted prior to such event and
incorporated in the notice referred to in Section 3.3(f), that at some time
prior to the effective date of such event this Option shall be exercisable as
to all the shares covered hereby, notwithstanding that this Option may not
yet have become fully exercisable under Section 3.1(a); PROVIDED, HOWEVER,
that this acceleration of exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3 prior to
said effective date; or
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(b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by an
employer corporation or a parent or subsidiary of such corporation.
The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he/she may exercise the
Option or any portion thereof. After the death of the Optionee, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by his/her personal
representative or by any person empowered to do so under the Optionee's will
or under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when the
exercisable Option or any exercisable portion thereof becomes unexercisable
under Section 3.3, such Option or portion thereof may be exercised in whole
or in part; PROVIDED, HOWEVER, that the Company shall not be required to
issue fractional shares and the Committee may, by the terms of the Option,
require any partial exercise to be with respect to a specified minimum number
of shares.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his/her office of all of the following
prior to the time when the Option or such portion becomes unexercisable under
Section 3.3:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) Full payment (in cash or by check) for the shares
with respect to which such Option or portion is exercised; or
(ii) With the consent of the Committee, shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer to
the Company;
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(iii) With the consent of the Committee, subject to the
timing requirements of Section 4.4, payment, in whole or in part, through
the surrender of shares of Common Stock then issuable upon exercise of the
Option having a fair market value on the date of Option exercise equal to
the aggregate exercise price of the Option or exercised portion thereof;
or
(iv) With the consent of the Committee, any combination of
the consideration provided in the foregoing subsections (i), (ii) and
(iii);
(c) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local
law in connection with the exercise of the Option;
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars;
(e) The delivery by or on behalf of Optionee of such other
ancillary agreements and undertakings as may have been provided for or
referred to in the Plan (including, without limitation, as contemplated by
Section 2.3(b) of the Plan); and
(f) In the event the Option or portion shall be exercised pursuant
to Section 4.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental
regulatory body, which the Committee shall, in its absolute discretion, deem
necessary or advisable;
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(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The payment to the Company (or other employer corporation) of
all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option;
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience; and
(f) The written acknowledgment of Optionee of the continued
applicability of the restrictions contained in this Agreement (including
Article IV) and the Plan, if applicable.
SECTION 4.5 - RIGHTS AS SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights
or privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company
to such holder.
SECTION 4.6 - RESTRICTIONS ON TRANSFER OF SHARES
There can be no valid transfer of any shares of stock purchased on
exercise of the Option, or any direct or indirect interest in such shares, by
any holder of such shares or interests unless such transfer is made in
compliance with the terms and conditions of the Shareholders Agreement. The
restrictions on transfer contained in this Section 4.8 are in addition to
those contained in Section 5.2.
SECTION 4.7 - LEGENDS
The Company is expressly authorized to place one or more legends on
any certificates representing shares of Common Stock issued upon exercise
hereof in order to provide adequate legal notice of any restrictions imposed
by applicable law or this Agreement or any related applicable agreements to
which Optionee shall be subject from time to time.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Optionee,
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the Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or the Option. The Board shall
have no right to exercise any of the rights or duties of the Committee under
the Plan and this Agreement.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the
Optionee or his/her successors in interest or shall be subject to disposition
by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other
legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of stock as will be
sufficient to satisfy the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him/her at the
address given beneath his/her signature hereto. By a notice given pursuant
to this Section 5.4, either party may hereafter designate a different address
for notices to be given to him/her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his/her status and address by written notice under
this Section 5.4. Any notice shall be deemed duly given when (i) enclosed in
a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained
by the United States Postal Service (ii) delivered in person, or (iii)
delivered by telecopy and promptly confirmed by delivery in person or post as
aforesaid in each case, with postage prepaid.
SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced
under the laws of the State of Nevada.
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SECTION 5.7 - CONFORMITY TO SECURITIES LAWS.
The Optionee acknowledges that the Plan is intended to conform to
the extent necessary with all provisions of the Securities Act and the
Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including without limitation
Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Option is granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
IN WITNESS WHEREOF, this Agreement has been executed and delivered
by the parties hereto.
ENTERTAINMENT BOULEVARD, INC.
By:
-----------------------------------
Authorized Signatory
By:
---------------------------
Optionee
- ------------------------------
(Name)
- ------------------------------
- ------------------------------
(Address)
Optionee's Taxpayer
Identification Number:
- ------------------------------
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Exhibit 10.5
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made and entered into this
__ day of _______, 1999, by and between Entertainment Boulevard, Inc.
("Company"), a Nevada corporation, and the undersigned ("Indemnitee").
Whereas, the Indemnitee will serve and/or is currently serving as a
director and/or officer of the Company, and the Company wishes the Indemnitee to
continue to serve in such capacity.
Whereas, the Indemnitee is willing, under certain circumstances, to
continue serving as a director and/or officer of the Company.
Whereas, the Indemnitee has indicated that he does not regard the
indemnities available under the Company's Bylaws and the Company's directors'
and officers' liability insurance policy as adequate to protect him against the
risks associated with his service to the Company. Whereas, the Company and the
Indemnitee now agree they should enter into this Agreement in order to provide
greater protection to the Indemnitee against such risks of service to the
Company.
Whereas, the General Corporation Law of the State of Nevada, under which
Law the Company is organized, empowers corporations to indemnify a person
serving as a director, officer, employee or agent of the corporation and that
any indemnifications in said General Corporation Law
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and in the Company's Bylaws are not deemed exclusive of any other rights to
which those seeking indemnification may be entitled.
Now, therefore, in order to induce the Indemnitee to continue to serve
and/or to continue to serve as a director and/or officer of the Company and in
consideration of his continued service, the Company hereby agrees to indemnify
the Indemnitee as follows:
1. INDEMNITY. The Company will indemnify the Indemnitee, his
executors, administrators or assigns, for any Expenses (as defined below)
which the Indemnitee is or becomes legally obligated to pay in connection
with any Proceeding (as defined below). As used in this Agreement, the term
"Proceeding" shall include any threatened, pending or completed claim,
action, suit or proceeding, whether brought by or in the right of the
Company or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which the Indemnitee may be or may have been
involved as a party or otherwise, by reason of the fact that the Indemnitee
is or was a director or officer of the Company, by reason of any actual or
alleged error or misstatement or misleading statement made or suffered by
the Indemnitee, by reason of any action taken by him or of any inaction on
his part while acting as such director or officer, or by reason of the fact
that he was serving at the request of the Company as a director, trustee,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; provided, that in each such case the
Indemnitee acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the
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Company, and, in the case of a criminal proceeding, in addition had no
reasonable cause to believe that his conduct was unlawful. As used in
this Agreement, the term "other enterprise" shall include (without
limitation) employee benefit plans and administrative committees
thereof, and the term "fines" shall include (without limitation) any
excise tax assessed with respect to any employee benefit plan.
2. EXPENSES. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
3. ENFORCEMENT. If a claim or request under this Agreement is not
paid by the Company, or on its behalf, within thirty days after a written
claim or request has been received by the Company, the Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid
amount of the claim or request and, if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the Expenses of prosecuting
such suit. The Company shall have the right to recoup from the Indemnitee
the amount of any item or items of Expenses theretofore paid by the Company
pursuant to this Agreement, to the extent such Expenses are not reasonable
in nature or amounts; provided, however, that the Company shall have the
burden of proving such Expenses to be unreasonable. The burden of proving
that the Indemnitee is not entitled to indemnification for any other reason
shall be upon the Company.
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4. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
5. EXCLUSIONS. The Company shall not be liable under this
Agreement to pay any Expenses in connection with any claim made against the
Indemnitee:
(a) to the extent that payment is actually made to the
Indemnitee under a valid, enforceable and collectible insurance
policy;
(b) to the extent that the Indemnitee is indemnified and
actually paid otherwise than pursuant to this Agreement;
(c) in connection with a judicial action by or in the right of
the Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and
only to the extent that any court in which such action was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper;
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(d) if it is proved by final judgment in a court of law or other
final adjudication to have been based upon or attributable to the
Indemnitee's in fact having gained any personal profit or advantage to
which he was not legally entitled;
(e) for a disgorgement of profits made from the purchase and
sale by the Indemnitee of securities pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended, and amendments thereto or
similar provisions of any state statutory law or common law;
(f) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the
foregoing, the Indemnitee shall be protected under this Agreement as
to any claims upon which suit may be brought against him by reason of
any alleged dishonesty on his part, unless a judgment or other final
adjudication thereof adverse to the Indemnitee shall establish that he
committed (i) acts of active and deliberate dishonesty, (ii) with
actual dishonest purpose and intent, (iii) which acts were material to
the cause of action so adjudicated; or
(g) for any judgment, fine or penalty which the Company is
prohibited by applicable law from paying as indemnity or for any other
reason.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding any other provision of this Agreement, to the extent that
the Indemnitee has been successful on the merits or otherwise in defense of
any Proceeding or in defense of any claim, issue or matter therein,
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including dismissal without prejudice, Indemnitee shall be indemnified
against any and all Expenses incurred in connection therewith.
7. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some
or a portion of Expenses, but not, however, for the total amount thereof,
the Company shall nevertheless indemnify the Indemnitee for the portion of
such Expenses to which the Indemnitee is entitled.
8. ADVANCE OF EXPENSES. Expenses incurred by the Indemnitee in
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon request of the Indemnitee that the
Company pay such Expenses. The Indemnitee hereby undertakes to repay to the
Company the amount of any Expenses theretofore paid by the Company to the
extent that it is ultimately determined that such Expenses were not
reasonable or that the Indemnitee is not entitled to indemnification.
9. APPROVAL OF EXPENSES. No Expenses for which indemnity shall be
sought under this Agreement, other than those in respect of judgments and
verdicts actually rendered, shall be incurred without the prior consent of
the Company, which consent shall not be unreasonably withheld.
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10. NOTICE OF CLAIM. The Indemnitee, as a condition precedent to
his right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as practicable of any claim made against him for
which indemnity will or could be sought under this Agreement. Notice to the
Company shall be given at its principal office and shall be directed to the
Corporate Secretary (or such other address as the Company shall designate
in writing to the Indemnitee); notice shall be deemed received if sent by
prepaid mail properly addressed, the date of such notice being the date
postmarked. In addition, the Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be
within the Indemnitee's power.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
12. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing herein shall
be deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
Bylaws of the Company and amendments thereto or under law.
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with Nevada law.
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14. SAVING CLAUSE. Wherever there is conflict between any provision
of this Agreement and any applicable present or future statute, law or
regulation contrary to which the Company and the Indemnitee have no legal
right to contract, the latter shall prevail, but in such event the affected
provisions of this Agreement shall be curtailed and restricted only to the
extent necessary to bring them within applicable legal requirements.
15. COVERAGE. The provisions of this Agreement shall apply with
respect to the Indemnitee's service as a Director of the Company prior to
the date of this Agreement and with respect to all periods of such service
after the date of this Agreement, even though the Indemnitee may have
ceased to be a Director of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
"COMPANY" ENTERTAINMENT BOULEVARD, INC.
By
------------------------------------
Stephen Brown
Chief Executive Officer
"INDEMNITEE" NAME
--------------------------------------
Signature
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Exhibit 10.6
LICENSE AGREEMENT
This Agreement is dated as of June 3, 1999 ("Agreement") and is entered into
by and between Sonique, 101 California St., Suite 3050, San Francisco, CA
94104 ("Licensee") and Entertainment Boulevard, Inc., 4052 Del Rey Avenue
Suite 108, Marina Del Rey, California 90292 ("EBLD").
1. CONTENT AND RECIPROCAL LINKS
EBLD distributes entertainment-related content, including streaming music
videos through a web site located at www.vidnet.com ("EBLD Site"). EBLD
hereby grants to Licensee a royalty-free, non-exclusive license to distribute
such content from the EBLD Site as is mutually agreed by the parties
("Content") on the Sonique web site, located at www.sonique.com ("Licensee
Site").
EBLD shall produce, host and serve a co-branded pop-up player or pop-up
players within the Licensee Site (hereinafter Collectively referred to as
"Co-Branded Player") for the distribution of the Content. The Co-Branded
Player is defined as a web page or web pages that contain both parties'
logos, trademarks, tradenames, service marks, and/or content as mutually
agreed upon.
Licensee shall include a link to the Co-Branded Player on the Licensee Site
in a mutually agreed upon place for the duration of the Term. Licensee shall
also include a link to the Co-Branded Player on the Sonique downloadable
players for the duration of the Term.
EBLD agrees that the Content shall not be defamatory or knowingly in breach
of any person's rights, including any intellectual property rights, privacy
or any other rights. Licensee shall have the right not to distribute the
Content, or any portion thereof, at any time if in the reasonable opinion of
Licensee any of the above conditions are breached and until EBLD has made the
requisite editorial changes.
Both parties shall have the right to sell and shall use best efforts to sell
advertising and sponsorships on the Co-Branded Player and shall split 50/50
all revenue received in connection therewith less any third party agency fees
or commissions actually paid in connections with such advertising and
sponsorships. Such advertising shall consist of any of the following: banner
ads, corporate sponsorships, audio, video, or audio/video ads which are
broadcast exclusively through the Co-Branded Player, or any other promotional
text, graphic, audio clip or combination of these which generates revenue in
exchange for broadcast over the Co-Branded Player. EBLD shall have the right
to approve all pricing schedules for such advertising. Such approval shall
not be unduly withheld, and EBLD shall respond to all requests for such
approval within three (3) business days. Should advertising generated by
Licensee conflict with advertising generated by EBLD, advertising generated
by EBLD shall take priority, but both parties shall make all possible efforts
to prevent such situation from occurring by informing each other of all
advertising campaigns as they occur.
Each party will account to the other and pay its share of revenue within
fifteen (15) days after the end of each calendar month. Along with such
payment, each party will furnish a written statement reflecting the number of
advertising impressions on, and number of visitors to, the Co-Branded Player
during the applicable month. Any such statement shall be deemed accepted
unless (i) the recipient notifies the sender in writing within eighteen
months (18) from the date of receipt of such statement setting forth specific
objections thereto and (ii) the recipient commences a lawsuit to contest such
statement within two (2) years from the date of receipt of such statement.
EBLD or EBLD's designated representative shall have the right, at Licensee's
usual place of business, during business hours and on reasonable notice to
Licensee (but in no event more than once annually), to examine and copy
(provided EBLD keeps such copies confidential and uses them solely in
connection with EBLD's audit rights hereunder, in any proceeding hereunder,
or in any necessary business disclosures to a third party subject to such
third party's agreement to retain such confidentiality) Licensee's books and
records to confirm the accuracy of
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any such statements not otherwise deemed accepted. In the event that such
audit reveals a discrepancy in the amounts owed EBLD from what was actually
paid, Licensee shall pay EBLD the amount of such discrepancy. If such
discrepancy is in excess of five percent (5%) of the amounts actually paid to
EBLD, Licensee shall reimburse EBLD for the cost of such audit.
Conversely, Licensee or Licensee's designated representative shall have the
right, at EBLD's usual place of business, during business hours and on
reasonable notice to EBLD (but in no event more than once annually), to
examine and copy (provided Licensee keeps such copies confidential and uses
them solely in connection with Licensee's audit rights hereunder, in any
proceeding hereunder, or in any necessary business disclosures to a third
party subject to such third party's agreement to retain such confidentiality)
EBLD's books and records to confirm the accuracy of any such statements not
otherwise deemed accepted. In the event that such audit reveals a discrepancy
in the amounts owed Licensee from what was actually paid, EBLD shall pay
Licensee the amount of such discrepancy. If such discrepancy is in excess of
five percent (5%) of the amounts actually paid to Licensee, EBLD shall
reimburse Licensee for the cost of such audit.
EBLD and Licensee agree to explore other, non-Internet means of promoting
their Sites and brands.
2. REPRESENTATIONS AND WARRANTIES.
EBLD represents and warrants that it licenses the rights to the Content and
that it has the authority to enter into this Agreement and to fully perform
all of its obligations hereunder. EBLD represents and warrants that the grant
of rights to the Content herein, does not violate the rights of any third
parties and will adhere to applicable Federal, State and Local law and
regulation in the performance of its obligations hereunder. Licensee
represents and warrants that it has the authority to enter into this
Agreement and to fully perform its obligations hereunder, and that it will
adhere to applicable Federal, State and Local law and regulation in the
performance of such obligations.
3. TRADEMARK OWNERSHIP AND LICENSE.
EBLD and Licensee will retain all right, title and interest in and to their
respective trademarks, service marks and trade names worldwide, subject to
limited cross-licenses necessary to perform this Agreement. Neither party
shall alter the other party's respective trademarks or other intellectual
property without the other party's express written consent. All references to
the other party's intellectual property shall include the appropriate
trademark, copyright or other legal notices, and shall be subject to the
other party's prior written approval.
4. TERM.
This Agreement shall continue for one (1) year from the last date of
execution of this Agreement. The Term shall be automatically renewed for
additional one (1) year increments unless either party notifies the other at
least thirty (30) days prior to the expiration of the then-current Term that
it does not wish to renew the Term of the Agreement.
5. TERMINATION.
Either party may terminate this Agreement if the other party breaches the
Agreement and the breach remains uncured for thirty (30) days (or, if such
breach is not susceptible to cure within thirty (30) days, the breaching
party must initiate steps to cure the breach within said thirty (30) day
period and continue its efforts to cure such breach), unless such breach is
caused by the alteration of a party's trademark or other intellectual
property, or failure to obtain an approval as required in this Agreement, in
which case the breaching party shall have, upon notice, two (2) business days
in which to cure. Either party may terminate this Agreement if the other
party is
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the subject of a bankruptcy filing which is not dismissed within sixty (60)
days. Either party may terminate this Agreement on thirty (30) days advance
written notice to the other party. This Agreement shall terminate with no
further obligations between the parties except the confidentiality obligation
set out in Paragraph 6 below and the obligation contained in the next
sentence of this Paragraph 5, if either the Licensee's Site or EBLD Site is
removed from the Web and/or ceases operation for a period of more than two
(2) consecutive weeks. Upon any termination, each party (i) will account to
and pay the other party its share of revenues for all periods prior to the
date of termination within thirty (30) days of termination and (ii) will
promptly return to the other party any materials containing the Content. In
addition, Paragraphs 2, 6, 7, 9 and 10 shall survive termination of this
Agreement.
6. CONFIDENTIALITY.
The terms and conditions of this Agreement shall be strictly confidential.
All information about the development of the EBLD Site and the development
and launch of the Co-Branded Player disclosed to Licensee, its officers,
directors, employees and/or agents shall be treated as confidential. All
information about the development of the Licensee Site and the development
and launch of the Co-Branded Player disclosed to EBLD, its officers,
directors, employees and/or agents shall be treated as confidential. Such
confidentiality is of the essence to this Agreement.
7. INDEMNITY.
Each party will indemnify the other, its parent, subsidiary and affiliated
companies, their employees, officers, directors and agents from third party
claims, losses, causes of action, costs (including reasonable attorney's
fees) arising from the breach of any warranty, representation or covenant in
the Agreement.
8. LIMITATION ON WARRANTY.
Neither party makes any warranty regarding the quality of their goods and
services. Neither party makes any warranty that all errors or failures in
their respective sites will be corrected. The parties expressly disclaim all
warranties of merchantability or fitness for a particular purpose. Beyond the
warranties contained in this paragraph, the parties do not warrant that their
sites are error-free or that operation of their sites will be secure or
uninterrupted.
9. LIMITATION ON LIABILITY.
In no event will either party be liable for any representation or warranty
made to any end user or third party by the other party, or any agent of the
other party. In no even will either party be liable for failure of its
network or support services. These limitations shall survive and apply
notwithstanding the validity of the limited remedies provided for in this
agreement. Except for liability for indemnity, neither party shall have
liability for any damages other than direct damages.
10. DISPUTE RESOLUTION.
Disputes about trademarks, service marks, trade names and confidentiality may
be resolved in court. All other disputes arising out of this Agreement shall
be resolved through mediation and then binding arbitration in accordance with
the rules and procedures of the American Arbitration Association, to take
place in the County of Los Angeles, California.
11. GENERAL.
Neither party may assign or otherwise transfer this Agreement without the
other party's prior written consent. The parties hereto are neither partners
nor joint venturers hereunder, and neither party shall have the power or
authority to bind or obligate the other in any way. This Agreement may not be
modified and none of its terms may be waived, except in writing signed by
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both parties. This Agreement shall not be binding until fully executed and
delivered to each of the parties hereto. Neither party's failure or delay to
enforce any rights hereunder shall be considered a waiver of such rights or a
modification of this Agreement. This Agreement shall be governed by and
interpreted in accord with the laws of the State of California applicable to
agreements entered into and to be performed wholly in California. The parties
hereby consent to the exclusive jurisdiction of any State or Federal court
empowered to enforce this Agreement in the State of California, County of Los
Angeles, and the parties waive any objection thereto on the basis of personal
jurisdiction or venue. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter of this Agreement ad
supersedes all prior agreements.
AGREED TO AND ACCEPTED BY:
SONIQUE ENTERTAINMENT BOULEVARD, INC.
By: /s/ David C. Touve By: /s/ Stephen Brown
------------------------------------ -------------------------------
Name: David C. Touve Name: Stephen Brown
---------------------------------- -----------------------------
Title: Director of Marketing and Title: CEO
Business Development
--------------------------------- ----------------------------
Date: 6/3/99 Date: 6/3/99
---------------------------------- ----------------------------
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Exhibit 10.7
CHECKOUT.COM/ENTERTAINMENT BOULEVARD
CO-MARKETING PARTNERSHIP AGREEMENT
This is an agreement dated as of July 21, 1999, between
Entertainment Boulevard, Inc., a Nevada corporation located at 4052 Del Rey
Avenue Suite 108, Marina Del Rey, CA 90292 ("EBLD"), and CheckOut.com ("CO"),
a ______________ located at 345 N. Maple Drive, Suite 300/304, Beverly Hills,
CA 90210.
The parties desire to establish a business relationship with each
other and engage in a promotional partnership and certain marketing
activities as set forth below. In consideration of the mutual premises and
undertakings stated herein and Exhibit A attached hereto and made a part
hereof, the parties hereto agree as follows (the "Agreement"):
1. TRADEMARKS
1.1 CO IDENTITIES ON EBLD SITE. CO hereby grants to EBLD a
non-exclusive, cost-free license (without the right of sublicense) throughout
the Term of this Agreement to use the CheckOut.com name and logo and other
proprietary identities of CO (collectively, "CO Mark(s)") in connection with
the EBLD multimedia player (the "Player") which is displayed on CheckOut.com
(defined below), solely as stated in Exhibit A.
1.2 EBLD IDENTITIES ON CO SITE. EBLD hereby grants a
non-exclusive cost-free license (without the right of sublicense) throughout
the Term of this Agreement to CO to use the EBLD name and logo and other
proprietary identities of EBLD (collectively, "EBLD Mark(s)") in connection
with CO's website called "CheckOut.com," currently located at
http://www.checkout.com, solely as stated in Exhibit A.
2. CONTENT
2.1 LICENSE OF EBLD CONTENT. EBLD hereby grants a
non-exclusive cost-free license (without the right of sublicense) throughout
the Term of this Agreement to CO to use the certain content owned and/or
controlled by EBLD, as described on Exhibit A (collectively, "EBLD Content")
in connection with CheckOut.com, solely as stated on Exhibit A. During the
term of this Agreement, CO will not (a) permit another entity, other than
EBLD, to broadcast streaming content that competes with the content served on
the Co-Branded Page on the Licensee Site, or (b) establish any direct
hypertext links between the Licensee Site and the site of an EBLD competitor.
2.2 CREATION OF CONTENT. Each party will be responsible for
the creation, development and publication of its respective Content. The
parties will consult regularly regarding creation of mutually beneficial
Content. Neither party will use the Content of each other's site in any way
whatsoever without the other party's prior approval.
2.3 QUALITY CONTROL. Each party agrees to maintain the
quality of the content of its site to at least the same level as has existed
heretofore. If either party, in its reasonable discretion, determines that
the content of the other party's site falls below this pre-existing standard
of quality and does not otherwise meet the editorial standards and quality of
its own site, that party will notify the other party to that effect in
writing giving specific details of the failure to meet such standards and the
party receiving that notice will remedy the deficiencies specified in such
notice within 30 days after the date of its receipt of that notice. If,
following such 30-day period, the quality of the applicable site has not
sufficiently improved, the party that gave the original notice may terminate
the Agreement effective immediately upon the receipt by the other party of
notice of termination.
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2.4 LIMITATION OF RIGHTS. Each party's use of the other
party's Marks and Content, as well as the use of the any links described on
Exhibit A, is strictly limited to the uses stated in this Agreement. Neither
party acquires any rights in or to the other party's Marks and/or the
goodwill inherent therein by this Agreement or otherwise. All rights granted
under this Agreement, including the right to use the other party's Marks or
Content, or to link to the other party's Content shall revert to the granting
party upon termination.
3. FINANCIAL
3.1 PRODUCTION EXPENSES. Each party will be solely
responsible for its own expenses incurred in undertaking its rights and
responsibilities under this Agreement and otherwise in operating its website.
3.2 ADVERTISING
(a) RETAINED RIGHTS. Each party will have the right to
continue to transact advertising and promotional programs for its own
website, to retain all advertising inventory and set all packaging and
pricing for any advertising thereon and to retain all revenue it
receives related thereto. No such arrangements by a party can allow
for any third-party use of the other party's Marks or Content without
the prior written approval of that other party. Notwithstanding the
foregoing, the parties hereby acknowledge and agree that (i) CO shall
have the exclusive right to transact advertising and promotional
programs related to, to retain all advertising inventory and set all
packaging and pricing for any advertising on and to retain all revenue
it receives related to any co-branded pages developed pursuant to this
Agreement; and (ii) EBLD shall have the exclusive right to transact
advertising and promotional programs related to, to retain all
advertising inventory and set all packaging and pricing for any
advertising on and to retain all revenue it receives related to the
Player.
(b) NO INTERSTITIALS. Neither party will transmit any
so-called "interstitial advertising" to users as they link from
CheckOut.com to the Player or vice-versa.
(c) CUSTOMER DATA. CO shall own and retain all right,
title and interest in all names, addresses and other identifying
information of users of CheckOut.com. CO shall make this customer
information available to EBLD exclusively for EBLD's promotional
and e-commerce purposes. EBLD shall not release this customer data
information to any third party.
(d) BANNER AD DISCOUNT. EBLD agrees to provide CO with
discounted banner ad space on the EBLD site. This ad space is
contemplated to be approximately 120 pixels by 120 pixels. CO will be
offered banner ad space at $10.00 CPM. In addition, EBLD will
promote the launch of CheckOut.com on the EBLD home page from
July 15th, 1999 through August 14th, 1999.
4. LINKS TO BUY PRODUCTS AT CHECKOUT.COM.
4.1 EBLD desires to offer EBLD site visitors the convenience of
buying products online, by merchandising these products on
the EBLD web site. EBLD will control the design and
placement of the products and associated merchandising
techniques on the EBLD web site, which will be linked to
CO's online catalog. CO will manage all aspects of order
processing and fulfillment for products sold through these
links.
4.2 LINKS ON THE EBLD SITE. EBLD may select one or more products
from the CO catalog to list on the EBLD site. For each
selected product, EBLD may display the title, cover art,
short description, review, or other reference. EBLD will be
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responsible for the content, style, and placement of these
references. EBLD will provide a special link from each
product reference on the EBLD site to the corresponding CO
online catalog entry. Each link will connect directly to a
single item's detail page in the CO online catalog, using a
special link format that CO will give to EBLD. EBLD may add
or delete products from the EBLD site at any time.
4.3 ORDER PROCESSING. CO will process product orders placed by
customers who follow special links from the EBLD site to the
CO site. CO reserve the right to reject orders that do not
comply with any requirements that CO periodically may
establish. CO will be responsible for all aspects of order
processing and fulfillment, including without limitation:
preparing order forms; processing payments, cancellations,
and returns; and handling customer service. CO will track
sales made to customers who purchase products using special
links from the EBLD site to the CO site and will send EBLD
reports summarizing this sales activity. To permit accurate
tracking, reporting, and fee accrual, the special links
between the EBLD site and the CO site must be properly
formatted.
4.4 REFERRAL FEES. CO will pay EBLD referral fees on qualified
product sales to third parties. For a product sale to
generate a referral fee, the customer must follow a special
link (in a format specified by CO) from the EBLD site to
the CO site; purchase a qualified product using CO's
automated ordering system; accept delivery of the product
at the shipping destination; and remit full payment to CO.
CO will not, however, pay referral fees on any products that
are added to a customer's Shopping Cart after the customer
has re-entered CO's site (other than through a special link
from the EBLD site), even if the customer previously
followed a link from the EBLD site to the CO site. Products
that are entitled to earn referral fees under the rules set
forth above are hereinafter referred to as "Qualifying
Products."
4.5 FEE SCHEDULE. Referral fees will be earned based on the sale
price of Qualifying Products (as defined above), according
to the fee schedule set forth below. As used below, "sale
price" means the sale price listed in CO's catalog, and
excludes costs for shipping, handling, gift-wrapping, and
taxes. The established base fee schedule is eight percent
(8%) of the sale price for sales of Qualifying Products. In
addition, CO will pay EBLD a one-time bounty of ten dollars
($10) for each new CheckOut.com customer that arrives from
the EBLD sites.
4.6 FEE PAYMENT. CO will pay referral fees on a quarterly basis.
Approximately 45 days following the end of each calendar
quarter, CO will send EBLD a check for the referral fees
earned on Qualifying Products that were shipped during that
quarter, less any taxes withheld. However, if the fees
payable to EBLD for any calendar quarter are less than
$100.00, those fees will be held until the total amount due
is at least $100.00 or until this Agreement is terminated.
If a product that generated a referral fee is returned by
the customer, the corresponding fee will be deducted from
the next payment. If there is no subsequent payment, a bill
for the fee will be sent.
4.7 POLICIES AND PRICING. Customers who buy products through CO
will be deemed to be CO's customers. Accordingly, all CO
rules, policies, and operating procedures concerning
customer orders, customer service, and product sales will
apply to those customers. CO will determine the prices to
be charged for products sold under this Program in
accordance with CO's pricing policies. Product prices and
availability may vary from time to time.
3
<PAGE>
4.8 PROMOTIONS AND INCENTIVES. During the Term of the Agreement,
CO will offer special promotions to EBLD users at least six
(6) times per year. These promotions will be mutually agreed
upon. EBLD will integrate a link to Buy at CheckOut.com
within the EBLD sites and in the pop-up video players EBLD
co-brands with third parties. EBLD shall provide links to
CO's Top 10 in music and movies on the home pages of Vidnet
and Screen Clips respectively.
4.9 EXCLUSIVITY. During the term of this Agreement, EBLD will
not (a) permit another entity, other than CO, to sell or
distribute music, movies, and games (in each case whether in
audio, video, electronic or other format) on or in
connection with the EBLD web sites, (b) establish any
direct hypertext links between the EBLD web site and a CO
Competitor. The term "Competitor" as used herein means (a)
any of the entities listed in EXHIBIT B, or (b) any
individual, corporation, corporate division, World Wide Web
or other online site or any other entity or service that
either derives more than ten percent (10%) of its annual
gross revenues from the sale of music or movie products or
is primarily known as a seller of movie and/or music
products (in each case whether in audio, video, electronic
or other format).
5. APPROVALS
5.1 PRIOR APPROVAL REQUIRED. All uses by either party of the
other party's Marks and Content and links to each other's Content must be
submitted to and approved by the other party prior to their use, with such
approval not to be unreasonably withheld. Failure to so seek and receive
prior approval will be grounds for immediate termination of this Agreement,
and such termination right will not constitute a waiver of any other rights
available to a party as a result thereof.
5.2 NO PUBLICITY WITHOUT CONSENT. Neither party will issue or
permit issuance of any press release regarding the other party or this
Agreement without prior coordination with and approval by the other party.
6. TERM
6.1 TERM. When executed by the parties, this Agreement is
effective as of the date specified above and shall continue for two (2) years
from the last date of execution of this Agreement. The Term shall be
automatically renewed for additional one (1) year increments unless either
party notifies the other at least thirty (30) days prior to the expiration of
the then-current Term that it does not wish to renew the Term of the
Agreement.
6.2 EARLY TERMINATION. Each party shall have the right to
terminate this Agreement immediately on notice: (a) upon a breach of any
material obligation hereunder by the other party other than those specified
in section 4.1, if such breach is not cured within 30 days following the date
the breaching party receives notice from the non-breaching party describing
in reasonable detail the elements of such breach; (b) in the event the other
party becomes insolvent (I.E., unable to pay its debts in the ordinary course
as they come due); or (c) pursuant to section 4.1 above.
6.3 EVENTS UPON TERMINATION. Upon the expiration or
termination of this Agreement for any reason, both parties shall immediately
remove all links to the other party's Content and website(s) and cease all
use of the other party's Marks and any and all use of any kind whatsoever of
the other party's Content.
6.4 SURVIVAL. Sections 2.4, 5.2, 7, and 8 will survive the
termination or expiration of this Agreement.
7. REPRESENTATIONS AND WARRANTIES
4
<PAGE>
Each party to this Agreement represents and warrants to the other
that: (a) such party has all necessary right, power and authority
to enter into this Agreement and to perform the acts required of it
hereunder; (b) the execution of this Agreement by such party and its
performance of its obligations hereunder do not and will not violate
any agreement by which such party is bound; (c) such party has (and
will have throughout the Term) all necessary rights in and to its
Marks, content links and Content described in this Agreement to allow
it to make those indicia and materials available to the other party
and users of that party's website (including, without limitation, the
Player) as contemplated by this Agreement without violating the
rights of any third party; and (d) it has (and will have throughout
the Term) all necessary rights in and to all underlying technology
(including both hardware and software) utilized in connection with
its website (including, without limitation, the Player) and all such
underlying technology does not infringe on any patent, copyright,
trademark, trade secret or other intellectual property or proprietary
right of any third party.
8. INDEMNIFICATION
8.1 MUTUAL INDEMNIFICATION. Each party hereby agrees to
indemnify and hold harmless the other party, its parent and
subsidiary companies and their respective officers, agents,
directors, employees and authorized representatives from and
against any costs, losses, liabilities and expenses, including court
costs, reasonable expenses and reasonable attorney's fees that any of
them may suffer, incur or be subjected to by reason of any legal
action, arbitration or other claim by a third party arising out of
or as a result of a breach of the indemnifying party's representations
and warranties made hereunder, the operations of the indemnifying
party's website (including, without limitation the Player) as
authorized by this Agreement or otherwise, any allegations that the
use of the indemnifying party's Marks, Content, links and/or
content on its website (including, without limitation, the Player)
violates any intellectual property rights of any third party, any
allegation that any content on its website (including, without
limitation, the Player) is defamatory or violates any privacy or
publicity rights of any third party, and/or any of its other
obligations under this Agreement.
8.2 INDEMNIFICATION PROCEDURES. If either party entitled to
indemnification hereunder (an "Indemnified Party") makes an
indemnification request to the other, the Indemnified Party shall
permit the other party (the "Indemnifying Party") to control the
defense, disposition or settlement of the matter at its own expense;
provided that the Indemnifying Party shall not, without the consent of
the Indemnified Party enter into any settlement or agree to any
disposition that imposes an obligation on the Indemnified Party that is
not wholly discharged or dischargeable by the Indemnifying Party, or
imposes any conditions or obligations on the Indemnified Party other
than the payment of monies that are readily measurable for purposes of
determining the monetary indemnification or reimbursement obligations
of Indemnifying Party. The Indemnified Party shall notify Indemnifying
Party promptly of any claim for which Indemnifying Party is responsible
and shall cooperate with Indemnifying Party in every commercially
reasonable way to facilitate defense of any such claim; provided that
the Indemnified Party's failure to notify Indemnifying Party shall not
diminish Indemnifying Party's obligations under this Section except to
the extent that Indemnifying Party is materially prejudiced as a result
of such failure. An Indemnified Party shall at all times have the
option to participate in any matter or litigation through counsel of
its own selection and at its own expense.
5
<PAGE>
9. GENERAL
9.1 COSTS. Each party shall be responsible for all costs and
expenses incurred by it in connection with the performance of its
obligations under this Agreement.
9.2 ASSIGNMENT. None of the rights and obligations of the
parties to this Agreement may be assigned by either party, except
(a) to the transferee of substantially all of the business
operations of such party (whether by asset sale, stock sale, merger
or otherwise) or (b) to any entity that is controlled by, or is
under common control with, such party.
9.3 RELATIONSHIP OF PARTIES. This Agreement does not create a
joint venture, partnership or principal/agent relationship between the
parties hereto, nor imposes upon either party any obligations for any
losses, debts or other obligations incurred by the other party except
as expressly set forth herein.
9.4 ENTIRE AGREEMENT. This Agreement states the entire agreement
between the parties with respect to its subject matter and supersedes
any prior oral or written agreements. This Agreement may not be
amended except in writing signed by both parties.
9.5 APPLICABLE LAW. This Agreement will be construed according
to the laws of the State of California, without regard to principles
of conflicts of law.
9.6 INVALIDITY OF PROVISIONS. If any provision of this
Agreement is declared or found to be illegal, unenforceable, or void,
in whole or in part, then the parties will be relieved of all
obligations arising under such provision, but only to the extent that
it is illegal, unenforceable, or void, it being the intent and
agreement of the parties that this Agreement be deemed amended by
modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible,
by substituting therefor another provision that is legal and
enforceable and achieves the same objectives.
9.7 NOTICE. Any notice due by one party to the other will be
given to the address listed above and marked to the
attention of the signatory specified below, unless a party
hereafter designates a successor address or contact person.
All notices will be transmitted by private courier or
facsimile transmission, and will be deemed given as of the
date of a written courier's receipt or electronic facsimile
confirmation report.
9.8 CONFIDENTIALITY. The terms and conditions of this Agreement
shall be strictly confidential. All information about the
development of the EBLD Site and the development and launch
of the Co-Branded Page disclosed to Licensee, its officers,
directors, employees and/or agents shall be treated as
confidential. All information about the development of the
Licensee Site and the development and launch of the
Co-Branded Page disclosed to EBLD, its officers, directors,
employees and/or agents shall be treated as confidential.
6
<PAGE>
ACKNOWLEDGED AND AGREED ACKNOWLEDGED AND AGREED
ENTERTAINMENT BOULEVARD, INC. CHECKOUT.COM
By: /s/ Stephen Brown By: /s/ Richard Wolpert
------------------------------ --------------------------------
Name: STEPHEN BROWN Name: RICHARD WOLPERT
---------------------------- ------------------------------
Title: CEO Title: CEO
--------------------------- -----------------------------
7
<PAGE>
EXHIBIT A - DESCRIPTION OF LICENSED CONTENT
1. CO-BRANDED VIDNET/CHECKOUT.COM POP-UP MUSIC VIDEO PLAYER
EBLD agrees to create and host a pop-up music video player for CO, defined as
a `pop-up' web page which includes embedded music videos, navigation links,
and an advertisement.
CO agrees to link to the Pop-Up Player a) on the music section of the CO web
site (CheckOutMusic), b) on the CO home page, and c) on CheckOut.com artist
pages which will contain links to respective videos by mutually agreed upon
artists.
The links will open the co-branded Vidnet/CheckOut.com pop-up player, with
streaming content and player pages served by EBLD. The pop-up player will
contain both parties' logos, trademarks, tradenames, service marks, and/or
content as mutually agreed upon. The videos will be available in 28k, 56k,
100k, and 300k transfer rates.
The Pop-Up Player will include one or more play-list based music channels.
Additionally, it will provide a mechanism for users to choose specific music
video clips.
2. CO-BRANDED SCREEN CLIPS/CHECKOUT.COM POP-UP MOVIE TRAILER PLAYER
EBLD agrees to create a pop-up music video player for CO, defined as a
`pop-up' web page which includes embedded movie trailers, navigation links,
and an advertisement.
CO agrees to link to the Pop-Up Player a) on the movie section of the CO web
site (CheckOutMovies), and b) on the CO home page.
The links will open the co-branded Screen Clips/CheckOut.com pop-up player,
with streaming content and player pages served by EBLD. The pop-up player
will contain both parties' logos, trademarks, tradenames, service marks,
and/or content as mutually agreed upon. The movie trailers will be available
in 28k, 56k, 100k, and 300k transfer rates.
The Pop-Up Player will be in a design to be mutually agreed upon. It may
include one or more play-list based channels. Additionally, it will provide a
mechanism for users to choose specific movie trailers of mutually agreed upon
DVDs and videos for sale on CheckOut.com.
<PAGE>
EXHIBIT B - LIST OF CHECKOUT.COM COMPETITORS
As used in this Agreement, "Competitors" includes (without limitation) the
following entities, their affiliated, successors and spin-offs, and each
person or entity doing business under their respective brand names or any
variation thereof (whether or not co-branded):
<PAGE>
Exhibit 10.8
AGREEMENT
THIS AGREEMENT is made this 1st day of July 1999, by and between TYPHOON CAPITAL
CONSULTANTS, LLC. (hereinafter TYPHOON), and ENTERTAINMENT BOULEVARD, INC.
(hereinafter CLIENT), with respect to the following facts:
A. TYPHOON is in business of providing financial and Internet strategy
consulting services.
B. CLIENT wishes to avail itself of TYPHOON'S services in Investor
Relations and Financial Communications.
C. TYPHOON is desirous of providing its services to CLIENT.
NOW, THEREFORE, predicated on the recitals above and of the terms,
conditions, and covenants described below, the parties hereto agree as follows:
1. TYPHOON agrees to render CLIENT its services which will be on a best
efforts basis.
2. CLIENT authorizes TYPHOON to act on its behalf in performing investor
relations services on a non-exclusive basis for the term of this
agreement, which are ordinarily and customarily performed by an
investor relations firm on behalf of a corporate client; including,
but not limited to, the review of the non-financial portions of the
quarterly and annual reports to the shareholders of CLIENT (excluding
forms filed with the Securities and exchange Commission and other
regulatory agencies), the drafting and distribution of financial and
general press releases, the drafting of a corporate profile for
distribution to shareholders and the investing public, and the general
introduction of CLIENT to the financial brokerage community. Releases
and other information made available to TYPHOON for dissemination to
the public, to shareholders and to the financial community will be
provided by a principal officer of CLIENT, its attorneys, or auditors.
3. CLIENT authorizes TYPHOON to act on its behalf as its non-exclusive
public relations agent. TYPHOON shall use its best efforts in the
performance of its assignment contemplated herein. However, since
outcomes are influenced by many factors beyond the control of TYPHOON,
CLIENT acknowledges and agrees that TYPHOON does not and cannot
guarantee specific, or overall results from its efforts on behalf of
CLIENT.
<PAGE>
4. CLIENT understands and agrees that TYPHOON shall not be required to
render services to CLIENT on an exclusive basis, or devote its entire
time to CLIENT's affairs. Nothing in this agreement shall be
construed as limited TYPHOON's right to represent other persons and/or
entities, except that TYPHOON agrees not to represent any entity or
product which is directly competitive with a product marketed by
client unless TYPHOON first obtains CLIENT's written approval, which
approval may be withheld in CLIENT's sole discretion.
5. This engagement will be in effect for six months following the
commencement of the engagement and thereafter may be terminated by
providing one month written notice to the other and delivering same by
regular mail and/or telefacsimile.
Further, CLIENT understands and agrees that upon the effective
termination date of this Agreement, it shall remain solely liable for any and
all outstanding obligations incurred pursuant to this Agreement, including, but
not limited to all obligations to reimburse TYPHOON, or third parties. As a
material inducement to TYPHOON, CLIENT agrees to indemnify TYPHOON and hold it
free and harmless from any and all such obligations. Should any Judgment, or
assessment be made against TYPHOON for any such obligation of CLIENT arising
from TYPHOON's performance of its duties hereunder, CLIENT agrees to pay all
such Judgments or assessments immediately upon notice of their respective
existence unless incurred because of willful malfeasance, bad faith, or gross
negligence.
6. CLIENT understands and agrees that in furnishing the company with
advice and other services as provided in this Agreement, neither
TYPHOON nor any officer, director or agent thereof shall be liable to
CLIENT or its creditors for errors of judgment or anything except
willful malfeasance, bad faith or gross negligence in the performance
of it duties or the reckless disregard of its obligations and duties
under the terms of this Agreement.
7. CLIENT represents and warrants to TYPHOON that; CLIENT will not cause
or knowingly permit any action to be taken in connection with
transactions which violates the Securities Act of 1933, Securities Act
of 1934, or any state securities law. CLIENT agrees to indemnify and
hold TYPHOON and its officers, directors, and agents, free and
harmless from any liability, cost and expense, including attorneys'
fees in the event of a breach of this representation and warranty.
CLIENT shall also assume responsibility for the Indemnitees' defense
in any such matters, except where a conflict exists such that they are
required to retain separate counsel, in which event, CLIENT shall pay
the reasonable legal fees and expenses, as and when incurred, of
separate counsel retained by Indemnitees to provide such defense.
8. CLIENT agrees to issue a total of 25,000 shares of Client's Rule 144
restricted stock (OTC BB: EBLD) to TYPHOON CAPITAL CONSULTANTS, LLC.
To be issued immediately.
<PAGE>
9. CLIENT agrees to reimburse TYPHOON for all reasonable out of pocket
expenses incurred by it in the performance of assignments on behalf of
CLIENT. Such out of pocket expenses shall include, but are not
limited to costs of long-distance telephone, facsimile services,
mileage/travel, messenger services, printing, copying, postage, and
other such ancillary services. However, it is understood by TYPHOON
that any single expense in excess of Two Hundred Dollars ($200.00)
will be approved in advance of CLIENT in writing. Any disputed
expense must be made known to TYPHOON in writing within fifteen (15)
days of receipt. Out of pocket expenses will be billed on or about
the fifteenth of each month and will be due and payable within fifteen
(15) days of receipt.
10. CLIENT or TYPHOON may cancel this agreement upon 30 days written
notice. Notwithstanding anything to the contrary, CLIENT will remain
obligated to pay TYPHOON pro-rata compensation in cash and stock
options for work done, according to this Agreement.
11. This Agreement shall be governed by and construed to be in accordance
with the laws of the State of California. The parties hereto shall
deliver notices to each other by personal delivery or by registered
mail (return receipt requested) addressed as follows:
TYPHOON: TYPHOON CAPITAL CONSULTANTS, LLC
3420 OCEAN PARK BOULEVARD, SUITE 3020
SANTA MONICA, CA 90405
CLIENT: ENTERTAINMENT BOULEVARD, INC.
4052 DEL REY AVENUE, SUITE 108
MARINA DEL REY, CA 90292
12. All controversies between the parties hereto or arising out of or
relating to the business combination contemplated by this Agreement,
shall be resolved by arbitration in accordance with applicable rules
of the American Arbitration Association. The venue for any such
arbitration Los Angeles County, in the State of California.
13. The individual signing on behalf of CLIENT represents and warrants
that he is duly authorized to execute this agreement on its behalf.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and date first above written.
"TYPHOON"
TYPHOON CAPITAL CONSULTANTS, LLC
By: /s/ Sanjay Sabnani
-----------------------------
Sanjay Sabnani, President
Date: July 1, 1999
"CLIENT"
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
-----------------------------
Stephen Brown, CEO
Date: July 1, 1999
<PAGE>
Exhibit 10.9
VENTURE CATALYST.COM
a Division of
INLAND ENTERTAINMENT CORPORATION
3420 Ocean Park Boulevard, Suite 3020
Santa Monica, California 90403
July 30, 1999
Ms. Stephen Brown
Chief Executive Officer
Entertainment Blvd.
4052 Del Rey Avenue, Suite 108
Marine del Ray, California 90292
Dear Steve:
This letter agreement (the "Agreement") confirms the terms and
conditions of the engagement of Venture Catalyst.com, a Division of Inland
Entertainment Corporation ("Venture Catalyst"), by Entertainment Blvd. (the
"Company") to render certain investor relations and financial communications
services to the Company which are referred to herein.
1. SERVICES. Venture Catalyst agrees to perform investor relations
services for the Company which are ordinarily and customarily performed by an
investor relations firm on behalf of a corporate client. These services
include, but are not limited to, (a) review of the non-financial portions of
quarterly and annual reports sent to securityholders by the Company,
exclusive of any current, quarterly or annual reports filed with U.S.
Securities and Exchange Commission and/or other regulatory agencies; (b)
drafting and distribution of financial and general press releases; (c)
drafting of a corporate profile for distribution to the Company's
shareholders and the public; and (d) introduction of the Company to the
financial brokerage community.
2. NON-EXCLUSIVE RELATIONSHIP, NO GUARANTEE. Venture Catalyst will act
as a non-exclusive agent of the Company and shall use its best efforts in the
performance of its services described above. Nothing in this Agreement shall
be construed as limiting Venture Catalyst's right to represent other clients,
except that Venture Catalyst agrees not to represent any other person or
entity which is in direct competition with the Company unless Venture
Catalyst first obtains the Company's written consent, which shall not be
unreasonably withheld.
3. FEES. The Company shall pay to Venture Catalyst for its services a
monthly fee of $5,000 per month. The initial monthly payment shall be due
upon your execution of this Agreement; thereafter, the monthly fee shall be
due and payable on or before the first day of each month.
4. EXPENSES. In addition to any fees that may be payable hereunder, the
Company agrees, from time to time upon request, to reimburse Venture Catalyst
for all reasonable out of pocket expenses incurred by it in the performance
of services on behalf of the Company. Such out of pocket expenses shall
include, but are not limited to, costs of long-distance telephone charges,
facsimile services, mileage/travel, messenger services, printing, copying,
postage, and other such ancillary services. It is understood by Venture
Catalyst, however, that any single expense in excess of $200.00 will be
approved, in advance by the Company in writing. Any disputed
<PAGE>
Mr. Stephen Brown
Entertainment Blvd.
July 30, 199
Page 2
expense must be made known to Venture Catalyst in writing within 5 days of
receipt. Out of pocket expenses will be billed on or about the fifteenth of
each month and will be due and payable with 10 days of receipt.
5. EQUITY PARTICIPATION. As an inducement for Venture Catalyst to enter
into this Agreement, the Company agrees to grant to Inland Entertainment
Corporation or its successor or designatee within 5 business days of the date
of this Agreement an option (the "Option") to purchase 50,000 shares of the
Company's common stock (the "Shares") at an exercise price of $6.00 per share.
Such number of shares of common stock and the related exercise price shall be
subject to customary protection adjustment provisions for the optionee. The
Option shall be immediately exercisable in whole or in part and shall expire
on August 2, 2002. Termination of Venture Catalyst's engagement hereunder
shall not effect the Option or the provisions of this Section 5 which shall
survive such termination. To the extent legally permissible, the Company
shall register the Shares on a registration statement on SEC Form S-8 or its
successor form. If not legally permissible, the Company shall include the
Shares with any of the Company's securities it determines to register for its
own account at any time, subject only, in an underwritten public offering, to
such customary limitations which such underwriter may impose based upon its
determination that marketing factors require a limitation on the number of
shares to be underwritten (the "Piggy Back Rights"). The Piggy Back Rights
shall not apply from time to time, if, at the time such holder desires to
sell any of the Shares, the holder of the Shares (together with its
affiliates) is able to sell all such Shares remaining pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended. The Piggy Back
Rights shall continue until all the Shares are registered and sold.
6. TERMINATION OF THE ENGAGEMENT. Venture Catalyst's engagement
hereunder may be terminated by either the Company or Venture Catalyst at any
time, with or without cause, upon written advice to that effect to the other
party; PROVIDED, HOWEVER, that Venture Catalyst will be entitled to (a) its
full fee for the month of August 1999 under Section 3 hereof regardless of
when this Agreement is terminated if terminated by the Company; (b) its
pro-rated fee for (i) months after August 1999 and (ii) if terminated during
the month of August 1999 by Venture Catalyst, August 1999; and PROVIDED
FURTHER, that the provisions of this Section 6 and Sections 4, 5 and 7 hereof
shall survive such termination.
7. INDEMNITY.
(a) INDEMNIFICATION BY THE COMPANY. In connection with Venture
Catalyst's engagement hereunder, including modifications of future additions
to this engagement and the related activities prior to this date, the Company
agrees that it will indemnify, hold harmless and defend Venture Catalyst and
its affiliates, any director, officer, agent or employee of Venture Catalyst
or any of its affiliates and each other person, if any, controlling Venture
Catalyst or any of its affiliates and each of their successors and assigns
(collectively, the "VC Group") against and in respect of any and all losses,
damages, claims, obligations, demands, actions, suits, proceedings,
assessments, liabilities, judgments, recoveries and deficiencies, costs and
expenses (including, without limitation, reasonable attorneys' fees and costs
and expenses incurred in investigating, preparing, defending against or
prosecuting any litigation, claim, proceeding or demand), all on an after-tax
basis, less any amounts actually paid as insurance reimbursement, of any kind
or character (collectively, a "Loss"), (i) related to, arising out of or
result from (A) oral or written information provided by the Company, the
Company's employees or the Company's other agents, for use by Venture
Catalyst in connection with Venture Catalyst's performance of services under
this Agreement; (B) other action or failure to act by the Company, the
Company's employees or the Company's other agents or by Venture Catalyst at
the Company's request or with the Company's consent or (C)
<PAGE>
Mr. Stephen Brown
Entertainment Blvd.
July 30, 1999
Page 3
any breach of, or failure by the Company to fully perform, or any inaccuracy
in, any of the representations, warranties, covenants or agreements of the
Company in this Agreement or (ii) otherwise related to or arising out of the
engagement of Venture Catalyst pursuant to this Agreement or any transaction
or conduct in connection therewith except that this clause (ii) and clause
(i)(B) relating to actions by Venture Catalyst, shall not apply with respect
to any losses that are finally judicially determined to have resulted
primarily from Venture Catalyst's bad faith or gross negligence.
(b) NOTICE OF CLAIM. Whenever Venture Catalyst learns of or
discovers any matter which may give rise to a claim for indemnification (the
"Claim") against the Company under this Section 7 (the "Indemnity Obligor"),
as the indemnified party (the "Indemnified Party"), shall give notice to the
Indemnity Obligor of the Claim. With respect to Claims which are the subject
of actions, suits, or proceedings threatened or asserted in writing by any
third party (a "Third Party Claim"), the Indemnified Party shall, within 15
days following receipt of such Third Party Claim, promptly notify the
Indemnity Obligor in writing of any Claim for recovery, specifying in
reasonable detail the nature of the Loss and the amount of the liability
estimated to arise therefrom. If the Indemnified Party does not so notify the
Indemnity Obligor within 15 days of its discovery of a Third Party Claim,
such Claim shall be barred only to the extent that the Indemnity Obligor is
prejudiced by such failure to notify. The Indemnified Party shall provide to
the Indemnity Obligor as promptly as practicable thereafter all information
and documentation reasonably requested by the Indemnity Obligor to verify the
Claim asserted.
(c) DEFENSE. If the facts relating to a Loss arise out a Third Party
Claim, or if there is any claim against a third party available by virtue of
the circumstances of the Loss, the Indemnity Obligor shall, by giving written
notice to the Indemnified Party within 15 days following its receipt of the
notice of such claim, assume the defense or the prosecution thereof,
including the employment of counsel or accountants, reasonably satisfactory
to the Indemnified Party, at its cost and expense; PROVIDED, HOWEVER that
during the interim the Indemnified Party shall use its best efforts to take
all action (not including settlement) reasonably necessary to protect against
further damage or loss with respect to the Loss. The Indemnified Party shall
have the right to employ counsel separate from counsel employed by the
Indemnity Obligor in any such action and to participate therein, but the fees
and expenses of such counsel shall be at the Indemnified Party's own expense,
unless (a) the employment thereof has been specifically authorized by the
Indemnity Obligor, (b) such Indemnified Party has been advised by counsel
reasonably satisfactory to the Indemnity Obligor that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Indemnity Obligor and in the reasonable judgment of
such counsel it is advisable for such Indemnified Party to employ separate
counsel, or (c) the Indemnity Obligor has failed to assume the defense of such
action and employ counsel reasonably satisfactory to the Indemnified Party.
Whether or not the Indemnity Obligor defends or prosecutes such claim, all
the parties hereto shall cooperate in the defense or prosecution thereof and
shall furnish such records, information and testimony and shall attend such
conferences, discovery proceedings and trial as may be reasonably requested
in connection therewith. The Indemnity Obligor shall not be liable for any
settlement of any such claim effected without its prior written consent. In
the event of payment by the Indemnity Obligor to the Indemnified Party in
connection with any Loss arising out of a Third Party Claim, the Indemnity
Obligor shall be subrogated to and shall stand in the place of the
Indemnified Party as to any events or circumstances in respect of which the
Indemnified Party may have any right or claim against such third party
relating to such indemnified matter. The Indemnified Party shall cooperate
with the Indemnity Obligor in prosecuting any subrogated claim. The
<PAGE>
Mr. Stephen Brown
Entertainment Blvd.
July 30, 1999
Page 4
Indemnity Obligor will take no action in connection with any claim that would
adversely affect the Indemnified Party without the consent of the Indemnified
Party.
(d) DURATION OF THE COMPANY'S OBLIGATIONS. The Indemnity Obligor's
indemnification obligations under this Agreement shall survive the
termination of this Agreement.
8. ACKNOWLEDGMENTS AND REPRESENTATIONS.
(a) The Company recognizes and confirms that in performing its
duties pursuant to this Agreement, Venture Catalyst will be using and relying
upon data, material and other information furnished by the Company, its
employees and representatives (the "Information"). The Company hereby agrees
and represents that all Information furnished to Venture Catalyst in
connection with this Agreement shall be accurate and complete in all material
respects at the time furnished, and that if such Information, in whole or
part, becomes materially inaccurate, misleading or incomplete during the term
of Venture Catalyst's engagement hereunder, the Company shall so advise
Venture Catalyst in writing and correct any such inaccuracy or omission.
Venture Catalyst assumes no responsibility for the accuracy and completeness
of such Information. In rendering its services hereunder, Venture Catalyst
shall be entitled to use and rely upon the Information without independent
verification thereof. To the extent consistent with legal requirements, all
Information, unless publicly available or otherwise available to Venture
Catalyst without restriction or breach of any confidentiality agreement, will
be held by Venture Catalyst in confidence and will not be disclosed to anyone
other than Venture Catalyst's agents and advisors without the Company's prior
written approval or used for any purpose other than those referred to in
this Agreement.
(b) The Company understands and agrees that in furnishing the
Company with advice and other services as provided in this Agreement, neither
Venture Catalyst nor any officer, director or agent thereof shall be liable
to the Company, its affiliates or its creditors for errors of judgment or
anything except bad faith or gross negligence in the performance of its
duties under the terms of this Agreement.
(c) The Company acknowledges that Venture Catalyst has been retained
solely as an advisor to the Company, and not as an advisor to or agent of any
other person, and that the Company's engagement of Venture Catalyst is not
intended to confer rights upon any persons not a party hereto (including
shareholders, employees or creditors of the Company) as against Venture
Catalyst, Venture Catalyst's affiliates or their respective directors,
officers, agents and employees.
(d) The Company represents and warrants to Venture Catalyst that it
will not cause, or knowingly permit(a) any action to be taken which violates
or (b) a failure to act, the effect of which violates, any federal or state
securities law.
9. NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand or
fax or mailed by overnight courier or first class certified or registered
mail, return receipt requested, postage prepaid and proper addressed as
follows:
If to Venture Catalyst, at Venture Catalyst.com, a Division of
Inland Entertainment Corporation, 3420 Ocean Park Boulevard, Suite 3020,
Santa Monica, California 90405, Attention: President. If to the
<PAGE>
Mr. Stephen Brown
Entertainment Blvd.
July 30, 1999
Page 5
Company, at Entertainment Blvd., 4052 Del Ray Avenue, Suite 108, Maria del
Rey, California 90292, Attention: Chief Executive Officer.
Any party may change its address for purposes of this provision by
giving the other party written notice of the new address in the manner set
forth above. Notice will be conclusively deemed to have been given when
personally delivered, or if given by mail, on the second day after being sent
by overnight courier or on the third day after being sent by first class,
registered or certified mail, or if given by fax, when confirmation of
transmission is indicated by the sender's fax machine.
10. ARBITRATION. All controversies, disputes or claims arising out of
or relating to this Agreement shall be resolved by binding arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. All arbitrators shall possess
such experience in, and knowledge of, the subject area of the controversy or
claim so as to qualify as an "expert" with respect to such subject matter.
The governing law for the purposes of any arbitration arising hereunder shall
be as set forth in Section 11 hereof. The prevailing party shall be entitled
to receive its reasonable attorney's fees and all costs relating to the
arbitration. Any award rendered by arbitration shall be final and binding on
the parties, and judgment thereon may be entered in any court of competent
jurisdiction.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California, without regard to the
conflicts of laws provisions thereof, and may not be amended or modified
except in writing signed by both parties.
12. SUCCESSORS. This Agreement and all rights and obligations
thereunder shall be binding upon and inure to the benefit of each party's
successors, but may not be assigned without the prior written consent of the
other party, which shall not be unreasonably withheld or delayed.
13. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected thereby and,
to this extent, the provisions of this Agreement shall be deemed severable.
14. AUTHORIZATION. The Company represents and warrants that it has all
requisite power and authority, and has received all necessary authorizations,
to enter into and carry out the terms and provisions of this Agreement.
Please confirm that the foregoing correctly sets forth our
Agreement by signing the enclosed letter in the space provided and returning
them to us for execution, whereupon we will send you a fully executed
original letter which shall constitute a binding Agreement as of the date
first above written. We look forward to working with you on this assignment.
Very truly yours,
VENTURE CATALYST.COM,
a Division of Inland Entertainment Corporation
<PAGE>
Mr. Stephen Brown
Entertainment Blvd.
July 30, 1999
Page 6
By: /s/ Sanjay Sabnani
-------------------
Sanjay Sabnani
President
Agreed to and Accepted as of the date above.
ENTERTAINMENT BLVD.
By: /s/ Stephen Brown
---------------------------
Stephen Brown
Chief Executive Officer
<PAGE>
Exhibit 10.10
INTERNET COMMERCE PARTNER AGREEMENT
This Internet Commerce Partner Agreement is entered into as of the 23rd
day of June, 1999 ("Effective Date") between Radiant System, Inc.
("Radiant"), with its principal place of business at 3925 Brookside Parkway,
Alpharetta, Georgia 30022 and Entertainment Boulevard, Inc. ("Commerce
Partner") with its principal place of business at 4052 Del Rey Ave., #108
Marina Del Rey, CA 90292.
NOW THEREFORE, for and in consideration of the mutual premises,
warranties and representations set forth in this Agreement and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1.0 BACKGROUND.
1.1 Radiant is the developer and owner of an internet transaction system
commonly referred to as the Radiant Internet Transaction System ("RITS").
Radiant is also the provider of an internet movie transaction service (the
"Radiant Service") which, through the use of RITS, enables end users of
Radiant's Theatre Management System ("Exhibitors") to offer movie tickets,
theatre concessions, and entertainment-oriented merchandise to consumers
over the internet.
1.2 Commerce Partner hosts and maintains an internet service through
which information is provided to internet consumers ("Internet Service").
Commerce Partner has agreed to provide to consumers via the Internet Service
certain information concerning the Exhibitors' show times, ticket prices,
and theatre information, all in accordance with the terms and conditions of
this Agreement and any exhibits attached hereto ("Exhibits"), which Exhibits
are incorporated herein by this reference.
2.0 LICENSE RIGHTS; COMMERCE PARTNER OBLIGATIONS.
2.1 Subject to the terms and conditions of this Agreement, Radiant
hereby grants to Commerce Partner:
(i) a non-exclusive, non-assignable, non-transferable and limited
right and license to connect Commerce Partner's servers to the RITS server for
the sole purpose of utilizing the Radiant Service to distribute "Content" (as
defined below) to internet consumers ("Consumers") via the Internet Service.
(ii) integrate the Content on Commerce Partner's website and
distribute the Content to Consumers via the Internet Service. For purposes
hereof, the term "Content" shall mean all information, materials and data
provided by Radiant to Commerce Partner for distribution on the Internet
Service, including, but not limited to, Exhibitor show times, ticket prices
and theatre information. Commerce Partner shall not modify or alter the
Content without the prior consent of Radiant, provided, however, that
Commerce Partner shall retain the right to adapt or otherwise alter the
design and look of the Internet Service and the placement of the Content on
the Internet Service.
2.2 Commerce Partner agrees not resell, assign, sublicense, lease,
distribute or otherwise transfer to any third party its right to connect to
RITS hereunder or its right to use and distribute the Content hereunder.
Commerce Partner further agrees not to sell, lease, distribute or otherwise
transfer the Content to any third party.
2.3 Radiant will allow Commerce Partner, at Commerce Partner's expense,
to access Content electronically via satellite or terrestrial Wide Area
Network or dial-up technology. Radiant will correct any errors contained in
the Content of which Radiant becomes aware and Commerce Partner will promptly
incorporate the error corrections into the Content.
2.4 Commerce Partner will be responsible for all telecommunication
charges associated with accessing the Content under Section 2.3 and the
provision of the Content to Consumer via the Service. Commerce Partner
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will also be responsible for and shall directly pay all taxes, including, but
not limited to, all excise, use, sales and value added taxes that may arise
from or be levied in connection with the Internet Service.
3.0 RITS IMPLEMENTATION AND ROLLOUT
3.1 Radiant will implement the Radiant Service on the Commerce Partner
website in accordance with the "Implementation Plan" set forth in Exhibit A.
In addition to implementation schedules and project planning, the
Implementation Plan shall describe, without limitation:
(i) The costs associated with the implementation of RITS and how
such costs are to be allocated between the parties;
(ii) The service charge revenues to be charged to Consumers and
how such revenues are to be allocated between the parties;
(iii) The term of this Agreement and any specific provisions
concerning termination (such provisions to be additional to the termination
provisions set forth in Section 9 herein); and
(iv) Any other terms and conditions applicable to the Radiant
Service or the relationship between the parties.
In the event of a conflict between the terms of Exhibit A and this Agreement,
the terms of Exhibit A shall prevail.
3.2 Radiant and Commerce Partner will rollout the Radiant Service in
accordance with the "Rollout Plan" set forth in Exhibit B.
4.0 SUPPORT SERVICES Support Services will be provided for the Radiant
Service in accordance with the "Customer Service Metrics" set forth in
Exhibit B.
5.0 OWNERSHIP
5.1 Commerce Partner acknowledges and agrees that, except for Commerce
Partner's license described in this Agreement, Commerce Partner has no right,
title and interest in RITS or the Radiant Service or any documentation
related thereto, including all worldwide copyrights, trade secrets, patent
rights and any other proprietary information and confidential information
rights therein. Commerce Partner further acknowledges and agrees that, except
for Commerce Partner's license described in this Agreement, Commerce Partner
has no right, title and interest in the Content.
5.2 Radiant and/or Exhibitors shall own all right, title and interest
in all information including, without limitation, names, e-mail addresses,
purchase information and other demographic information provided by Consumers
via the Radiant Service ("Consumer Data"). Notwithstanding the foregoing, and
subject to Consumer consent and applicable rules and regulations, Commerce
Partner may use Consumer Data in the course of its business.
6.0 WARRANTIES
6.1 RADIANT DISCLAIMS ALL WARRANTIES OF ANY NATURE WITH RESPECT TO THE
RADIANT SERVICE, RITS AND THE CONTENT, WHETHER ORAL OR WRITTEN, EXPRESS OR
IMPLIED, PARTICULARLY INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. RADIANT DOES NOT WARRANT THAT THE RADIANT
SERVICE, THE CONTENT OR COMMERCE PARTNER'S CONNECTION TO THE RITS SERVER WILL
BE UNINTERRUPTED OR ERROR FREE.
6.2 Commerce Partner hereby warrants to Radiant that:
(i) it has all rights necessary to enter into this Agreement;
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(ii) its entry into this Agreement does not violate any agreement
with any other party;
(iii) its performance under this Agreement will conform to
applicable laws and government rules and regulations; and
(iv) the Internet Service does not infringe the patent, copyright
or other proprietary rights of any third party.
6.3 Commerce Partner shall be solely responsible for and shall hold
harmless and indemnify Radiant from any claims, demands, liabilities and
judgments, including reasonable attorneys' fees and expenses, related to or
arising from the Internet Service, any unauthorized modification or
distribution of the Content made by Commerce Partner or any breach of the
warranties set forth in Section 6.2. The indemnity provided herein is
conditioned upon (i) Radiant providing Commerce Partner with prompt written
notice of any such claim; (ii) Radiant providing Commerce Partner the right
to control the defense of or settle such claim; and (iii) Radiant providing
Commerce Partner, at Commerce Partner's expense, with the assistance and
information that is reasonably necessary for Commerce Partner to defend or
settle any such claim.
7.0 LIMITATION OF LIABILITY
7.1 IN NO EVENT SHALL RADIANT, ITS AFFILIATES, OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, SHAREHOLDERS, AGENTS OR REPRESENTATIVES, BE
LIABLE TO COMMERCE PARTNER FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
EXEMPLARY DAMAGES OF ANY NATURE, OR LOSS OF GOODWILL IN ANY WAY RELATING TO
THIS AGREEMENT OR RESULTING FROM THE USE OF OR INABILITY TO USE THE RADIANT
SERVICE, RITS OR THE CONTENT, EVEN IF RADIANT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES OCCURRING.
7.2 IN NO EVENT SHALL RADIANT'S TOTAL LIABILITY TO COMMERCE PARTNER
HEREUNDER, REGARDLESS OF THE CAUSE OF ACTION, EVER EXCEED THE TOTAL SERVICE
CHARGE REVENUES (AS DESCRIBED IN SECTION 3 AND EXHIBIT A) RECEIVED BY RADIANT
IN CONNECTION WITH THIS AGREEMENT.
8.0 NONDISCLOSURE AND CONFIDENTIALITY.
8.1 Each party may disclose to the other party certain Trade Secrets
and Confidential Information of such party or its affiliates, customers
(including Exhibitors) or vendors. For purposes of this Agreement, "Trade
Secrets" means information, without regard to form, which: (a) derives
economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy;
"Confidential Information" means information, other than Trade Secrets, that
is of value to its owner and is treated as confidential; "Proprietary
Information" means Trade Secrets and Confidential Information; "Owner" refers
to the party disclosing Proprietary Information hereunder, whether such party
is Radiant or Commerce Partner and whether such disclosure is directly from
Owner or through Owner's employees or agents; and "Recipient" refers to the
party receiving any Proprietary Information hereunder, whether such party is
Radiant or Commerce Partner and whether such disclosure is received directly
or through Recipient's employees or agents.
8.2 Recipient agrees to hold the Proprietary Information disclosed by
Owner in strictest confidence and not to, directly or indirectly, copy,
reproduce, distribute, manufacture, duplicate, reveal, report, publish,
disclose, cause to be disclosed, or otherwise transfer the Proprietary
Information disclosed by Owner to any third party, or utilize the Proprietary
Information disclosed by Owner for any purpose whatsoever other than as
expressly contemplated by this Agreement. Commerce Partner acknowledges that
Proprietary Information shall include any proprietary and confidential
information of Exhibitors which may be provided by Radiant to Commerce
Partner, and Commerce Partner agrees to treat such information as Proprietary
Information in accordance with the terms of this Agreement. With regard to
the Trade Secrets, the obligations in this section shall continue for so long
as such information constitutes a trade secret under applicable law. With
regard to the Confidential Information, the obligations in this section shall
continue for the term of this Agreement and for a period of five years
thereafter. The foregoing obligations shall not apply if and to the extent
that: (a) the information communicated was already known
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to Recipient, without obligations to keep such information confidential, at
the time of Recipient's receipt from Owner, as evidenced by documents in the
possession of Recipient prepared or received prior to disclosure of such
information; (b) the information communicated was received by Recipient in
good faith from a third party lawfully in possession thereof and having no
obligation to keep such information confidential; (c) the information
communicated was publicly known at the time of Recipient's receipt from Owner
or has become publicly known other than by a breach of this Agreement; or (d)
the information communicated is legally required to be disclosed by court
order.
9.0 TERM AND TERMINATION.
9.1 This Agreement shall be valid as of the Effective Date noted
above and shall continue for the Initial Term specified in Exhibit A. This
Agreement may be terminated as provided in Exhibit A. In addition, either
party may terminate this Agreement at any time upon the giving of written
notice:
(a) in the event that the other party fails to discharge any
obligations or remedy any default under this Agreement for a period
continuing more than ninety (90) days after the aggrieved party shall have
given the other party written notice specifying such failure or default and
that such failure or default continues to exist as of the date upon which the
aggrieved party gives such notice so terminating this Agreement; or
(b) in the event that the other party makes an assignment for the
benefit of creditors, or commences or has commenced against it any proceeding
in bankruptcy, insolvency, or reorganization pursuant to bankruptcy laws or
laws of debtor's moratorium.
9.2 Upon termination of this Agreement for any reason, all rights and
licenses granted by Radiant hereunder to Commerce Partner in this Agreement
shall immediately cease, and Commerce Partner shall immediately return to
Radiant all Radiant property affected by such termination including, but not
limited to, all Proprietary Information of Radiant, together with all copies
thereof. Upon written request from Commerce Partner, Radiant will return to
Commerce Partner all of Commerce Partner's Proprietary Information that
Radiant may have in its possession.
9.3 Upon termination or expiration of this Agreement, the sections
titled "Nondisclosure and Confidentiality", "Limitation of Liability",
"Warranties", "Dispute Resolution -- Arbitration" and "Governing Law" and
other sections of this Agreement and its Exhibits that expressly provide they
will survive any termination of this Agreement shall continue and survive in
full force and effect.
10.0 DISPUTE RESOLUTION-ARBITRATION. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, shall be settled by
final and binding arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules. The arbitration shall
take place in or about Atlanta, Georgia. Judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
The arbitrators shall apply Georgia law, without regard to its rules of
conflict of law. Notwithstanding the foregoing, the parties may apply to any
court of competent jurisdiction for a temporary restraining order,
preliminary injunction, or other interim or conservatory relief, as
necessary, without breach of this Agreement and without any arbidgment of the
powers of the arbitrator(s).
11.0 INDEPENDENT CONTRACTOR. This Agreement shall not be construed to create
any employment relationship, partnership, joint venture or agency
relationship or to authorize any party to enter into any commitment or
agreement binding on the other party. Commerce Partner understands and agrees
that Radiant's relationship with Exhibitors is that of independent contractor
and that neither this Agreement nor any agreement between Radiant and the
Exhibitors creates any employment relationship, partnership, joint venture or
agency relationship between Radiant and the Exhibitors.
12.0 FORCE MAJEURE Neither party will be liable for delay or default in the
performance of its obligations under this Agreement if such delay or default
is caused by conditions beyond its reasonable control, including, but not
limited to, fire, flood, accident, earthquakes, telecommunications line
failures, storm, acts of war, riot, government interference, strikes and/or
walk-outs.
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13.0 MARKETING. Commerce Partner agrees that Radiant may reference Commerce
Partner's execution of this Agreement and its status as a provider of
internet services to Radiant in product literature, advertisements, articles,
press releases, marketing literature, presentations and the like.
14.0 BINDING EFFECT. This Agreement shall be binding upon and enure to the
benefit of the parties, their legal representatives, permitted transferees,
successors, and assigns as permitted by this Agreement.
15.0 ASSIGNMENT. Commerce Partner may not assign this Agreement or any rights
and obligations hereunder without the prior written consent of Radiant.
Radiant may freely assign this Agreement to its successors in interest.
16.0 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to its rules
regarding conflict of laws.
17.0 MISCELLANEOUS.
17.1 No delay or failure in exercising any right hereunder and no
partial or single exercise thereof shall be deemed to constitute a waiver of
such right or any other rights hereunder. No consent to a breach of any
express or implied term of this Agreement shall constitute a consent to any
prior or subsequent breach. If any provision hereof is declared invalid by a
court of competent jurisdiction, such provision shall be ineffective only to
the extent of such invalidity, so that the remainder of that provision and
all remaining provisions of this Agreement shall be valid and enforceable to
the fullest extent permitted by applicable law. All notices required to be
given hereunder shall be given in writing and shall be delivered either by
hand, by certified mail with proper postage affixed thereto, or by facsimile
(with confirmation copy sent by registered mail) addressed to the signatory
at the address set forth above, or such other person and address as may be
designated from time to time in writing. All such communications shall be
deemed received by the other party upon actual delivery. No modifications,
additions, or amendments to this Agreement shall be effective unless made in
writing as an addendum to this Agreement and signed by duly authorized
representatives of the parties.
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17.2 Commerce Partner acknowledges that it has read this Agreement,
understands this agreement, and agrees to be bound by its terms and
conditions. Further Commerce Partner agrees that this Agreement, together
with any Exhibits and other applicable Radiant agreements referencing this
Agreement and expressly made a part hereof that are duly signed by the
parties will be the complete and exclusive statement of the agreement between
the parties, superseding all proposals or prior agreements, oral or written,
and all other communications between the parties relating to the subject
matter of this Agreement.
ACCEPTED BY:
"RADIANT" "COMMERCE PARTNER"
RADIANT SYSTEMS, INC. /s/ Entertainment Boulevard, Inc.
---------------------------------
By: /s/ E. Gorven By: /s/ Stephen Brown
------------------------- -----------------------------
(Authorized Signature) (Authorized Signature)
Name: Erez Gorven Name: Stephen Brown
------------------------- -------------------------
Title: CEO Title: CEO
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EXHIBIT A
IMPLEMENTATION PLAN
1.0 RITS IMPLEMENTATION
a. Radiant will provide Commerce Partner with the following, at no cost
to Commerce Partner:
(i) development resources to integrate the Radiant Service with
Commerce Partner's website;
(ii) access to the ticket inventory of Exhibitors who have licenses to
use RITS.
b. Commerce Partner will provided Radiant with the following, at no cost
to Radiant:
(i) resources to assist Radiant's developers with implementing the
Radiant Service on the Commerce Partner's website.
(ii) Commerce Partner website-based content management and consumer
promotional efforts to direct consumers to use Radiant's internet movie
ticketing services.
2.0 SERVICE CHARGE FEES AND PAYMENTS TO COMMERCE PARTNER
a. Radiant and Exhibitors will charge a minimum $1.00 service charge per
ticket, on average, across the total volume of tickets, to Consumers.
Radiant and Exhibitors will set the service charges for the Radiant
Service by region. Under circumstances of competitive necessity,
Radiant and Exhibitors will mutually agree to an average service charge
of less than $1.00 per ticket.
b. For Commerce Partner website purchases, if Commerce Partner commits to
the use of RITS exclusively as its movie ticketing system for all Commerce
Partner online properties for the term of this Agreement, Commerce Partner
will receive 10% of service charge revenues. Otherwise, Commerce Partner
will receive 5% of the service charge revenues generated from Commerce
Partner website sales.
As of the Effective Date, Commerce Partner AGREES/DOES NOT AGREE (CIRCLE
AND INITIAL SELECTED OPTION) to use RITS as its sole internet movie
ticketing system for all Commerce Partner online properties.
3.0 PROMOTIONAL ACTIVITIES
a. Radiant and Commerce Partner will issue a joint press release upon the
execution of this Agreement.
4.0 USE OF THIRD PARTY SHOWTIME PROVIDERS
a. If Commerce Partner utilizes a third party movie show time provider,
Radiant will make commercially reasonable efforts to work with that
third party as needed to complete the Radiant Service. Radiant reserves
the right, however, to provide movie show times to Commerce Partner
directly from the Exhibitors connected by the Radiant server farm.
5.0 ADDITION OF OTHER TRANSACTION SERVICES
a. Radiant and Commerce Partner will expand and promote the Radiant
Service offering to include internet orderings for theater concessions
and movie-related merchandise when Radiant offers these additional
services to Commerce Partner.
6.0 TERM OF AGREEMENT
a. Subject to Section 9 of the Agreement, this Agreement shall remain in
effect until December 31, 2003 ("Initial Term"). The Agreement will
automatically renew thereafter for successive annual terms unless either
party provides written termination notice to the other party at least one
hundred and eighty (180) days prior to the expiration of the Initial Term
or any successive renewal term.
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EXHIBIT B
ROLL-OUT PLAN AND SERVICE PROCEDURES
II-OUT PLAN; PERFORMANCE METRICS
PHASE I
- -------
The initial phase of the test will involve integrating the capability to
purchase tickets through the Commerce Partner website for movies being played
at a single, multi-screen multiplex. Users will be able to navigate to the
ticket purchasing capability from the associated pages on the movie show
times portion of the Commerce Partner website. All pages of the ticket
purchasing process will reside on the Radiant RITS servers.
Radiant and Commerce Partner will jointly determine the Exhibitor
organization(s) that will be the partner(s) for this test.
Radiant and Commerce Partner will jointly develop the Internet Service user
interface and navigational experience. Radiant will have responsibility for
development of the interface between the Commerce Partner web site and the
theatre management system.
The Radiant Service will be deemed to be operating successfully if the
following capabilities are available to Consumers and if the performance
standards specified below are met:
RADIANT SERVICE CREDIT CARD ACCEPTANCE AND RESPONSE Consumers must be
able to enter their credit card information, including credit card type,
credit card number, expiration date, and billing address. After a Consumer
submits this information, the transaction system must perform real-time
verification and fraud checking and then deliver a page to the User
indicating successful completion of the transaction, or in the case of
unsuccessful completion of the transaction, the reason for denial.
PURCHASE FULFILLMENT Radiant and the Exhibitor must demonstrate that, given
successful completion of the online transaction, results of the transaction
can be satisfactorily fulfilled. The Exhibitor must have a "will call" box
office window or ticketing kiosk(s) to receive the credit card of Consumers
who have purchased on-line tickets through the Commerce Partner web site,
confirm the pre-existing transaction, and deliver the ticket(s) to the
Consumer.
COMPREHENSIVE SUPPORT INFRASTRUCTURE Commerce Partner, Radiant, and the
Exhibitor will ensure that customer service processes and resources are in
place to support this system. Support will be available to users of the
service 24 hours a day, 7 days a week. The standard of service must be at
least as high as that specified in the performance metrics below.
Each of the above standards, as well as the performance standards below, must
be satisfied for 14 consecutive days before the Commerce Partner will agree
to begin to implement Phase II of the roll-out plan.
PHASE II
- --------
The purpose of this phase of the rollout schedule is to test the Radiant
Service under increased stress to ensure that the hardware, software and
bandwidth that comprise the Radiant Service can scale to support significant
numbers of Consumers. The goal of this phase is to increase the number of
theatres and screens being supported by the Radiant Service. The parties
will mutually agree to a Designated Metropolitan Area (DMA) that they would
like to use to pilot the Radiant Service.
CUSTOMER SERVICE METRICS:
Radiant and each Exhibitor will be responsible for servicing Consumers that
use the Radiant Service to purchase movie tickets online through the Radiant
Service. The following metrics must be satisfied:
CONSUMER SUPPORT VIA TELEPHONE Exhibitors shall provide support services
directly to Consumers in connection with such Consumers' use of the Service.
Such support services shall be provided at the Exhibitor's theatre and via a
support line established by Exhibitor. The number for the support line shall
be prominently displayed on a "Customer Service Page" linked to each service
transaction page.
CONSUMER SUPPORT VIA ELECTRONIC MAIL Radiant or Radiant's designated support
service provider shall provide support services to Consumers in connection
with such Consumers' use of the Radiant Service by means of an electronic
mail service that will provide an automatic response indicating receipt of the
Consumer electronic mail query. Radiant's support staff or Radiant's
designated support service provider will send a targeted follow-up response
to the Consumer within 48 hours of the
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receipt of the initial query. The link to electronic mail support shall be
prominently displayed on a "Customer Service Page" linked to each service
transaction page.
CLIENT SUPPORT Radiant will provide Exhibitors with support services via its
24 x 7 toll-free support line to assist Exhibitors with technical issues
concerning the Radiant Service. All calls made to the support line shall be
responded to and resolved by Radiant in accordance with its then-current
support procedures. Commerce Partner shall not direct Consumers to call
Radiant directly for support services, it being understood that the
obligation to provide support services to Consumers is the sole
responsibility of Exhibitors.
PERFORMANCE METRICS
The Radiant Service must meet the following performance metrics:
RESPONSE TIME The Radiant Service must respond to each Commerce Partner
server request, on average, no longer than one second after the request is
made, as measured hourly each hour of the day.
DOWNTIME While linked to the Commerce Partner site, the Radiant Service
server farm connectivity to Commerce Partner server farm must be operational
at least 99.0% of each calendar month, excluding any downtime scheduled by
Radiant for routine maintenance purposes; provided that, Radiant shall
provide Commerce Partner no less than 48 hours prior written notice of any
such routine maintenance that shall cause the Radiant Service to be
inoperable for greater than 30 minutes on any one occasion.
FULFILLMENT 99.5% of all tickets ordered by a Consumer using the Radiant
Service on the Commerce Partner web site will be fulfilled successfully when
the Consumer seeks to acquire her ticket through a ticket window or a kiosk at
the theatre for which tickets were purchased, provided that all information
supplied by the Consumer is accurate and complete, as measured on a monthly
basis.
TRANSACTIONS PER SECOND The Radiant Service will be capable of handling ten
transactions per second.
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BOLT/EBLD AGREEMENT
This is an agreement dated as of July 26, 1999, between Entertainment
Boulevard, Inc., a Nevada corporation located at 4052 Del Rey Avenue Suite 108,
Marina Del Rey, CA 90292 ("EBLD"), and Bolt Media, Inc. ("Bolt"), a ___________
_________________ corporation located at 304 Hudson, 7th Floor N., New York, NY
10013. In consideration of the mutual promises and undertakings stated herein
and Exhibit A attached hereto and made a part hereof, the parties hereto agree
as follows (the "Agreement"):
1. TRADEMARKS
1.1 BOLT IDENTITIES ON EBLD SITE. Bolt hereby grants to EBLD a
non-exclusive, cost-free license (without the right of sublicense) throughout
the Term of this Agreement to use the Bolt name and logo and other proprietary
identities of Bolt (collectively, "Bolt Mark(s)") solely in connection with the
EBLD multimedia player (the "Player") which is displayed on Bolt (defined
below), as stated in Exhibit A.
1.2 EBLD IDENTITIES ON BOLT SITE. EBLD hereby grants a non-exclusive
cost-free license (without the right of sublicense) throughout the Term of this
Agreement to Bolt to use the EBLD name and logo and other proprietary identities
of EBLD (collectively, "EBLD Mark(s)") in connection with Bolt's website called
"Bolt.com" ("Bolt.com") currently located at http://bolt.com, solely as stated
in Exhibit A.
2. CONTENT
LICENSE. EBLD hereby grants a non-exclusive cost-free license (without the right
of sublicense) throughout the Term of this Agreement to Bolt to use the
certain content owned and/or controlled by EBLD, as described on
Exhibit A (collectively, "EBLD Content") in connection with Bolt,
solely as stated on Exhibit A. There is no exclusivity granted to
either party under the terms and conditions of this contract.
2.2 CREATION OF CONTENT. Each party will be responsible for the
creation, development and publication of its respective Content. The parties
will consult regularly regarding creation of mutually beneficial Content.
Neither party will use the Content of each other's site in any way whatsoever
without the other party's prior approval.
2.3 QUALITY CONTROL. Each party agrees to maintain the quality of the
content of its site to at least the same level as has existed heretofore. If
either party, in its reasonable discretion, determines that the content of the
other party's site falls below this pre-existing standard of quality and does
not otherwise meet the editorial standards and quality of its own site, that
party will notify the other party to that effect in writing giving specific
details of the failure to meet such standards and the party receiving that
notice will remedy the deficiencies specified in such notice within 30 days
after the date of its receipt of that notice. If, following such 30-day period,
the quality of the applicable site has not sufficiently improved, the party that
gave the original notice may terminate the Agreement effective immediately upon
the receipt by the other party of notice of termination.
2.4 LIMITATION OF RIGHTS. Each party's use of the other party's Marks
and Content, as well as the use of the any links described on Exhibit A, is
strictly limited to the uses stated in this Agreement. Neither party acquires
any rights in or to the other party's Marks and/or the goodwill inherent therein
by this Agreement or otherwise. All rights granted under this Agreement,
including the right to use the other party's Marks or Content, or to link to the
other party's Content shall revert to the granting party upon termination.
3. FINANCIAL
3.1 PRODUCTION EXPENSES. Each party will be solely responsible for its
own expenses incurred in undertaking its rights and responsibilities under this
Agreement and otherwise in operating its website.
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3.2 ADVERTISING
(a) RETAINED RIGHTS. Each party will have the right to
continue to transact advertising and promotional programs for
its own website, to retain all advertising inventory and set
all packaging and pricing for any advertising thereon and to
retain all revenue it receives related thereto. No such
arrangements by a party can allow for any third-party use of
the other party's Marks or Content without the prior written
approval of that other party.
(b) Each party will have the right to transact advertising and
promotional programs within the Player. Bolt will serve the ads
in the Player through Bolt's DART technology and will provide
EBLD with access to the DART technology, only in connection to
the ads served on the Player. Bolt will provide all advertising
unless EBLD transacts advertising within the player. Bolt shall
have the right to refuse to serve ads sold by EBLD, but this
approval will not be unnecessarily withheld. All advertising
revenue will be recorded by Bolt.com in accordance with
generally accepted accounting principles and 50% of the
advertising revenue be paid to EBLD as a content fee according
to the schedule outlined below. For the purposes hereof, the
revenue split for all advertising transacted within the Player
will be as follows: Bolt: 50%, EBLD: 50%.
(c) PAYMENT SCHEDULE. Each party will account to the other and
pay its share of revenue within forty-five (45) days after the
end of each calendar month. Along with such payment, each party
will furnish to the other a written statement reflecting the
following: EBLD will provide Bolt with the number of visitors
to the Player during the applicable month.
(d) AUDITS. EBLD or EBLD's designated representative shall
have the right, at Bolt's usual place of business, during
business hours and on reasonable notice to Bolt (but in no
event more than once annually), to examine and copy (provided
EBLD keeps such copies confidential and uses them solely in
connection with EBLD's audit rights hereunder, in any
proceeding hereunder, or in any necessary business disclosures
to a third party subject to such third party's agreement to
retain such confidentiality) Bolt's books and records to
confirm the accuracy of any such statements not otherwise
deemed accepted. In the event that such audit reveals a
discrepancy in the amounts owed EBLD from what was actually
paid, Bolt shall pay EBLD the amount of such discrepancy. If
such discrepancy is in excess of five percent (5%) of the
amounts actually paid to EBLD, Bolt shall reimburse EBLD for
the cost of such audit. Conversely, Bolt or Bolt's designated
representative shall have the right, at EBLD's usual place of
business, during business hours and on reasonable notice to
EBLD (but in no event more than once annually), to examine and
copy (provided Bolt keeps such copies confidential and uses
them solely in connection with Bolt's audit rights hereunder,
in any proceeding hereunder, or in any necessary business
disclosures to a third party subject to such third party's
agreement to retain such confidentiality) EBLD's books and
records to confirm the accuracy of any such statements not
otherwise deemed accepted. In the event that such audit reveals
a discrepancy in the amounts owed Bolt from what was actually
paid, EBLD shall pay Bolt the amount of such discrepancy. If
such discrepancy is in excess of five percent (5%) of the
amounts actually paid to Bolt, EBLD shall reimburse Bolt for
the cost of such audit.
(e) NO INTERSTITIALS. Neither party will transmit any
so-called "interstitial advertising" to users as they link from
Bolt to the Player or vice-versa.
(f) CUSTOMER DATA. Bolt shall own and retain all right, title
and interest in all names, addresses and other identifying
information of users of Bolt, including, without limitation,
any co-branded pages developed hereunder and EBLD will have no
right to use any such customer data.
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4. APPROVALS
4.1 PRIOR APPROVAL REQUIRED. All uses by either party of the other
party's Marks and Content and links to each other's Content must be submitted to
and approved by the other party prior to their use, with such approval not to be
unreasonably withheld. Failure to so seek and receive prior approval will be
grounds for immediate termination of this Agreement, and such termination right
will not constitute a waiver of any other rights available to a party as a
result thereof.
4.2 NO PUBLICITY WITHOUT CONSENT. Neither party will issue or permit
issuance of any press release regarding the other party or this Agreement
without prior coordination with and approval by the other party.
5. TERM
5.1 TERM. When executed by the parties, this Agreement is effective as
of the date specified above and will continue for six (6) months (the "Term").
The Term shall be automatically renewed for up to three additional six (6) month
increments unless either party notifies the other at least thirty (30) days
prior to the expiration of the then-current Term that it does not wish to renew
the Term of the Agreement.
5.2 EARLY TERMINATION. Each party shall have the right to terminate
this Agreement immediately on notice: (a) upon a breach of any material
obligation hereunder by the other party other than those specified in section
4.1, if such breach is not cured within 30 days following the date the breaching
party receives notice from the non-breaching party describing in reasonable
detail the elements of such breach; (b) in the event the other party becomes
insolvent (I.E., unable to pay its debts in the ordinary course as they come
due); or (c) pursuant to section 4.1 above.
5.3 EVENTS UPON TERMINATION. Upon the expiration or termination of this
Agreement for any reason, both parties shall immediately remove all links to the
other party's Content and website(s) and cease all use of the other party's
Marks and any and all use of any kind whatsoever of the other party's Content.
5.4 SURVIVAL. Sections 2.4, 4.2, 7 and 8 will survive the termination
or expiration of this Agreement.
6. REPRESENTATIONS AND WARRANTIES
Each party to this Agreement represents and warrants to the other that:
(a) such party has all necessary right, power and authority to enter
into this Agreement and to perform the acts required of it hereunder;
(b) the execution of this Agreement by such party and its performance
of its obligations hereunder do not and will not violate any agreement
by which such party is bound; (c) such party has (and will have
throughout the Term) all necessary rights in and to its Marks, content
links and Content described in this Agreement to allow it to make those
indicia and materials available to the other party and users of that
party's website (including, without limitation, the Player) as
contemplated by this Agreement without violating the rights of any
third party; and (d) it has (and will have throughout the Term) all
necessary rights in and to all underlying technology (including both
hardware and software) utilized in connection with its website
(including, without limitation, the Player) and all such underlying
technology does not infringe on any patent, copyright, trademark, trade
secret or other intellectual property or proprietary right of any third
party.
7. INDEMNIFICATION
7.1 MUTUAL INDEMNIFICATION. Each party hereby agrees to indemnify and
hold harmless the other party, its parent and subsidiary companies and
their respective officers, agents, directors, employees and authorized
representatives from and against any costs, losses, liabilities and
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expenses, including court costs, reasonable expenses and reasonable
attorney's fees that any of them may suffer, incur or be subjected to
by reason of any legal action, arbitration or other claim by a third
party arising out of or as a result of a breach of the indemnifying
party's representations and warranties made hereunder, the operations
of the indemnifying party's website (including, without limitation the
Player) as authorized by this Agreement or otherwise, any allegations
that the use of the indemnifying party's Marks, Content, links and/or
content on its website (including, without limitation, the Player)
violates any intellectual property rights of any third party, any
allegation that any content on its website (including, without
limitation, the Player) is defamatory or violates any privacy or
publicity rights of any third party, and/or any of its other
obligations under this Agreement.
7.2 INDEMNIFICATION PROCEDURES. If either party entitled to
indemnification hereunder (an "Indemnified Party") makes an
indemnification request to the other, the Indemnified Party shall
permit the other party (the "Indemnifying Party") to control the
defense, disposition or settlement of the matter at its own expense;
provided that the Indemnifying Party shall not, without the consent of
the Indemnified Party enter into any settlement or agree to any
disposition that imposes an obligation on the Indemnified Party that
is not wholly discharged or dischargeable by the Indemnifying Party,
or imposes any conditions or obligations on the Indemnified Party
other than the payment of monies that are readily measurable for
purposes of determining the monetary indemnification or reimbursement
obligations of Indemnifying Party. The Indemnified Party shall notify
Indemnifying Party promptly of any claim for which Indemnifying Party
is responsible and shall cooperate with Indemnifying Party in every
commercially reasonable way to facilitate defense of any such claim;
provided that the Indemnified Party's failure to notify Indemnifying
Party shall not diminish Indemnifying Party's obligations under this
Section except to the extent that Indemnifying Party is materially
prejudiced as a result of such failure. An Indemnified Party shall at
all times have the option to participate in any matter or litigation
through counsel of its own selection and at its own expense.
8. CONFIDENTIALITY. The terms and conditions of this Agreement shall be
strictly confidential. All information about the development of the EBLD Site
and the development and launch of the Co-Branded Page disclosed to Licensee,
its officers, directors, employees and/or agents shall be treated as
confidential. All information about the development of the Licensee Site and
the development and launch of the Co-Branded Page disclosed to EBLD, its
officers, directors, employees and/or agents shall be treated as confidential.
Such confidentiality is of the essence to this Agreement.
9. GENERAL
9.1 COSTS. Each party shall be responsible for all costs and expenses
incurred by it in connection with the performance of its obligations
under this Agreement.
9.2 ASSIGNMENT. None of the rights and obligations of the parties to
this Agreement may be assigned by either party, except (a) to the
transferee of substantially all of the business operations of such
party (whether by asset sale, stock sale, merger or otherwise) or (b)
to any entity that is controlled by, or is under common control with,
such party.
9.3 RELATIONSHIP OF PARTIES. This Agreement does not create a joint
venture, partnership or principal/agent relationship between the
parties hereto, nor imposes upon either party any obligations for any
losses, debts or other obligations incurred by the other party except
as expressly set forth herein.
9.4 ENTIRE AGREEMENT. This Agreement states the entire agreement
between the parties with respect to its subject matter and supersedes
any prior oral or written agreements. This Agreement may not be amended
except in writing signed by both parties.
9.5 APPLICABLE LAW. This Agreement will be construed according to
the laws of the State of New York, without regard to principles of
conflicts of law.
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9.6 INVALIDITY OF PROVISIONS. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, in whole or
in part, then the parties will be relieved of all obligations arising
under such provision, but only to the extent that it is illegal,
unenforceable, or void, it being the intent and agreement of the
parties that this Agreement be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable
while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable
and achieves the same objectives.
9.7 NOTICE. Any notice due by one party to the other will be given to
the address listed above and marked to the attention of the signatory
specified below, unless a party hereafter designates a successor
address or contact person. All notices will be transmitted by private
courier or facsimile transmission, and will be deemed given as of the
date of a written courier's receipt or electronic facsimile
confirmation report.
ACKNOWLEDGED AND AGREED ACKNOWLEDGED AND AGREED
ENTERTAINMENT BOULEVARD, INC. BOLT MEDIA, INC.
By: /s/ Stephen Brown By: /s/ Dan Pelson
--------------------------------- -------------------------------
Name: Stephen Brown Name: D.A. Pelson
------------------------------- ------------------------------
Title: CEO Title: CEO
------------------------------ -----------------------------
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EXHBIT A - DESCRIPTION OF LICENSED CONTENT
CO-BRANDED EBLD/BOLT MUSIC VIDEO INDEX PAGE/POP-UP PLAYER
This video index page would be promoted from the Index page of the Bolt Music
section. EBLD will serve a co-branded pop-up Player as follows:
a) The player will be branded in some way in which "presented by Vidnet"
appears on it.
b) The Player will feature approximately one hundred music videos and
will be updated weekly by EBLD and Bolt. The videos will be available
in 28k, 56k, 80k, and 300k transfer rates.
<PAGE>
Exhibit 10.12
COLLEGE BROADCAST/ENTERTAINMENT BOULEVARD AGREEMENT
This is an agreement dated as of August 4, 1999, between Entertainment
Boulevard, Inc., a Nevada corporation located at 4052 Del Rey Avenue Suite 108,
Marina Del Rey, CA 90292 ("EBLD"), and College Broadcast, Inc. ("CB"), a Limited
Liability corporation located at 248 Westminster Ave., Venice, CA 90291. In
consideration of the mutual premises and undertakings stated herein and Exhibit
A attached hereto and made a part hereof, the parties hereto agree as follows
(the "Agreement"):
1. TRADEMARKS
1.1 CB IDENTITIES ON EBLD SITE. CB hereby grants to EBLD a
non-exclusive, cost-free license (without the right of sublicense) throughout
the Term of this Agreement to use the CB name and logo and other proprietary
identities of CB (collectively, "CB Mark(s)") in connection with the EBLD
multimedia player (the "Player") which is displayed on CB (defined below),
solely as stated in Exhibit A.
1.2 EBLD IDENTITIES ON CB SITE. EBLD hereby grants a non-exclusive
cost-free license (without the right of sublicense) throughout the Term of this
Agreement to CB to use the EBLD name and logo and other proprietary identities
of EBLD (collectively, "EBLD Mark(s)") in connection with CB's website called
"CollegeBroadcast.com" ("CollegeBroadcast.com") currently located at
http://collegebroadcast.com, solely as stated in Exhibit A.
2. CONTENT
2.1 LICENSE. EBLD hereby grants a non-exclusive cost-free license
(without the right of sublicense) throughout the Term of this Agreement to CB
to use the certain content owned and/or controlled by EBLD, as described on
Exhibit A (collectively, "EBLD Content") in connection with CB, solely as
stated on Exhibit A. CB will not (a) permit another entity, other than EBLD,
to broadcast streaming content that competes with the content served on the
Co-Branded Player on CollegeBroadcast.com, or (b) establish any direct
hypertext links between CollegeBroadcast.com and the site of an EBLD
competitor.
2.2 CREATION OF CONTENT. Each party will be responsible for the
creation, development and publication of its respective Content. The parties
will consult regularly regarding creation of mutually beneficial Content.
Neither party will use the Content of each other's site in any way whatsoever
without the other party's prior approval.
2.3 QUALITY CONTROL. Each party agrees to maintain the quality of the
content of its site to at least the same level as has existed heretofore. If
either party, in its reasonable discretion, determines that the content of the
other party's site falls below this pre-existing standard of quality and does
not otherwise meet the editorial standards and quality of its own site, that
party will notify the other party to that effect in writing giving specific
details of the failure to meet such standards and the party receiving that
notice will remedy the deficiencies specified in such notice within 30 days
after the date of its receipt of that notice. If, following such 30-day period,
the quality of the applicable site has not sufficiently improved, the party that
gave the original notice may terminate the Agreement effective immediately upon
the receipt by the other party of notice of termination.
2.4 LIMITATION OF RIGHTS. Each party's use of the other party's Marks
and Content, as well as the use of the any links described on Exhibit A, is
strictly limited to the uses stated in this Agreement. Neither party acquires
any rights in or to the other party's Marks and/or the goodwill inherent therein
by this Agreement or otherwise. All rights granted under this Agreement,
including the right to use the other party's Marks or Content, or to link to the
other party's Content shall revert to the granting party upon termination.
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3. FINANCIAL
3.1 PRODUCTION EXPENSES. Each party will be solely responsible for its
own expenses incurred in undertaking its rights and responsibilities under this
Agreement and otherwise in operating its website.
3.2 ADVERTISING
(a) RETAINED RIGHTS. Each party will have the right to
continue to transact advertising and promotional
programs for its own website, to retain all
advertising inventory and set all packaging and
pricing for any advertising thereon and to retain all
revenue it receives related thereto. No such
arrangements by a party can allow for any third-party
use of the other party's Marks or Content without the
prior written approval of that other party.
Notwithstanding the foregoing, the parties hereby
acknowledge and agree that EBLD shall have the
exclusive right to transact advertising and
promotional programs related to, to retain all
advertising inventory and set all packaging and
pricing for any advertising on any co-branded pages
and Players developed pursuant to this Agreement.
(b) PAYMENTS. EBLD shall pay to CB with respect to all
advertising revenues generated a sum equal to that
percent of the gross revenues actually received on
behalf of the Player hereunder. For the purposes
hereof, the Revenue Split will be as follows: EBLD
50%, CB 50%.
(c) Payment Schedule. EBLD shall pay CB its share of
revenue within fifteen (15) days after EBLD receives
payment from its advertising agency, approximately
every thirty (30) days. Along with such payment, EBLD
will include a written statement reflecting the
number of visitors to the Player during the
applicable pay period.
(d) AUDITS. CB or CB's designated representative shall
have the right, at EBLD's usual place of business,
during business hours and on reasonable notice to
EBLD (but in no event more than once annually), to
examine and copy (provided CB keeps such copies
confidential and uses them solely in connection with
CB's audit rights hereunder, in any proceeding
hereunder, or in any necessary business disclosures
to a third party subject to such third party's
agreement to retain such confidentiality) EBLD's
books and records to confirm the accuracy of any such
statements not otherwise deemed accepted. In the
event that such audit reveals a discrepancy in the
amounts owed CB from what was actually paid, EBLD
shall pay CB the amount of such discrepancy. If such
discrepancy is in excess of five percent (5%) of the
amounts actually paid to CB, EBLD shall reimburse CB
for the cost of such audit.
(e) NO INTERSTITIALS. Neither party will transmit any
so-called "interstitial advertising" to users as they
link from CB to the Player or vice-versa.
(f) CUSTOMER DATA. CB shall own and retain all right,
title and interest in all names, addresses and other
identifying information of users of CB, including,
without limitation, any co-branded pages developed
hereunder and EBLD will have no right to use any such
customer data.
3.3 PRODUCT SALES. EBLD will offer Player users the opportunity to
purchase products through EBLD's deal with CheckOut.com ("CO") as follows:
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(a) LINKS. The Player will include a button to link to CO
in a mutually agreed upon design.
(b) ORDER PROCESSING. CO will process product orders
placed by customers who follow these links from the
Player to the CO site. CO reserve the right to reject
orders that do not comply with any requirements that
CO periodically may establish. CO will be responsible
for all aspects of order processing and fulfillment,
including without limitation: preparing order forms;
processing payments, cancellations, and returns; and
handling customer service. CO will track sales made
to customers who purchase products using the links
from the Player to the CO site and will send EBLD
reports summarizing this sales activity.
(c) CUSTOMER DATA. CO shall own and retain all right,
title and interest in all names, addresses and other
identifying information of users of CheckOut.com.
(d) REFERRAL FEES. EBLD will pay CB referral fees on
qualified product sales to third parties. For a
product sale to generate a referral fee, the customer
must follow a link (in a format specified by CO) from
the Player to the CO site; purchase a qualified
product using CO's automated ordering system; accept
delivery of the product at the shipping destination;
and remit full payment to CO. CO will not, however,
pay referral fees on any products that are added to a
customer's Shopping Cart after the customer has
re-entered CO's site (other than through a link from
the Player), even if the customer previously followed
a link from the Player to the CO site. Products that
are entitled to earn referral fees under the rules
set forth above are hereinafter referred to as
"Qualifying Products."
(e) FEE SCHEDULE. Referral fees will be earned based on
the sale price of Qualifying Products (as defined
above), according to the fee schedule set forth
below. As used below, "sale price" means the sale
price listed in CO's catalog, and excludes costs for
shipping, handling, gift-wrapping, and taxes. The
established base fee schedule is four percent (4%).
(as per your conversation with Adam, the 4% is a
percentage of CheckOut.com's sale price. of the sale
price for sales of Qualifying Products. EBLD will pay
referral fees on a quarterly basis. Approximately
thirty (30) days following the end of each calendar
quarter, EBLD will send CB a check for the referral
fees earned on Qualifying Products that were shipped
during that calendar quarter, less any taxes
withheld. However, if the fees payable to CB for any
calendar quarter are less than $100.00, those fees
will be held until the total amount due is at least
$100.00 or until this Agreement is terminated. If a
product that generated a referral fee is returned by
the customer, the corresponding fee will be deducted
from the next payment. If there is no subsequent
payment, a bill for the fee will be sent.
(f) POLICIES AND PRICING. Customers who buy products
through CO will be deemed to be CO's customers.
Accordingly, all CO rules, policies, and operating
procedures concerning customer orders, customer
service, and product sales will apply to those
customers. CO will determine the prices to be charged
for products sold under this Program in accordance
with CO's pricing policies. Product prices and
availability may vary from time to time.
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(g) PROMOTIONS AND INCENTIVES. During the Term of the
Agreement, CO will provide special promotions to EBLD
users at least six (6) times per year. These
promotions will be mutually agreed upon by EBLD and
CO and will be provided to CB users as well.
4. APPROVALS
4.1 PRIOR APPROVAL REQUIRED. All uses by either party of the other
party's Marks and Content and links to each other's Content must be submitted to
and approved by the other party prior to their use, with such approval not to be
unreasonably withheld. Failure to so seek and receive prior approval will be
grounds for immediate termination of this Agreement, and such termination right
will not constitute a waiver of any other rights available to a party as a
result thereof.
4.2 NO PUBLICITY WITHOUT CONSENT. Neither party will issue or permit
issuance of any press release regarding the other party or this Agreement
without prior coordination with and approval by the other party.
5. TERM
5.1 TERM. This Agreement shall be effective as of the date of the
launch of the College Broadcast launch, tentatively scheduled for on or before
September 15, 1999, and will continue for one (1) year (the "Term"). The Term
shall be automatically renewed for additional one (1) year increments unless
either party notifies the other at least thirty (30) days prior to the
expiration of the then-current Term that it does not wish to renew the Term of
the Agreement. Both parties shall have the right to terminate this Agreement
upon thirty (30) days written notice during the first three months of the Term.
5.2 EARLY TERMINATION. Each party shall have the right to terminate
this Agreement immediately on notice: (a) upon a breach of any material
obligation hereunder by the other party other than those specified in section
4.1, if such breach is not cured within 30 days following the date the breaching
party receives notice from the non-breaching party describing in reasonable
detail the elements of such breach; (b) in the event the other party becomes
insolvent (I.E., unable to pay its debts in the ordinary course as they come
due); or (c) pursuant to sections 4.1 or 5.1 above.
5.3 EVENTS UPON TERMINATION. Upon the expiration or termination of this
Agreement for any reason, both parties shall immediately remove all links to the
other party's Content and website(s) and cease all use of the other party's
Marks and any and all use of any kind whatsoever of the other party's Content.
5.4 SURVIVAL. Sections 2.4, 4.2, 7 and 8 will survive the termination
or expiration of this Agreement.
6. REPRESENTATIONS AND WARRANTIES
Each party to this Agreement represents and warrants to the other that:
(a) such party has all necessary right, power and authority to enter
into this Agreement and to perform the acts required of it hereunder;
(b) the execution of this Agreement by such party and its performance
of its obligations hereunder do not and will not violate any agreement
by which such party is bound; (c) such party has (and will have
throughout the Term) all necessary rights in and to its Marks, content
links and Content described in this Agreement to allow it to make those
indicia and materials available to the other party and users of that
party's website (including, without limitation, the Player) as
contemplated by this Agreement without violating the rights of any
third party; and (d) it has (and will have
4
<PAGE>
throughout the Term) all necessary rights in and to all underlying
technology (including both hardware and software) utilized in
connection with its website (including, without limitation, the
Player) and all such underlying technology does not infringe on any
patent, copyright, trademark, trade secret or other intellectual
property or proprietary right of any third party.
7. INDEMNIFICATION
7.1 MUTUAL INDEMNIFICATION. Each party hereby agrees to indemnify and
hold harmless the other party, its parent and subsidiary companies and
their respective officers, agents, directors, employees and authorized
representatives from and against any costs, losses, liabilities and
expenses, including court costs, reasonable expenses and reasonable
attorney's fees that any of them may suffer, incur or be subjected to
by reason of any legal action, arbitration or other claim by a third
party arising out of or as a result of a breach of the indemnifying
party's representations and warranties made hereunder, the operations
of the indemnifying party's website (including, without limitation the
Player) as authorized by this Agreement or otherwise, any allegations
that the use of the indemnifying party's Marks, Content, links and/or
content on its website (including, without limitation, the Player)
violates any intellectual property rights of any third party, any
allegation that any content on its website (including, without
limitation, the Player) is defamatory or violates any privacy or
publicity rights of any third party, and/or any of its other
obligations under this Agreement.
7.2 INDEMNIFICATION PROCEDURES. If either party entitled to
indemnification hereunder (an "Indemnified Party") makes an
indemnification request to the other, the Indemnified Party shall
permit the other party (the "Indemnifying Party") to control the
defense, disposition or settlement of the matter at its own expense;
provided that the Indemnifying Party shall not, without the consent
of the Indemnified Party enter into any settlement or agree to any
disposition that imposes an obligation on the Indemnified Party that
is not wholly discharged or dischargeable by the Indemnifying Party,
or imposes any conditions or obligations on the Indemnified Party
other than the payment of monies that are readily measurable for
purposes of determining the monetary indemnification or
reimbursement obligations of Indemnifying Party. The Indemnified
Party shall notify Indemnifying Party promptly of any claim for
which Indemnifying Party is responsible and shall cooperate with
Indemnifying Party in every commercially reasonable way to
facilitate defense of any such claim; provided that the Indemnified
Party's failure to notify Indemnifying Party shall not diminish
Indemnifying Party's obligations under this Section except to the
extent that Indemnifying Party is materially prejudiced as a result
of such failure. An Indemnified Party shall at all times have the
option to participate in any matter or litigation through counsel of
its own selection and at its own expense.
8. CONFIDENTIALITY. The terms and conditions of this Agreement shall be
strictly confidential. All information about the development of the
EBLD Site and the development and launch of the Co-Branded Page
disclosed to Licensee, its officers, directors, employees and/or agents
shall be treated as confidential. All information about the development
of the Licensee Site and the development and launch of the Co-Branded
Page disclosed to EBLD, its officers, directors, employees and/or
agents shall be treated as confidential. Such confidentiality is of the
essence to this Agreement.
9. GENERAL
9.1 COSTS. Each party shall be responsible for all costs and expenses
incurred by it in connection with the performance of its obligations
under this Agreement.
9.2 ASSIGNMENT. None of the rights and obligations of the parties to
this Agreement may be assigned by either party, except (a) to the
transferee of substantially all of the
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business operations of such party (whether by asset sale, stock sale,
merger or otherwise) or (b) to any entity that is controlled by, or
is under common control with, such party.
9.3 RELATIONSHIP OF PARTIES. This Agreement does not create a joint
venture, partnership or principal/agent relationship between the
parties hereto, nor imposes upon either party any obligations for any
losses, debts or other obligations incurred by the other party except
as expressly set forth herein.
9.4 ENTIRE AGREEMENT. This Agreement states the entire agreement
between the parties with respect to its subject matter and supersedes
any prior oral or written agreements. This Agreement may not be amended
except in writing signed by both parties.
9.5 APPLICABLE LAW. This Agreement will be construed according to the
laws of the State of California, without regard to principles of
conflicts of law.
9.6 INVALIDITY OF PROVISIONS. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, in whole or in
part, then the parties will be relieved of all obligations arising
under such provision, but only to the extent that it is illegal,
unenforceable, or void, it being the intent and agreement of the
parties that this Agreement be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable
while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable
and achieves the same objectives.
9.7 NOTICE. Any notice due by one party to the other will be given to
the address listed above and marked to the attention of the signatory
specified below, unless a party hereafter designates a successor
address or contact person. All notices will be transmitted by private
courier or facsimile transmission, and will be deemed given as of the
date of a written courier's receipt or electronic facsimile
confirmation report.
ACKNOWLEDGED AND AGREED ACKNOWLEDGED AND AGREED
ENTERTAINMENT BOULEVARD, INC. COLLEGE BROADCAST, INC.
By: /s/ Stephen Brown By: /s/ Chris Rovtar
-------------------------------- --------------------------------
Name: Stephen Brown Name: Chris Rovtar
------------------------------ ------------------------------
Title: CEO Title: Executive Vice President
----------------------------- -----------------------------
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EXHIBIT A - DESCRIPTION OF LICENSED CONTENT
CO-BRANDED ENTERTAINMENT BOULEVARD/COLLEGE BROADCAST MUSIC VIDEO PLAYER
This framed music video player will be promoted from the CB homepage. EBLD will
serve a co-branded framed music video player as follows:
a) Branded as "College Broadcast Top Ten Videos, presented by Vidnet," or
such wording as is mutually agreed upon.
b) The Player will feature a to be determined number of videos and will be
updated regularly by EBLD. The videos will be available in 28k, 56k,
80k, and 300k transfer rates, or through any mutually agreed upon
technology that becomes available during the Term.
c) Links from CB open co-branded Vidnet/College Broadcast framed music
video Player, with streaming content and Player pages served by EBLD.
<PAGE>
ADDENDUM TO EXHIBIT A OF
COLLEGE BROADCAST/ENTERTAINMENT BOULEVARD AGREEMENT
Entertainment Boulevard, Inc. ("EBLD") hereby grants College Broadcast ("CB")
the right to use the Entertainment Boulevard Movie Trailer Player (defined
below) on College Broadcast (www.collegebroadcast.com) under the terms and
conditions of the agreement between Entertainment Boulevard, Inc. and College
Broadcast dated as of July __, 1999.
DESCRIPTION OF LICENSED CONTENT
CO-BRANDED ENTERTAINMENT BOULEVARD/COLLEGE BROADCAST MOVIE TRAILER PLAYER
This framed movie trailer player will be promoted from the CB homepage. EBLD
will serve a co-branded framed movie trailer player as follow:
a) Branded as "College Broadcast Movie Trailers, presented by
Entertainment Boulevard," or such wording as is mutually agreed upon.
b) The Player will feature a to be determined number of movie trailers
and will be updated regularly by EBLD. The trailers will be available
in 28k, 56k, 80k, and 300k transfer rates, or through any mutually
agreed upon technology that becomes available during the Term.
c) Links from CB open the co-branded Entertainment Boulevard/College
Broadcast framed movie trailer Player, with streaming content and
Player pages served by EBLD.
ACKNOWLEDGED AND AGREED ACKNOWLEDGED AND AGREED
ENTERTAINMENT BOULEVARD, INC. COLLEGE BROADCAST, INC.
By: /s/ Stephen Brown By: /s/ Chris Rovtar
------------------------------- -------------------------------
Name: Stephen Brown Name: Chris Rovtar
----------------------------- -----------------------------
Title: CEO Title: Executive Vice President
---------------------------- ----------------------------
<PAGE>
Exhibit 10.13
810 Winslow Street
Redwood City, CA 94083
[LOGO] LIQUID AUDIO 850.549.2000
Fax: 850.549.2099
www.liquidaudio.com
HOSTING SERVICE AGREEMENT
SERVICES PROVIDED BY LIQUID AUDIO
1. Liquid Audio, Inc. ("Liquid Audio") shall provide Customer with hosting
services for the Liquefied Content (as defined in Section 4 below) on the
terms set forth in this Agreement. The Liquefied Content will be hosted and
maintained on Liquid Audio's servers, equipment and physical and
telecommunications facilities in accordance with the terms attached hereto.
Liquid Audio shall provide for connectivity of the Liquefied Content to the
internet, and shall enable public Web browser access to the host server with
a reasonably consistent level of availability, subject to scheduled
maintenance downtime. Liquid Audio has the right to control and direct the
means by which the hosting services are performed and may at its discretion
subcontract these services to third party internet service providers. Liquid
Audio shall provide a reasonable level of technical support for the hosting
services and such additional support as may be agreed upon between Customer
and Liquid Audio.
2. Liquid Audio shall provide Customer with remote access to computer
hardware, server software bandwidth and electronic commerce web page
templates and functionality as necessary to publish the Liquefied Content
onto the internet. Customer will be responsible for all host server content
management relating to the Liquefied Content, including file uploads pursuant
to Section 4 below. This Agreement does not transfer any title, rights or
licenses to any software, hardware, documentation or any intellectual
property embodied or used in connection with the services provided.
3. Liquid Audio shall also provide electronic commerce credit card
processing services for digital downloads of the Liquefied Content. Liquid
Audio shall process credit card orders relating to digitally downloaded music
on behalf of Customer using Liquid Audio's merchant bank account. Liquid
Audio shall provide Customer with statements detailing the number of songs
downloaded and any proceeds collected. Liquid Audio shall provide such
statements and remit any net proceeds collected to Customer within 30 days
following the end of each calendar month. Liquid Audio shall deduct from such
proceeds amounts related to bank processing fees, charge backs, credits and
Liquid Operation Center transaction fees. Liquid Audio has the right to
retain any net sales proceeds of Customer as partial offset for any past due
amounts owed to Liquid Audio.
CUSTOMER RESPONSIBILITIES AND OBLIGATIONS
4. Customer shall be responsible for encoding music tracks, samples and
other content (the "Liquefied Content") in Liquid Audio Format pursuant to a
separate license agreement to use Liquid Audio's Liquifier software, and for
publishing the Liquefied Content and any related graphics and text to the
host server. Customer shall designate the Liquefied Content click through
buttons with Liquid Audio's trademarks (LIQUID AUDIO and/or related icons
available from Liquid Audio's Web site), and Liquid Audio grants to Customer
a nonexclusive, non-transferable revocable license for such use. If Liquid
Audio encodes Liquefied Content as a service for and on behalf of Customer,
Customer shall be solely responsible for Liquefied Content under the terms
and conditions set forth in this Agreement. Liquid Audio agrees to encode
Liquefied Content as prescribed by Customer in a professional manner.
Customer agrees to test Liquefied Content encoded by Liquid Audio for quality
and accuracy and shall communicate any exceptions or corrections to Liquid
Audio in writing within five days of the date Liquefied Content is published
on host server.
5. Customer shall solely be responsible for the Liquefied Content it
publishes via the hosting services provided by Liquid Audio including but not
limited to data, graphics, artwork, and copyright/trademark notices. Customer
shall defend, indemnify, hold harmless Liquid Audio from all liabilities and
costs including reasonable attorney fees arising from any and all claims by
any person arising out of Customer's use of the services, including without
limitation any content. Customer represents and warrants that it has accrued
all necessary rights to publish and/or sell Liquefied Content via services
provided under this Agreement and will comply with any obligations it may
have under third party mechanical and/or performance rights agreements.
Liquid Audio may report mechanical and performance rights information to
agencies that the Customer is under contract with. Such right however, does
not relieve any existing contractual reporting or financial obligations the
Customer may directly have with such rights agencies. Liquid Audio reserves
the right to suspend or terminate services immediately upon notice to
Customer if Liquid Audio has reasonable grounds to believe that Customer is
utilizing services illegally or is in violation of any agreement with Liquid
Audio.
6. Customer shall be responsible for reporting and payment of any sales
taxes resulting from commerce transactions hereunder and shall indemnity and
hold Liquid Audio harmless from any claim, liability or penalty assessed or
imposed by any taxation authority having jurisdiction over sales hereunder.
LIQUID MUSIC NETWORK SYNDICATION
7. Liquid Audio owns and operates the Liquid Music Network (the "LMN"),
pursuant which Liquid Audio distributes on a syndicated basis an exclusive
database of music programming and other content in Liquid Audio Format (the
"LMN Programming") for public performance and digital delivery to Web sites
that are licensed as LMN syndication affiliates. Customer hereby grants
Liquid Audio a nonexclusive licenses to reproduce, distribute, perform,
display, deliver and make available the Liquefied Content, in whole or in
part, as part of the LMN Programming, to end users via the LMN licensed Web
sites, and to use the Liquefied Content for the purpose of marketing,
advertising and promoting the LMN and the
<PAGE>
availability of the Liquefied Content on the LMN, in all media whether known
or hereafter derived on a worldwide basis for as long as Customer makes the
Liquefied Content available hereunder. Liquid Audio and/or its affiliate
websites shall be responsible for the design of the LMN and the selection,
ordering and arrangement of the Liquefied Content as part of the LMN
Programming, which remain subject to change by Liquid Audio from time to time
in its sole discretion. Liquid Audio and its affiliate websites have the
right to exclude any Liquefied Content from the LMN that is deemed
inappropriate. Net sales proceeds from digital downloads of the Liquefied
Content shall be payable to Customer pursuant to Section 3 above.
LIQUID OPERATIONS CENTER
8. Liquid Audio's Liquid Operations Center ("LOC") is intended to
facilitate the monitoring, distribution sale and payment of royalties on the
Liquefied Content. Customers are restricted to those areas of the LOC as
designated for access in accordance with the hosting services provided to
Customer hereunder. Customer may not, nor attempt to, gain unauthorized
access to the LOC's computer systems or data bases, or to any transaction or
performance rights logs, nor attempt to circumvent or disable any features of
the LOC. All data provided by the LOC shall remain the sole and exclusive
property of the LOC and Liquid Audio and the use of such data shall be
limited to those expressly authorized in writing by the LOC. CUSTOMER MUST
REGISTER COMPLETE AND CORRECT RIGHTS MANAGEMENT INFORMATION FOR EACH
SEPARATELY AVAILABLE PIECE OF MUSIC OR OTHER CONTENT (E.G., EACH TRACK OF AN
ALBUM) WITH THE LOC AND INCORPORATE THE REGISTRATION INFORMATION IN THE
ENCODING PROCESS BEFORE ENCODING AND DISTRIBUTING SUCH MUSIC/CONTENT USING
LIQUID AUDIO SOFTWARE. FAILURE TO REGISTER AND INCORPORATE THE REGISTRATION
INFORMATION IN THE ENCODING PROCESS MAY REQUIRE RE-ENCODING BEFORE THESE
FEATURES CAN BE USED. CUSTOMER WILL INDEMNIFY LIQUID AUDIO AND THE LOC FOR
CUSTOMER'S VIOLATION OF SUCH REQUIREMENTS.
TERMS AND PAYMENT TERMS
9. Customer agrees to pay the fees set forth in the Hosting Service
Agreement and accompanying quote, proposal or sales order form ("Sales
Quote") and authorizes Liquid Audio to charge Customer's credit card for fees
associated with this service agreement.
10. This Agreement shall commence on the Effective Date and continue for the
duration as described in the Sales Quote. This Agreement may be
extended upon mutual agreement between Liquid Audio and Customer. Either
party may terminate this Agreement in the event a) the other party materially
defaults in performing any obligation under this Agreement and such default
continues unremedied for a period of thirty days following written notice of
default, except in the case of default due to non-payment by Customer in
which Liquid Audio may terminate services.
MISCELLANEOUS
11. LIQUID AUDIO'S LIABILITY FOR ALL CLAIMS ARISING OUT OF THIS AGREEMENT
SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY CUSTOMER TO LIQUID AUDIO. IN
NO EVENT SHALL LIQUID AUDIO BE LIABLE FOR ANY LOSS OF DATA, LOSS OF PROFITS,
COST OF COVER OR OTHER SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES
ARISING FROM OR IN RELATION TO THIS AGREEMENT OR THE USE OF THE SERVICES,
HOWEVER CAUSED AND REGARDLESS OF THEORY OF LIABILITY, LIQUID AUDIO
SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESSED OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY
LIQUID AUDIO HEREUNDER.
CUSTOMER ACCEPTANCE:
- --------------------
CUSTOMER HAS READ AND HEREBY ACCEPTS AND AGREES TO THE TERMS AND CONDITIONS OF
THE HOSTING SERVICE AGREEMENT AND SALES QUOTE.
/s/ Stephen Brown, CEO
- --------------------------------------------------
Company: International Net Broadcasting, LLC
-----------------------------------------
Date: August 31, 1998
--------------------------------------------
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT made and entered into this 29th day of October, 1998,
between MARATHON SPORTS GROUP, INC., 11 West 84th St. 4th Floor, New York, NY
10024; its sublicensees, designees, successors and permitted assigns
(Hereinafter individually and collectively referred to as "Licensor") of the
first part
and
INTERNATIONAL NET BROADCASTING, LLC., 4052 Del Rey Avenue, Suite 108,
Marina Del Rey, CA 90292 USA, its sublicensees, designees, successors and
permitted assigns (hereinafter individually and collectively referred to as
"Licensee"), of the second part
WHEREAS, Licensor is actually engaged in the Dominion of North America
in the production of The Tim McCarver Show, AKA "McCarver One on One"; and
WHEREAS, Licensee agrees in accordance with the terms hereof, to
provide design, marketing and on-line service for Internet Programming/Content
in the Licensed Territory, as the same shall be hereinafter defined.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and subject always to the terms and provisions hereinafter set
forth, the parties hereto agree as follows:
1. Licensor hereby licenses to Licensee the exclusive license to use
the following Programming/Content in and for the Licensed Territory:
a) The Programming/Content listed on Exhibit "A" attached
hereto and incorporated herein by this reference embodying that
Programming/Content entitled "McCarver One on One" (hereinafter referred to as
the "First Content"). This Programming/Content will be available from the INB
"Pro Sports Net" front page, and/or any other mutually agreed upon location on
the Licensee's Internet domain.
2. The rights herein granted by Licensor to Licensee are the
following for the Licensed Territory during the Term hereof:
a) The Term of this License Agreement shall commence October
27, 1998, and expire on the date one (1) year from the date of Delivery to
Licensee of all Content for which Licensee exercises its option, pursuant to
Paragraph 2.a)2) hereof (hereinafter, individually and collectively referred to
as "the Term").
1) "Delivery" or words of similar connotation - shall mean
delivery to Licensee by Licensor, for the purpose of digital conversion and
distribution via the Internet, of: three-quarter (3/4) inch master video tapes
and digital audio tapes (DAT) of the content listed on Exhibit "A" or a direct
satellite feed if Licensee is able to retrieve a satellite feed. If content is
not delivered via satellite, the cost of the tape and the delivery of the tape
to INB shall be at INB's sole expense. These tapes are to be technically
satisfactory to Licensee. Licensor shall also mean delivery to Licensee of all
consents, approvals, copyright information, credits corresponding to these
master tapes, all at Licensor's sole cost and expense. The Delivery may also
be made available to Licensee by Licensee's providing an Internet server at
the said location of the McCarver One on One show at Licensee's sole expense.
2) Options: Licensor further grants to Licensee one (1)
option to acquire the exclusive license for the Licensed Territory for a
period of one (1) year. Should Licensor elect to exercise this Option,
Licensor shall notify Licensee in writing within thirty (30) days prior to the
end of the Initial Term. Failure by Licensee to exercise this Option shall be
1
<PAGE>
deemed termination of this Agreement. Should Licensee exercise its option, all
of the same terms and conditions as the Initial Term hereunder shall apply.
b) The right to use the name of McCarver One on One, Licensor
and any other person rendering services in connection with the Content only in
connection with the marketing of Content; During the Term, Licensee may refer to
McCarver One on One as Licensee's Internet Content Provider, only in the
Licensed Territory.
c) The unfettered right to market, promote, exploit, use and
control the said Content or derivatives thereof, the Content produced therefrom
and embodied therein, throughout the Licensed Territory. All such Content and
derivatives, and any and all copyrights therein and other rights pertaining
thereto, are and shall remain the sole and exclusive property of Licensor.
Licensor acknowledges this ownership and undertakes to protect such ownership at
its sole cost and expense. Licensee shall give Licensor prompt written notice of
any apparent or alleged infringement of any of Licensee's rights hereunder, or
of Licensor's ownership rights in and to the Content. In this regard, Licensee
shall have the sole right, but not the obligation to take all reasonable and
practical steps necessary to protect the copyright and trademark of Content in
the Licensed Territory and, if applicable, to renew and extend such protection.
Licensor shall additionally have the sole and exclusive right, but not the
obligation, to take all reasonable legal steps necessary to protect said
interests and to obtain redress and/or restrain any third party from any
unauthorized use of the Content in the Licensed Territory or the doing of any
act which infringes upon any Content. Licensee shall be able to participate in
any such action, PARI PASSU with the repayment to Licensor of its expenses.
Should Licensor receive any judgment, settlement or action, after the
reimbursement therefrom to Licensor (and Licensee, if applicable) of their
respective legal fees and costs incurred therein, any remaining proceeds shall
be divided between the parties hereto in the following percentages: Licensor:
70%, Licensee: 30%. Notwithstanding the foregoing, should Licensor fail or
refuse to take any of the foregoing actions, then, in addition to any of the
rights which Licensee shall have hereunder, either at law or in equity, Licensee
may (but shall not be obligated to) take such action in Licensor's and/or
Licensee's name, in which event any recovery from such action undertaken by
Licensee shall be the sole property of Licensee.
d) All rights in and to the Content licensed hereunder which
are not specifically granted to Licensee hereunder, are reserved by Licensor.
3. Both Licensee and Licensor agree not to grant to any other
person, firm or corporation in the Licensed Territory, any rights in the
Content which are contrary to the grant of rights herein.
4. For the purpose of the Agreement, the term "Licensed Territory"
and/or "Territory" shall be defined as The Internet.
5. In consideration for the rights herein granted, and Licensor's
full and faithful performance of all material terms and conditions hereof,
Licensee shall pay to Licensor with respect to all advertising revenues
generated a sum equal to that percent of the gross revenues actually received
by or on behalf of the Content hereunder, less any fixed costs that are
approved by Licensor. For the purposes hereof, the Revenue Split will be as
follows: Licensor 70%, Licensee 30%.
6. Payments by Licensee to Licensor of revenues due hereunder shall
be made in currency of the United States of America. Each payment shall be made
monthly, within fifteen (15) days following the end of each month. Such
statement shall be forwarded to Licensor, regardless of whether or not any
monies are due and owing to Licensor. All statements and payments made by
Licensee shall be binding on Licensor and not subject to any objection for any
reason, unless specific objection is made by Licensor in writing to Licensee
stating the basis thereof within eighteen (18) months after the date of each
such statement. Licensor shall not maintain any action, claim or proceeding
against Licensee in any form with respect to any such
2
<PAGE>
statement or payment unless a written objection notice is made and such
action, claim or proceeding is commenced against Licensee in a court of
competent jurisdiction within two (2) years after the date of any such
statement. Licensor has the right, at its sole cost and expense, to appoint an
independent certified public accountant to audit only those books and records
of Licensee which pertain to the revenues generated hereunder and only for the
purposes of verifying accounting statements. Licensee will cooperate fully
with such audit, which shall be during ordinary business hours, after at least
thirty (30) days notice at the Licensee's regular place of business where
Licensee keeps said books and records and be conducted so as to minimize
disruption to the Licensee business. All information derived by Licensor
during such audit shall be kept confidential, as same constitutes trade
secrets of Licensee. Licensor may only conduct an audit once in any calendar
year and only once per statement.
7. In the event that:
Either party shall fail to perform any of the material
obligations required of it hereunder and should the allegedly failing party fail
to cure any such alleged failure within thirty (30) days after receiving written
notice from the other party detailing same, or, if not possible to cure within
such thirty (30) day period, not commence such cure during such thirty (30) day
period and continue do pursue same; the non-failing, non-bankrupt and/or
non-insolvent party shall have the right to terminate this Agreement forthwith,
by written notice to the other party. In the event of such termination, all
executory obligations contained in this Agreement shall cease. Any monies
collected and/or received by a party shall be deemed to be monies held in trust
on behalf of the other party. In the event of termination of the Agreement
pursuant to this Paragraph, the rights granted to the Licensee hereunder shall
cease and terminate and shall, without notice or process, revest in Licensor and
Licensor shall in no way waive any revenues due hereunder.
8. Each party represents and warrants as follows:
a) That each party has not made and does not contemplate
making an assignment for the benefit of creditors, that no bankruptcy or other
proceedings based upon insolvency are pending or threatened against it, and that
there are no impediments, against it and that there are no impediments,
agreements or litigation, actual or threatened, which would prevent or impair
that party from performing its duties hereunder.
b) That Licensee is now and will use its best efforts to
remain, during the Term hereof, an active Internet Content provider within the
Internet industry.
c) Licensor warrants and represents that none of the Content,
nor its exploitation by Licensee will violate or infringe any common or
statutory right of any person or entity.
d) Licensee's acceptance of Content or the materials related
to the Content will not constitute a waiver of any of Licensor's warranties,
representations or agreements hereunder.
e) Each party is free to enter into and perform this Agreement
and each party's warranties and representations shall be true and correct upon
execution hereof, upon Delivery of the Content and shall remain in effect for so
long as Licensee has any rights to the Content.
9. Each party hereto agrees to and does hereby indemnify, save and
hold harmless, the other, its permitted assigns, licensees and its directors,
officers, shareholders, agents and employees from any and all liabilities,
claims, demands, loss and damage (including reasonable attorneys' fees and
court costs) arising out of or connected with any claim by a third party which
is inconsistent with any of the warranties, representations, covenants or
agreements made by the Indemnitor herein and agrees to reimburse Indemnitee,
on demand, for any
3
<PAGE>
payment made by Indemnitor at any time after the date hereof with respect to
any liability or claim to which the foregoing indemnity applies.
10. This Agreement is entire and sets forth the entire understanding
and agreement of the parties hereto, in respect of the matters herein contained.
This Agreement may not be altered, modified, canceled or terminated in any way
except upon agreement of the parties hereto in writing, and all rights and
remedies hereunder shall be cumulative and not limited by specification. All
signatures at the foot hereof shall make this a valid, binding and enforceable
Agreement between the parties hereto. In the event any payments due Licensor are
delayed or prohibited by currency restrictions or other government regulations,
Licensor shall be entitled to designate a local depository in the Licensed
Territory into which Licensee, at Licensor's expenses, shall deposit such
monies. In the event of any action, suit or proceeding hereunder, the prevailing
party shall be entitled to recover its attorneys' fees and costs from the
non-prevailing party. This Agreement does not create any partnership, joint
venture, agency or employment relationship between the parties hereto, their
relationship being that of independent contractors. No waiver of any breach,
conditions or covenants herein shall be deemed to be a waiver or consent to any
other breach, condition or covenant hereunder.
11. Any notice to be given under the terms of this Agreement will be
properly given if delivered in person to the addresses first given above, or if
mailed by prepaid postage, registered or certified mail, return receipt
requested or to such other addresses as any party may advise and if such notice
as aforesaid is delivered by mail, it shall be deemed to have been received at
noon on the fourth business day following posting. Notwithstanding the
immediately foregoing, in the event of the occurrence of a postal strike or
disruption of postal service occurring within six (6) days before or six (6)
days after the giving of any notice of as aforesaid, then and in that event such
notices shall be delivered in person and the option of giving notice by prepaid
registered mail or certified shall not be available to any party until the sixth
(6th) day following the termination of any such postal strike or disruption of
postal services.
12. This Agreement shall be construed only under the laws of the
State of California and the parties hereto irrevocably submit to the
jurisdiction of the Courts of the State of California, located in Los Angeles,
California. Any proceeding or action or process commenced in said Courts
arising out of any such claim, dispute or disagreement may, among other
methods, be served upon either by delivering or mailing same, via registered
or certified mail, addressed to that party at the address as set out above and
any such delivery or mail service shall be deemed to have the same force and
effect as personal service within the State of California. If any part of this
Agreement shall be invalid or unenforceable, it shall not affect the validity
of the balance of this Agreement.
13. This Agreement and the execution thereof shall inure to the
benefit of and be binding upon all of the parties hereto, and their respective
heirs, executors, administrator, successors and assigns, this Agreement to be
executed by their duly authorized officers on the day and date first above
written. Notwithstanding anything to the contrary foregoing, either party
shall have the right to assign this Agreement, in its good faith business
judgment, so long as the assigning party agrees to remain primarily liable for
its obligations hereunder to the non-assigning party and further so long as
any such assignee agrees in writing to be bound by the terms and conditions of
this Agreement.
Neither party shall be in breach or default hereunder if its performance becomes
impossible, impracticable or is hampered by reason of any act of God, war, fire,
earthquake, labor controversy, sickness, accident, civil commotion, epidemic,
act of Government, its agencies or officers, failure of technical or
transportation facilities or any other cause of a similar or dissimilar nature
not reasonably within that party's control or which that party could not, with
reasonable diligence, have avoided (hereinafter, individually and collectively
referred to as a "Force Majeure Event"). Upon the happening of any such Force
Majeure Event, Licensee, in addition to any other rights or remedies it may
have, including the right to terminate this Agreement, the non-breaching or
defaulting party may elect by notice to the other party to suspend the Term of
this
4
<PAGE>
Agreement for that period of time which any such Force Majeure Event
continues. In the event of any such suspension, the Term as applicable to any
Record, shall be automatically extended by adding a period of time equal to
the number of days of such suspension to the end of the applicable Term. In
such event, specific dates, periods and time requirements referred to herein
shall be postponed and extended accordingly. During any such suspension, all
agreements, covenants, and obligations of each party hereunder shall continue
in full force and effect. Notwithstanding anything to the contrary foregoing,
should any such Force Majeure Event continue for a consecutive period of time
equivalent to Two Hundred Seventy (270) days, then, in such event, either
party shall have the right to terminate this Agreement by notice to the other
party. However, in the event of any such termination, Licensee shall still be
entitled to a thirty (30) day shut-down period hereunder, once the Force
Majeure Event has ceased.
5
<PAGE>
The number of pages preceding this page is five (5).
IN WITNESS WHEREOF, the parties hereto have hereunto set their hand and
seals on the day and date first above written.
MARATHON SPORTS GROUP
By: /s/ Jim Moscovitz Dated: October 28, 1998
---------------------------------- ---------------------------------
Jim Moscovitz, President
INTERNATIONAL NET BROADCASTING, LLC.
By: /s/ Stephen Brown Dated: October 28, 1998
---------------------------------- ---------------------------------
Stephen Brown, CEO
6
<PAGE>
Exhibit "A"
Four (4) hours of programming on a weekly basis of the "McCarver One on One"
show.
7
<PAGE>
[LOGO]
WEB COLLOCATION
SERVICE ORDER FORM
<TABLE>
<S><C>
- -------------------------------------------------------------------------------------------------------------
CUSTOMER INFORMATION
Customer Name Entertainment Boulevard, Inc.
Customer Address: Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey State: CA Zip: 90292
Phone: ( 310 ) 578-5404 Fax: ( 310 ) 578-6304 E-Mail: [email protected]
Billing Address: Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey State: CA Zip: 90292
Customer Contact: Stephen Brown
Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey State: CA Zip: 90292
Phone: ( 310 ) 578-5404 Fax: ( 310 ) 578-6304 E-Mail: [email protected]
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Your signature on this Service Order acknowledges that you understand and
accept the terms and conditions set forth below, that you are duly authorized
to execute this Service Order on Customer's behalf, and that Customer agrees
to be bound by the provisions hereof (including terms contained in the
Standard Terms and Conditions).
CUSTOMER ACCEPTANCE LEVEL 3 ACCEPTANCE
/s/ Stephen Brown /s/ Mark T. Mayeda
- ---------------------------------- ---------------------------------
Authorized Customer Signature Authorized Level 3 Signature
2-8-99 2-2-99
- ---------------------------------- ---------------------------------
Date Date
Stephen Brown Mark T. Mayeda
- ---------------------------------- ---------------------------------
Typed or Printed Name Typed or Printed Name
Chief Executive Officer Account Manager
- ---------------------------------- ---------------------------------
Title Title
- ------------------------------------------------------------------------------
WEB COLLOCATION TERMS AND CONDITIONS:
1. This Service Order is entered into pursuant to the terms of the Standard
Terms and Conditions for Delivery of Products or Services ("Standard Terms
and Conditions") issued by Level 3 Communications, LLC ("Level 3"), a current
copy of which has been made available for Customer's review (either
electronically or in hard copy). The Standard Terms and Conditions, and any
state Tariffs applicable to the Services to be delivered hereunder, are
hereby incorporated into the terms hereof. In addition, the Services shall
at all times be used in compliance with Level 3's then-current Acceptable Use
Policy, as amended by Level 3 from time to time and which is available
through Level 3's web site.
2. Customer is hereby granted the right to occupy the space ("Space") and
agrees to purchase certain communications services ("Services") identified in
"Customer Order Forms." Each Customer Order Form, when submitted and accepted
by Level 3, shall be incorporated into and become a part of this Service
Order. Customer may submit multiple Customer Order Forms requesting use of
different Space and delivery of Services related thereto, each of which shall
be governed by the terms of this Service Order (including the Standard Terms
and Conditions). Customer Order Forms may be submitted in any fashion
specified by Level 3 (including, but not limited to, electronic submission).
3. Customer shall be be permitted to use the Space only for placement and
maintenance of computer and/or communications equipment which shall be
interconnected to the Services provided by Level 3. Customer may use the
Space to cross connect to the facilities of other communications carriers if
and only if Level 3 cannot or will not provide such services to Customer on
commercially reasonable terms. The nonrecurring and monthly recurring charges
for the Space and the Services shall be set forth in each Customer Order Form.
4. During the term for use of the Space set forth in each Customer Order
Form, Customer shall commit to use, order and pay for the following amounts
of bandwidth provided by Level 3: (a) for Customers using cabinets, at least
1 Mbps of bandwidth for each partial cabinet and at least 2 Mbps of bandwidth
for each full cabinet of Space ordered by Customer; and (b) for Customers
using private rooms, at least 1 Mbps of bandwidth for each 10 square feet of
Space ordered by Customer. Customer shall achieve the minimum service level
immediately after submission and acceptance of each Customer Order Form.
Level 3 may terminate use of the Space in the event that Customer does not
satisfy this minimum service commitment.
5. Level 3 shall perform such janitorial services, environmental systems
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the facility in which the Space is located in good
condition which is suitable for the placement of communications equipment. In
addition, Customer may order and pay for Level 3 to perform certain limited
("remote hands") maintenance services on Customer's equipment within the
space, which shall be performed in accordance with Customer's directions.
"Remote hands" maintenance services includes power cycling equipment. Level 3
shall in no event be responsible for the repair, configuration or tuning of
equipment, or for installation of Customer's equipment (although Level 3 will
provide
<PAGE>
reasonable assistance to Customer in such installation). Customer shall
maintain the Space in orderly and safe condition, and shall return the Space to
Level 3 at the conclusion of the term set forth in the Customer Order Form in
the same condition (reasonable wear and tear excepted) as when such Space was
delivered to Customer.
6. The term of use of the Space shall begin on the later to occur of the date
requested by Customer or the date that Level 3 completes the build-out of the
Space. Customer's use of the Space beyond the initial term shall be on a
month-to-month basis, unless Customer and Level 3 have agreed in writing to a
renewal of the right to use such Space. Customer hereby agrees to pay for the
Space and Services for the period of time specified in each Customer Order
Form, which period shall commence when both completion of the build-out of
the Space and initiation of delivery of such Services has occurred. The rates
and other charges set forth in each Customer Order Form are established in
reliance on the term commitment made therein. In the event that Customer
terminates its use of Space or Services ordered in any Customer Order Form or
in the event that the delivery of Space or Services is terminated due to a
failure of Customer to satisfy the requirements set forth herein or in the
Standard Terms and Conditions, termination charges (as specified in the
Standard Terms and Conditions) shall apply.
7. Level 3 shall use reasonable efforts to complete the build-out and make
the Space available to Customer on or before the date requested by Customer.
In the event that Level 3 fails to complete the build-out within sixty (60)
days of the date requested by Customer, then Customer may terminate its
rights to use such Space and receive a refund of any fees paid for the use or
build-out of such Space.
8. Level 3 shall have the right to terminate Customer's use of the Space or
the Services in the event that: (a) Level 3's rights to use the facility
within which the Space is located terminates or expires for any reason; (b)
Customer has violated the terms hereof (including the Standard Terms and
Conditions or any Service Order submitted thereunder); (c) Customer makes any
material alterations to the Space without first obtaining the written consent
of Level 3; (d) Customer allows personnel subcontractors to enter the Space
who have not been approved by Level 3 in advance; or (e) Customer violates any
posted or otherwise communicated rules relating to use of or access to the
Space. Level 3 shall use reasonable efforts to notify Customer of any events
that may result in termination of the use of the Space or delivery of
Services.
9. Level 3 reserves the right to change the location or configuration of
the Space, provided, however, that Level 3 shall not arbitrarily or
discriminatorily require such changes. Level 3 and Customer shall work in
good faith to minimize any disruption in Customer's services that may be
caused by such changes in location or configuration of the Space.
10. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3
relating to the content of the Internet or respecting any information,
product, service or software ordered through or provided by virtue of the
Internet.
11. Prior to occupancy and during the term of use of any Space, Customer
shall procure and maintain the following minimum insurance coverage: (a)
Workers' Compensation in compliance with all applicable statutes of
appropriate jurisdiction. Employer's Liability with limits of $500,000 each
accident; (b) Commercial General Liability with combined single limits of
$1,000,000 each occurrence; and (c) "All Risk" Property insurance covering
all of Customers personal property located in the Space. Customer's
Commercial General Liability policy shall be endorsed to show Level 3 as an
additional insured. All policies shall provide that Customer's insurers waive
all rights of subrogation against Level 3. Customer shall furnish Level 3
with certificates of insurance demonstrating that Customer has obtained the
required insurance coverages prior to occupancy of the Space. Such
certificates shall contain a statement that the insurance coverage shall not
be materially changed or cancelled without at least thirty (30) days prior
written notice to Level 3. Customer shall require any contractor entering the
Space on its behalf to procure and maintain the same types, amounts and
coverage extensions as required of Customer above.
12. The liability of Level 3 for damages arising out of the furnishing of
Services or Products (including the Space), including but not limited to
mistakes, omissions, interruptions, delays, tortious conduct or errors, or
other defects arising out of the failure to furnish Services or Products,
whether caused by acts of commission or omission, shall be limited to a
prorated refund of the charges paid by Customer for the use of the Space
hereunder. The extension of such refunds shall be the sole remedy of Customer
and the sole liability of Level 3. Level 3 shall in no event be liable for
any indirect, incidental, special, consequential, exemplary or punitive
damages (including but not limited to damages for lost profits or lost
revenues) Customer may suffer, whether or not caused by the intentional acts
or omissions or negligence of Level 3's employees or agents, and regardless
of whether Level 3 has been informed of the possibility or likelihood of such
damage.
13. Service Level Agreement ("SLA"). Level 3 shall provide the following
SLAs: Network Performance SLA; One-Way Delay SLA; and Response Time SLA (each
as defined herein). NETWORK PERFORMANCE SLA = 100% Service Availability.
"Availability" refers to Customer's access point to the Level 3 Internet
network and Customer's access port. "Unavailability Events" shall mean any
outage of Customer's port which is longer than 15 consecutive minutes, other
than outages caused by regularly scheduled or emergency maintenance events,
or Customer caused outages or disruptions. The Network Performance SLA does
not extend to the performance of Internet networks controlled by other
companies, or traffic exchange points (including NAPs and MAEs) which are
controlled by other companies. Customer shall report Unavailability Events to
Level 3 Customer Service within 48 hours of the Unavailability Event. If the
Unavailability Event is confirmed by Level 3, Customer will receive a
prorated service credit equal to the monthly recurring charges for the
affected Service for the duration of the outage. ONE-WAY DELAY SLA = 40
Milliseconds. The One-Way Delay SLA refers to the average delay parameters
among the Level 3 Gateway sites in the United States. It does not extend to
the Customer's local access circuit, transit or peering connections, or to
circuits to the traffic exchange points, including NAPs and MAEs. Delay is
measured as the average delay, over a calendar month, of all traffic between
all Gateways on the Level 3 U.S. Internet network. Level 3 will publicly
report the Average Monthly Delay measurement for the Level 3 U.S. Internet
Network at the end of every month. If the Customer reports that Level 3 has
failed to meet the One-Way Delay SLA, and such failure is confirmed by Level
3, Customer will receive a service credit equal to one day of the monthly
recurring charge for the affected Service for the month in which the One-Way
Delay SLA is not met. RESPONSE TIME SLA. Level 3 shall respond to any customer
issue within 30 minutes of notice of an outage from Customer. Level 3's
"Average Time To Repair" (ATTR) shall be no greater than 2 hours in any
calendar month. If Level 3 fails to meet the Response Time SLA, Customer will
receive a service credit equal to one day of the monthly recurring charge for
the affected Service for the month in which such failure occurs. Credits will
only be applied to events where Customer reports an outage to Level 3
Customer Service within five business days of the outage. The total amount of
service credits granted to Customer under this paragraph shall in no event
exceed four days of the pro-rated monthly recurring charge for the affected
Service.
<PAGE>
LEVEL (3)-SM-
COMMUNICATIONS
PRIVATE LINE
SERVICE ORDER FORM
- -------------------------------------------------------------------------------
CUSTOMER INFORMATION
Customer Name Entertainment Boulevard, Inc.
Customer Address: Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey
State: CA Zip: 90292
Phone: (310) 578-5404 Fax: (310) 578-6304
E-mail: [email protected]
Billing Address: Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey
State: CA Zip: 90292
Customer Contact: Stephen Brown
Street: 4052 Del Rey Avenue, #108 City: Marina Del Rey
State: CA Zip: 90292
Phone: (310) 578-5404 Fax: (310) 578-6304
E-mail: [email protected]
- -------------------------------------------------------------------------------
Your signature on this Service Order acknowledges that you understand and
accept the terms and conditions set below, that you are duly authorized to
execute this Service Order on Customer's behalf, and that Customer agrees to
be bound by the provisions hereof (including terms contained in the Standard
Terms and Conditions).
CUSTOMER ACCEPTANCE LEVEL 3 ACCEPTANCE
/s/ Stephen Brown /s/ Mark T. Mayeda
- ---------------------------------- -----------------------------------
Authorized Customer Signature Authorized Level 3 Signature
2-8-99 2-2-99
- ---------------------------------- -----------------------------------
Date Date
Stephen Brown Mark T. Mayeda
- ---------------------------------- -----------------------------------
Typed or Printed Name Typed or Printed Name
Chief Executive Officer Account Manager
- ---------------------------------- -----------------------------------
Title Title
- -------------------------------------------------------------------------------
PRIVATE LINE TERMS AND CONDITIONS:
1. This Service Order is entered into pursuant to the terms of the Standard
Terms and Conditions for Delivery of Products or Services ("Standard Terms
and Conditions") issued by Level 3 Communications, LLC ("Level 3"), a current
copy of which has been made available for Customer's review (either
electronically or in hard copy). The Standard Terms and Conditions, and any
state Tariffs applicable to the Services to be delivered hereunder, are
hereby incorporated into the terms hereof.
2. This Service Order memorializes Customer's agreement to purchase the
private line, non-switchable circuits (the "Services") from the location(s)
specified by Customer and accepted by Level 3 in "Customer Order Forms" to be
submitted by Customer from time to time hereunder. Each Customer Order Form,
when submitted and accepted by Level 3, shall be incorporated into and become
a part of this Service Order. Customer may submit multiple Customer Order
Forms requesting delivery of Services, each of which shall be governed by the
terms of this Service Order (including the Standard Terms and Conditions).
Customer Order Forms may be submitted in any fashion specified by Level 3
(including, but not limited to, electronic submission).
3. The nonrecurring charges and monthly recurring rates for the Services
provided by Level 3 to Customer shall be set forth in each Customer Order
Form.
4. Customer hereby agrees to pay for the Services for the period of time
specified in each Customer Order Form, which period shall commence with the
initiation of delivery of such Services. The rates and other charges set
forth in each Customer Order Form are established in reliance on the term
commitment made therein. In the event that Customer terminates Services
ordered in any Customer Order Form or in the event that the delivery of
Services terminated due to a failure of Customer to satisfy the requirements
set forth herein or in the Standard Terms and Conditions, termination
charges (as specified in the Standard Terms and Conditions) shall apply.
5. In the event that the Services do not function for a period of time, a
credit allowance will be given for such period (except as set forth below).
Services shall be eligible for credit allowances only where there is complete
loss of transport capacity along such Service. Credit allowances, if any,
shall be deducted from the charges payable by Customer hereunder and shall be
expressly indicated on the next bill to Customer. An interruption period
begins when Customer reports a malfunction in Service to Level 3. An
interruption period ends when the affected Service is operative. Credit
allowances do not apply to interruptions which are caused by Customer, End
User or any third party, which result from failure of power or equipment
provided by Customer or others, which occur during any period in which Level
3 is not given access to the Premises, or which result from scheduled
maintenance and repair (Level 3 shall provide advance notice of scheduled
maintenance as provided in the Standard Terms and Conditions).
CREDIT ALLOWANCE AMOUNT
<TABLE>
<CAPTION>
Length of Service Interruption Credit
- ------------------------------ ------
<S> <C>
- -1 to 8 hours 1/4th Day
- -8 to 12 hours 1/2 Day
- -12 to 16 hours 3/4th Day
- -16 to 24 hours 1 Day
</TABLE>
The amount of the credit allowance shall be based on the prorated monthly
recurring charge for the affected Service. Two or more Service interruptions
of the same type to the same line/equipment of two (2) hours or more during
any one twenty-four (24) hour period shall be considered as one interruption.
In no event shall such credits for any one line/equipment exceed one (1)
day's fixed recurring charges for such line/equipment in any twenty-four (24)
hour period. Interruptions greater than twenty-four hours will be credited
one day for each full twenty-four hour period, plus a credit for portions of
each day thereafter in accordance with the foregoing schedule.
6. The liability of Level 3 for damages arising out of the furnishing of
Services, including but not limited to mistakes, omissions, interruptions,
delays, tortious conduct or errors, or tother defects arising out of the
failure to furnish Services, whether caused by acts of commission or
omission, shall be limited to the extension of credit allowances set forth
above. The extension of such credit allowances shall be the sole remedy of
Customer and the sole liability of Level 3. Level 3 shall in no event be
liable for any indirect, incidental, special, consequential, exemplary or
punitive damages (including but not limited to damages for lost profits or
lost revenues) Customer may suffer, whether or not caused by the
intentional acts or omissions or negligence of Level 3's employees or
agents, and regardless of whether Level 3 has been informed of the possibility
or likelihood of such damages.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
LEVEL (3)-SM-
COMMUNICATIONS CUSTOMER ORDER FORM
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION 1: CONTRACTING CUSTOMER INFORMATION CON: [ILLEGIBLE] SON: [ILLEGIBLE]
Customer: Entertainment Boulevard, Inc. DBA: Entertainmentblvd.com
Address 1: 4052 Del Rey Avenue Address 2: Suite 108 Country: USA
City/Town: Marina Del Rey State/Prov.: CA Postal/ZIP: 90292
Contact: Steve Brown Title: CEO Telephone: 310-578-5404
Facsimile: 310-578-6304 Pager: e-mail: [email protected]
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION 2: SERVICES REQUESTED QUOTE ID: [ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------------------------
PRIVATE LINE CO-LOCATION SERVICES IP & RELATED SERVICES
- ----------------------------------------------------------------------------------------------------------------------------------
[ ] Point-to-Point Intercity [X] Web Co-Location Internet Access: [ ] Dedicated [ ] Dial-Up
Metropolitan: [X] Access [ ] Point-to-Point [ ] Telephony Co-Location Managed Modem: [ ] Dedicated [ ] Transit
Dealer Circuit: [ ] Intercity [ ] Metropolitan Voice Services: [ ] Long Distance [ ] Local
[ ] Hubbed Services [X] Cross-Connect [ ] VPN Services [ ] Other ___________________
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION 3: CHARGES RELATED TO ORDER
- ----------------------------------------------------------------------------------------------------------------------------------
MRC: [ $3,189] [X] Fixed NRC:[ $625] Revenue [ ] [ ]1 yr [x]2 yr [ ]3 yr By making a Revenue Commitment, Customer
Commitment agrees that, during the term specified at
left, Customer will order and pay for
MRC [ ] [X] Usage Other:[ ] [ ]4 yr [ ]5 yr [ ]Month Services which, on a monthly basis during
Product: Ramp Period [ ] -to- the agreed term (after any applicable
month "Ramp Period" specified above), have
monthly recurring charges which are, in
the aggregate, at least equal to the
Revenue Commitment. In the event that,
during any month, Customer's invoice for
actual Services used is less than the
Revenue Commitment, Customer shall
nevertheless be invoiced for, and shall be
responsible to pay, an amount equal to
the Revenue Commitment.
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION 4: ORDER TYPE & CUSTOMER SERVICE DATE REQUEST
- ----------------------------------------------------------------------------------------------------------------------------------
[X]New[ ]Add [ ]Up/Downgrade [ ]Move End: [ ] [ ]Reengineer[ ]Voice Change [ ]pre-install cxl [ ] Delete [ ] Record Request:
[5] [March] [99]
Day Month Year
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION 5: BILLING ADDRESS & DETAILS [X] Address Same as Contracting Customer Information. Above
- ----------------------------------------------------------------------------------------------------------------------------------
Customer: _______________________________ AKA:______________________________ County:______________________________
Address 1: _______________________________ Address 2:______________________________ Country: _____________________________
City/Town: _______________________________ State/Prov.:______________________________ Postal/ZIP:______________________________
Contract: _______________________________ Title:______________________________ Telephone:______________________________
Facsimile: _______________________________ Pager:______________________________ e-mail:______________________________
Currency: USD Language:________ Split Bill %:________
_______________________________
</TABLE>
Page 1 of 2
<PAGE>
<TABLE>
<S><C>
Section 6: Customer Site Details, Originating End /X/ Address Same as Contracting Customer Information, Above Site A
Bldg.Code: Site A / / On-Net /X/ Off Net /X/ With-in SSA / / Outside of SSA (additional charges may apply)
Customer: International Net Broadcasting, Inc. AKA: entertainmentblvd.com County: LA Time Zone: PST
Address 1: 4052 Del Rey Avenue Floor: Room: Suite: 108 Country: USA
City/Town: Marina Del Rey State/Prov.: CA Postal/ZIP: 90292
Site Contact: Mike Schaefer Title: VP, Web Development Telephone: 310-578-5404
Facsimile: 310-578-6304 Pager: e-mail: [email protected]
Tech Contact: Mike Schaefer Title: VP, Web Development Telephone: 310-578-5404
Facsimile: 310-578-6304 Pager: 888-769-9919 e-mail: [email protected]
24 Hr. Fault: Telephone: 310-578-5404 e-mail: [email protected]
Section 7: Customer Site Details or Gateway Details, Terminating End /X/ This is a Gateway-termination Site B
Bldg.Code: LSANCABA /X/ On-Net / / Off-Net /X/ With-in SSA / / Outside of SSA (additional charges may apply)
Customer: entertainmentblvd.com AKA: International Net Broadcasting, Inc. County: Time Zone:
Address 1: 818 West 7th Street Floor: Room: Suite: 1110 Country: USA
City/Town: Los Angeles State/Prov.: CA Postal/ZIP: 90017
Site Contact: Mark Hawkins Title: Sr. Tech Telephone: 213-996-5513
Facsimile: 213-996-5550 Pager: 888-769-9919 e-mail: [email protected]
Tech Contact: Mark Hawkins Title: Sr. Tech Telephone: 213-996-5513
Facsimile: 213-996-5550 Pager: e-mail: [email protected]
24 Hr. Fault: Telephone: e-mail:
For additional sites see separate sheet(s) /X/ No / / Yes If Yes, the total number of sites:
Section 8: Sales Account Executive Information
Name & ID: Mark Mayeda Telephone: 213-996-5545 e-mail: [email protected]
Section 9. Acceptance and Terms
This Customer Order is governed by Level 3 Communications, LLC's Terms and Conditions for Delivery of Service (which are
available for Customer's review either upon request or on Level 3's web site), which are hereby incorporated into this Customer
Order. Neither party shall be liable for any indirect, incidental, special, consequential, exemplary or punitive damages
(including but not limited to damages for lost profits or lost revenues), whether or not caused by the acts or omissions or
negligence of its employees or agents, and regardless of whether such party has been informed of the possibility or likelihood of
such damages.
/s/ Stephen Brown 2-8-99 Authorized Customer Name: Stephen Brown
Authorized Customer Signature Date Title: CEO
Customer & Order Details Page 2 of 2
</TABLE>
<PAGE>
2/8/99 LEVEL 3 COMMUNICATIONS PRICE QUOTE
<TABLE>
<S> <C>
AE Mark T. Mayeda
DATE 4-Feb-99
CUSTOMER Stephen Brown
COMPANY International Net Broadcasting, Inc. LOCATION A 4052 Del Rey Avenue
STREET 4052 Del Rey Avenue, Suite 108 Marina Del Rey, CA 90292
CITY, ST ZIP Marina Del Rey, CA 90292
PHONE 310-578-5404 LOCATION Z 818 West 7th Street
Los Angeles, CA 90017
</TABLE>
PRICE QUOTE ID Ste36195Mar
<TABLE>
QTY ITEM ITEM NO. DESCRIPTION TERM $-VOL 1999 MRC 2000 MRC 2001 MRC INSTALL NOTES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 SPC IPCOL-SPC-WHOLE Co-Location Whole Cabinet 2 YEAR $2,500 $ 760 $ 760 $ 760 $ - Groundfloor Promotion
($1,500)
2 BW IPCOL-BW-09M Bandwidth Per MB 2-9 Mbps 2 YEAR $2,500 $1,400 $1,330 $1,330 $ - Groundfloor Promotion
($1,500) - 2 Mgs
2 MAINT IPCOL-OPT-MANT-05HR 5 Hour Maintenance Package 2 YEAR $2,500 $ 700 $ 700 $ 700 $ - Remote Hands
1 XCON IPCOL-XCON-DSO Cross Connect DS0/DS1 2 YEAR $2,500 $ 15 $ 15 $ 15 $ - Groundfloor Promotion
($200)
1 DS1 ACC-DS1-PAC Local Access PacBell DS1; OFF 2 YEAR $2,500 $ 314 $ 314 $ 314 $525
$3,189 $3,119 $3,119 $525
1999 MRC 2000 MRC 2001 MRC INSTALL
</TABLE>
______________ RAMP-UP PERIOD
APPROVALS
- ----------------------------------------------
/s/ Stephen Brown
- ----------------------------------------------
Authorized Customer Signature Date
Stephen Brown 2-8-99
- ----------------------------------------------
Typed or Printed Name Date
CUSTOMER APPROVAL OF CUSTOMER ORDER FORM
This Price Quote is governed by Level 3 Communications, LLC's Terms and
Conditions for Delivery of Service (which are available for Customer's review
either upon request or on Level 3's web site), and shall be incorporated into
the Customer Order submitted by Customer for the foregoing Services.
IF LEVEL 3 DOES NOT HAVE LOCAL ACCESS CAPACITY: THE ORDER WILL BE PUT ON HOLD
UNTIL CAPACITY IS AVAILABLE OR THE CUSTOMER MAY REQUEST REPRICING AT OFF-NET
RATES.
<PAGE>
CUSTOMER ORDER FORM - CREDIT PROFILE
Section 1: Customer Type
<TABLE>
<S><C>
/ / Corporation / / Partnership / / Proprietorship / / Ltd. Liability Company / / Other
- ----------------------------------------------------------------------------------------------------------------------------------
Section 2: Contracting Customer Information
- ----------------------------------------------------------------------------------------------------------------------------------
Customer: Entertainment Boulevard, Inc. Customer ID: Parent ID:
--------------------------------- ----------------------- ------------------------------
Address 1: 4052 Del Rey Avenue Address 2: Suite 108 Country: USA
--------------------------------- ----------------------- ------------------------------
City/Town: Marina Del Rey State/Prov.: CA Postal/ZIP: 90292
--------------------------------- ----------------------- ------------------------------
Contact: Steve Brown Title: CEO Telephone: 310-578-5404
--------------------------------- ----------------------- ------------------------------
Facsimile: [ILLEGIBLE] Pager: [ILLEGIBLE] e-mail: [email protected]
--------------------------------- ----------------------- -------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Section 3: General Credit Information
- ----------------------------------------------------------------------------------------------------------------------------------
------------------ --------------- -------------------
Dun & Bradstreet Number: 96-951-0845 Stock Ticker Symbol: EBLD Taxpayer ID Number: 95-460-1106
------------------ --------------- -------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Section 4: Secondary Billing Address & Details (for split billing requirements)
- ----------------------------------------------------------------------------------------------------------------------------------
Customer: AKA: County:
--------------------------------- ----------------------------- ------------------------
Address 1: Address 2: Country:
--------------------------------- ----------------------------- ------------------------
City/Town: State/Prov.: Postal/ZIP:
--------------------------------- ----------------------------- ------------------------
Contact: Title: Telephone:
--------------------------------- ----------------------------- ------------------------
Facsimile: Pager: e-mail:
--------------------------------- ----------------------------- ------------------------
--------------------------------- -------------- ----
Currency: USD Language: English Split Bill%:
--------------------------------- -------------- ----
- ----------------------------------------------------------------------------------------------------------------------------------
Section 5: Company Principals
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------- ----------------------------- ------------------------
Name: Stephen Brown Title: CEO SSN/ID: ###-##-####
--------------------------------- ----------------------------- ------------------------
Name: Robin Wren Title: President SSN/ID: [ILLEGIBLE]
--------------------------------- ----------------------------- ------------------------
Name: Title: SSN/ID:
--------------------------------- ----------------------------- ------------------------
Name: Title: SSN/ID:
--------------------------------- ----------------------------- ------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Bank Information
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------- ----------------------------- ------------------------
Primary Bank: Bank of America Address 1: [ILLEGIBLE] Address 2:
--------------------------------- ----------------------------- ------------------------
City/Town: Marina Del Rey State/Prov.: CA Postal/ZIP:
--------------------------------- ----------------------------- ------------------------
Contact: Dedric Robinette Telephone: [ILLEGIBLE] Facsimile:
--------------------------------- ----------------------------- ------------------------
Account 1: [ILLEGIBLE] Account 2: Country:
--------------------------------- ----------------------------- ------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Trade Reference One
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------- ----------------------------- ------------------------
Company: Unitek Address 1: 12024 Wilshire Blvd. Address 2:
--------------------------------- ----------------------------- ------------------------
City/Town: Los Angeles State/Prov.: CA Postal/ZIP: 90025
--------------------------------- ----------------------------- ------------------------
Contact: Nick Telephone: 310-820-2400 Facsimile: 310-826-1455
--------------------------------- ----------------------------- ------------------------
Acc 1: Account 2: Country:
--------------------------------- ----------------------------- ------------------------
Credit Profile Page 1 of 2
<PAGE>
CUSTOMER ORDER FORM - CREDIT PROFILE
- ----------------------------------------------------------------------------------------------------------------------------------
Trade Reference Two
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------- ----------------------------- ------------------------
Company: [ILLEGIBLE] Address 1: [ILLEGIBLE] Address 2:
--------------------------------- ----------------------------- ------------------------
City/Town: Toronto State/Prov.: [ILLEGIBLE], Canada Postal/ZIP: MSV-241
--------------------------------- ----------------------------- ------------------------
Contact: [ILLEGIBLE] Telephone: [ILLEGIBLE] Facsimile: 416-362-5424
--------------------------------- ----------------------------- ------------------------
Account 1: Account 2: Country:
--------------------------------- ----------------------------- ------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Special Notes
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Level 3 internal use
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Customer Authorization
- ----------------------------------------------------------------------------------------------------------------------------------
I AUTHORIZE LEVEL 3 COMMUNICATIONS, LLC (LEVEL 3) TO CONDUCT A ROUTINE CREDIT
CHECK IN CONNECTION WITH MY APPLICATION FOR SERVICE. I HEREBY VERIFY THAT
THE INFORMATION PROVIDED ON THIS APPLICATION IS ACCURATE, AND THAT LEVEL 3
MAY USE ANY INFORMATION OBTAINED THROUGH THIS CREDIT APPLICATION OR ANY OTHER
REPORTING SOURCE. I UNDERSTAND SUCH INFORMATION WILL BE KEPT STRICTLY
CONFIDENTIAL, AND WILL REMAIN THE PROPERTY OF LEVEL 3 WHETHER OR NOT CREDIT
IS EXTENDED. I UNDERSTAND THAT SERVICE IS CONTINGENT UPON LEVEL 3'S
APPROVAL, WHICH MAY OCCUR AFTER ACTUAL ACTIVATION, AND THAT FAILURE TO MEET
PAYMENT REQUIREMENTS COULD RESULT IN A SUSPENSION OF ANY OR ALL SERVICES
PROVIDED TO MY COMPANY BY LEVEL 3. I UNDERSTAND THAT MY COMPANY IS
RESPONSIBLE FOR ANY AND ALL COSTS ASSOCIATED WITH HAVING A THIRD PARTY
COLLECT PAST DUE BALANCES OWED TO LEVEL 3 BY MY COMPANY. FURTHER, I
UNDERSTAND IT IS MY COMPANY'S RESPONSIBILITY TO NOTIFY LEVEL 3 IMMEDIATELY IF
THERE AN OWNERSHIP OR NAME CHANGE INVOLVING MY COMPANY.
- ----------------------------------------------------------------------------------------------------------------------------------
-------------------------------
Authorized Customer Name: Stephen Brown
/s/ Stephen Brown 2-8-99 -------------------------------
Title: CEO
Authorized Customer Signature Date -------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Credit Profile Page 2 of 2
<PAGE>
[LOGO] [LETTERHEAD]
February 25, 1999
Entertainment Blvd, Inc.
Attn: Stephen Brown
4052 Del Rey Avenue, Suite 108
Marina Del Rey, CA 90292
RE: STRATEGIC AND CO-MARKETING PARTNERSHIP AGREEMENT
Gentlemen:
This letter, when executed by the parties, will constitute a partnership and
co-marketing agreement ("Agreement") between SCOUR INC. ("Scour") and
ENTERTAINMENT BLVD INC. ("Entertainment Blvd"), with reference to the
following facts:
Scour Inc. operates a search engine and guide for finding multimedia on
the Internet. Entertainment Blvd operates a network of entertainment and
multimedia content web sites.
The parties desire to establish a business relationship with each other
and engage in a promotional partnership and certain marketing activities
as set forth below.
The parties agree as follows:
1. DEFINITIONS
VIDNET - A music video web site operated by Entertainment Blvd that
enables Internet users to listen and view streaming music videos.
SCREEN CLIPS - A multimedia web site operated by Entertainment Blvd
that enables Internet users to view streaming video movie trailers.
SCOURTV - A section of the Scour Net web site which showcases
television-like programming available on the Internet.
MUSIC CONTENT AREA - A section of the Scour.Net multimedia guide which
showcases music content on the Internet and provides a directory of
music-related web sites.
SCOUR AND ENTERTAINMENT BLVD - STRATEGIC PARTNERSHIP AND CO-MARKETING AGREEMENT
PAGE 1 OF 7
<PAGE>
FILM/MOVIE CONTENT AREA - A section of the Scour.Net multimedia guide
which showcases film/movie content on the Internet and provides a
directory of film/movie-related web sites.
2. PROMOTIONAL PARTNERSHIP
2.1 VIDNET TO BECOME MUSIC VIDEO PROVIDER FOR SCOURTV. Scour and
Entertainment Blvd agree to enter into a content partnership whereby Vidnet
provides music videos for Scour.Net's ScourTV section and whereby Scour
provides Vidnet with appropriate branding and shared revenues as follows:
a) ENTERTAINMENT BLVD/VIDNET TO CREATE "MUSIC VIDEO PLAYER" FOR
SCOUR.NET (hereon defined as a 'pop-up' web page which includes
embedded music videos, navigation links, and an advertisement) AS
FOLLOWS:
1. Entertainment Blvd agrees to create a Music Video Player as
defined above. The Music Video Player will include one or more
play-list based music channels. Additionally, it will provide some
mechanism for users to choose specific music video clips.
2. Entertainment Blvd will include a Scour search box embedded in the
Music Video Player which enables users to search for other
multimedia files through the Scour.Net search engine.
3. Scour agrees to link to the Music Video Player a) on the ScourTV
section of the Scour.Net web site, b) the Vidnet content area of
the ScourTV section, and c) other locations on the Scour.Net web
site at Scour's sole discretion.
4. Scour and Entertainment Blvd agree to split banner advertising
revenues earned by placing advertisements and other sponsorships
on the Music Video Player according to the following structure:
50% of advertising revenues earned on the Music Video Player
accrue to Scour and are payable 30 days after collection of said
revenues and the remaining 50% of advertising revenues accrue to
Entertainment Blvd and are payable 30 days after collection of
said revenues.
5. Entertainment Blvd agrees to provide a demo version of the Music
Video Player to Scour no later than February 26, 1999 and also
agrees to provide a final version available for release no later
than March 5, 1999.
6. During the term of this agreement, Scour agrees not to enter into
a similar business relationship with any third party that would
result in a joint venture to customize, promote, and share revenues
from a "Music Video Player" that features full-length music videos.
b) VIDNET INCLUSION IN SCOURTV SECTION OF SCOUR.NET WEB SITE:
1. Scour agrees to provide Vidnet with ongoing visibility on the main
ScourTV section of the Scour.Net web site.
2. Entertainment Blvd agrees to allow Scour to directly link to no
less than 5 links to full-length streaming music video files from
Vidnet's top 20 music videos off the main ScourTV page. On any
page where these links are provided, Scour agrees to provide
appropriate links back to Vidnet and to include a Vidnet logo.
3. Scour will provide Vidnet with its own content area (or sub-pages)
of ScourTV that enable Vidnet to showcase new Vidnet offerings and
Scour/Vidnet joint ventures. On any of these pages, Scour agrees
to split banner advertising revenues according to the following
structure: 50% of advertising revenues earned accrue to Scour and
are payable 30 days after collection of said revenues and the
SCOUR AND ENTERTAINMENT BLVD - STRATEGIC PARTNERSHIP AND CO-MARKETING AGREEMENT
PAGE 2 OF 7
<PAGE>
remaining 50% of advertising revenues accrue to Entertainment Blvd
and are payable 30 days after collection of said revenues.
4. Scour agrees to include links back to Vidnet on any page where
Scour links to Vidnet content.
2.2 VIDNET VISIBILITY IN MUSIC CONTENT AREA OF SCOUR.NET HOME PAGE
AND MULTIMEDIA GUIDE. Scour and Entertainment Blvd agree to enter into a content
partnership whereby Vidnet provides music content to be included in special
features that are part of Scour.Net multimedia guide.
a) BACKGROUND. As part of an upcoming release of the new Scour.Net
web site, Scour will be partnering with several major content
providers on the Internet. Scour will offer each of these content
providers visibility through "Content Area Features" on the
top-level entry points to the Scour.Net multimedia directory of
web sites and on the Scour.Net home page. These Content Area
Features include photos or graphic art, some teaser text about the
featured content, 1-5 links to multimedia files, and a link to the
content provider's web page.
b) Scour agrees to offer Entertainment Blvd participation to provide
Content Area Features for the music section of Scour.Net's
multimedia guide. Scour further agrees to commit at least one
24-hour period out of every seven (7) days for the first ninety
(90) days of this agreement, to showcase Vidnet in a Content Area
Feature of the music section. After said ninety (90) days, Scour
agrees to commit at least one 24-hour period out of every fourteen
(14) days to showcase Vidnet in a Content Area Feature of the
music section.
c) Entertainment Blvd agrees to produce necessary Vidnet content at
least forty-eight (48) hours in advance of public availability of
the Content Area Feature.
d) Scour agrees to provide an automated mechanism to transfer
necessary materials from Entertainment Blvd's production staff to
Scour's production staff.
e) Scour agrees to provide Entertainment Blvd with permanent banner
ad space on the music video subcategory of the Scour.Net web site
directory at no charge for 60 days following the launch of
Scour.Net's new web site targeted for release in the March
timeframe. (This ad space is contemplated to be approximately 120
pixels by 120 pixels.) After the first 60 days, Scour agrees to
provide Entertainment Blvd with one-third (1/3) of this inventory
and Entertainment Blvd has the first right of refusal for
purchasing the remaining two-thirds (2/3) of this ad space at a
$15 CPM rate.
2.3 SCREEN CLIPS VISIBILITY IN MOVIE CONTENT AREA OF SCOUR.NET
HOME PAGE AND MULTIMEDIA GUIDE. Scour and Entertainment Blvd agree to enter
into a content partnership whereby Screen Clips provides film/movie content
to be included in special features that are part of Scour.Net multimedia
guide.
a) BACKGROUND. As part of an upcoming release of the new Scour.Net web
site, Scour will be partnering with several major content
providers on the Internet. Scour will offer each of these content
providers visibility through "Content Area Features" on the
top-level entry points to the Scour.Net multimedia directory of
web sites and on the Scour.Net home page. These Content Area
Features include photos or graphic art, some teaser text about the
featured content, 1-5 links to multimedia files, and a link to the
content provider's web page.
b) Scour agrees to offer Screen Clips participation to provide
Content Area Features for the film/movie section of Scour.Net's
multimedia guide. Scour further agrees to commit at least one
24-hour period out of every seven (7) days for the first ninety
(90) days of this agreement, to showcase Screen Clips in a Content
Area Feature of the film section. After said ninety (90) days,
Scour agrees to commit at least one 24-
PAGE 3 OF 7
<PAGE>
hour period out of every fourteen (14) days to showcase Screen
Clips in a Content Area Feature of the film section.
c) Entertainment Blvd agrees to produce necessary Screen Clips
content at least 48 hours in advance of public availability of the
Content Area Feature.
d) Scour agrees to provide an automated mechanism to transfer
necessary materials from Entertainment Blvd's production staff to
Scour's production staff.
2.4 INCLUSION OF ENTERTAINMENT BLVD CONTENT IN SCOUR MEDIA
PARTNERS PROGRAM. Entertainment Blvd agrees to participate in Scour's upcoming
partnership program, contemplated to be named "Scour Media Partners Program",
as follows:
a) BACKGROUND. Scour has created a promotional program that offers
content providers branding and ad revenues through Scour.Net's
multimedia links available through Scour.Net's core multimedia
search engine. Scour has developed its own search spiders that
scan the Internet to find links to multimedia. The Scour.Net
search engine offers users a searchable index to this content.
Scour.Net currently links directly to these multimedia files. By
becoming part of the Scour Media Partners Program, content
providers will change the way their content is linked to. Instead
of linking directly to the multimedia files, content indexed on a
web site managed by any member of the Scour Media Partners Program
will launch a 'pop-up' window that includes the embedded
multimedia file and an ad space available for placement by the
partner.
b) Entertainment Blvd agrees to participate in the program described
above.
2.5 TECHNICAL LIAISON. Upon the execution of this Agreement, Scour
and Entertainment Blvd will each provide the other with access to one of its
technical personnel ("Technical Liaison") for the purpose of exchanging
information and cooperating to successfully effect any technical activities
set forth in this Agreement and future agreements between the parties. As of
the date hereof, the parties' Technical Liaison are as follows:
For Scour: Ilya Haykinson
SCOUR INC.
10982 Roebling Drive, #433
Los Angeles, CA 90024
Phone: 310.443.1178
Fax: 310.443.1127
Email: [email protected]
For Entertainment Blvd:
Mike Schaefer
ENTERTAINMENT BLVD, INC.
4052 Del Rey Avenue, Suite 108
Marina Del Rey, CA 90292
Phone: 310.578.5404
Fax: 310.578.6304
Email: [email protected]
3. MARKETING PARTNERSHIP
PAGE 4 OF 7
<PAGE>
3.1 MARKETING LIAISON. Upon the execution of this Agreement, Scour and
Entertainment Blvd will each provide the other with access to one of its
public relations or marketing personnel ("Marketing Liaison") for the purpose
of exchanging information and cooperating to successfully effect any
marketing activities set forth in this Agreement and future agreements
between the parties. As of the date hereof, the parties' Marketing Liaison
are as follows:
For Scour: Dan Rodrigues
SCOUR INC.
10982 Roebling Drive, #433
Los Angeles, CA 90024
Phone: 310.443.1178
Fax: 310.443.1127
Email: [email protected]
For Entertainment Blvd:
Robin Wren
ENTERTAINMENT BLVD, INC.
4052 Del Rey Avenue, Suite 108
Marina Del Rey, CA 90292
Phone: 310.578.5404
Fax: 310.578.6304
Email: [email protected]
3.2 PARTNERSHIP LOGO AND LINKS. Upon the execution of this Agreement,
Entertainment Blvd will provide to Scour an Entertainment Blvd logo, a link to
Entertainment Blvd's web site, and an Entertainment Blvd company description
to be included on a web page on the Scour.Net web site which showcases
Scour.Net's partner relationships. Similarly, Scour will provide to
Entertainment Blvd a Scour.Net logo, a link to the Scour.Net web site, and a
Scour.Net product description to be used in a similar way by Entertainment
Blvd, at Entertainment Blvd's sole discretion.
4. CONFIDENTIALITY
Each of the parties to this Agreement warrants and agrees that neither
it nor its counsel will disclose, disseminate, or cause to be disclosed the
terms of this Agreement, except:
a) Insofar as disclosure is reasonably necessary to carry out and
effectuate the terms of this Agreement;
b) Insofar as a party hereto is required by law to respond to any
demand for information from any court, governmental entity, or
governmental agency;
c) Insofar as disclosure is necessary to be made to a party's
independent accountants for tax and audit purposes; and
d) Insofar as the parties may mutually agree in writing upon language
to be contained in one or more press releases.
5. TERM AND TERMINATION
5.1 The term of this Agreement shall commence on March 2, 1999 and
is executed by the parties and shall commence for a period of 180 days unless
earlier terminated as is
Page 5 of 7
<PAGE>
otherwise rightfully terminated. At the end of the above period, this
Agreement shall automatically renew every 30 days until March 2, 2000 unless
terminated by either party upon notice provided 30 days prior to any such
renewal period.
5.2 Upon termination or expiration of this Agreement, regardless of the
cause thereof, the parties shall abide by and uphold any rights or obligations
accrued or existing on the date of termination or expiration. The parties
agree to continue cooperating with each other and to carry out an orderly
termination of their relations. Paragraph 4 shall survive termination of this
Agreement.
6. GENERAL PROVISIONS
6.1 Each party hereto agrees to and does hereby indemnify, save and
hold harmless, the other, its permitted assigns, licensees and its directors,
officers, shareholders, agents and employees from any and all liabilities,
claims, demands, loss and damage (including reasonable attorneys' fees and
court costs) arising out of or connected with any claim by a third party
which is inconsistent with any of the warranties, representations, covenants
or agreements made by the Indemnitor herein and agrees to reimburse
Indemnitee, on demand, for any payment made by Indemnitor at any time after
the date hereof with respect to any liability or claim to which the foregoing
indemnity applies.
6.2 Each party represents and warrants that it has the authority to
enter into this Agreement and to fully perform all of its obligations
hereunder. Each party represents and warrants that the grant of rights herein
does not violate the rights or any third parties and each party will adhere
to applicable Federal, State and Local law and regulation in the performance
of its obligations hereunder.
Page 6 of 7
<PAGE>
If the above reflects our understanding, please sign in the space
indicated below. We look forward to working with you!
Sincerely yours,
SCOUR INC.
By: /s/ Dan Rodrigues
- --------------------------
Dan Rodrigues
President and CEO
AGREED AND ACCEPTED:
ENTERTAINMENT BLVD, INC.
By: /s/ Stephen Brown
-----------------------
Authorized Signature
Name: Stephen Brown
---------------------
Title: CEO
--------------------
Date: 2-26-99
---------------------
Page 7 of 7
<PAGE>
Exhibit 10.17
[Graphic]
ENTERTAINMENT BLVD., INC and
InterVU
Video Content Management & Delivery Services Agreement
The specifics of our agreement are outlined below:
Proposed Term
- -------------
The term will be for 12-months from date of signing.
1. InterVU to Offer:
- --------------------
Applications and Services
-------------------------
InterVU to provide, in a non-exclusive manner, the following
applications and services to ENTERTAINMENT BLVD., INC.:
Applications:
A) Audio/Video-on-Demand
Video-on-Demand entails a one-to-one unicast model, in which a viewer
selects those clips they wish to see or hear. Services involved in this
application include Web Site Integration and Content Management &
Delivery. ENTERTAINMENT BLVD., INC. may aggregate all of its properties
covered by this Agreement together to achieve the volume levels
required for discounted pricing for Content Management & Delivery services
(bandwidth). Pricing is hosted on MB of data transferred. Please see
addendum for specifics.
For Video-on-Demand, InterVU will provide content management (storage of
clips) for the term of this agreement. Clips will be placed on an archive
servers(s), with no significant performance reduction.
1. Services:
A. Production-Web Site Integration
Application Broadcast Services, Video-on-Demand
InterVU will work directly with a designated ENTERTAINMENT BLVD., INC.
web site producer to facilitate the inclusion of the video material into
each appropriate web page.
<PAGE>
[LOGO]
ENTERTAINMENT BLVD., INC AND
INTERVU
VIDEO CONTENT MANAGEMENT & DELIVERY SERVICES AGREEMENT
- -------------------------------------------------------------------------------
The specifics of our agreement are outlined below:
PROPOSED TERM
The term will be for 12-months from date of signing.
I. INTERVU TO OFFER:
APPLICATIONS AND SERVICES
InterVU to provide, in a non-exclusive manner, the following
applications and services to ENTERTAINMENT BLVD., INC.,
Applications:
A) Audio/Video-on-Demand
Video-on-Demand entails a one-to-one unicast model, in which a viewer
selects those clips they wish to see or hear. Services involved in this
application include Web Site Integration and Content Management &
Delivery. ENTERTAINMENT BLVD., INC. may aggregate all of its properties
covered by this agreement together to achieve the volume levels required
for discounted pricing for Content Management & Delivery services
(bandwidth). Pricing is based on MB of data transferred. Please see
addendum for specifics.
For Video-on-Demand, InterVU will provide content management (storage of
clips) for the term of this agreement. Clips will be placed on an
archive server(s), with no significant performance reduction.
1. Services:
A. Production--WebSite Integration
Applications: Broadcast Services, Video-on-Demand
InterVU will work directly with a designated ENTERTAINMENT BLVD., INC.
web site producer to facilitate the inclusion of the video material into
each appropriate web page
<PAGE>
2. Content Management & Delivery
Applications: Broadcast Services, Audio/Video-on-Demand
InterVU will host and deliver ENTERTAINMENT BLVD., INC. content from the
InterVU Network, which consists of intelligently distributed video
delivery centers colocated across nine major backbone providers to
provide premium performance and unmatched scalability. By intelligently
managing the video distribution across these multiple backbones and ISP
networks, InterVU shall provide to ENTERTAINMENT BLVD., INC. many times
the amount of bandwidth and throughput to viewers than a single network
provider could provide alone.
PROMOTIONAL BENEFITS
ENTERTAINMENT BLVD., INC. BRANDING & TARGETED AUDIENCE BUILDING
As part of the relationship with ENTERTAINMENT BLVD., INC., InterVU
requires ENTERTAINMENT BLVD., INC. to provide InterVU's proprietary
multimedia manager through the Eye Q download button on the pages where
InterVU hosted content is found. This multimedia software provides
direct functional benefits to ENTERTAINMENT BLVD., INC. as well as to
the viewer.
Viewers want to download this free software because doing so installs
the player(s) necessary to see ENTERTAINMENT BLVD., INC. multimedia
content. Further, it will keep the viewer's player technology current by
notifying the viewer that a new version of the player is available, and
if prompted, will update that player.
ENTERTAINMENT BLVD., INC. TO PROVIDE:
INTERNET AND OTHER PROMOTION
During the term of this agreement, ENTERTAINMENT BLVD., INC. agrees to
provide "InterVU Enabled" branding or the "Eye Q download button" on all
associated multimedia pages in a mutually agreeable form.
ENTERTAINMENT BLVD., INC. agrees to provide an encoded feed and clips in
any acceptable format for Broadcast Services and Audio/Video-on-Demand
content originating from ENTERTAINMENT BLVD., INC., ENTERTAINMENT BLVD.,
INC. is also responsible for any costs in the production and
transmission to InterVU of such feed and clips.
ENTERTAINMENT BLVD., INC. also agrees to allow InterVU to link to those
ENTERTAINMENT BLVD., INC. properties served by InterVU. During the terms
of this agreement, InterVU shall be allowed to use ENTERTAINMENT BLVD.,
INC. property names to reproduce examples of work both on-line and
through CD-ROMs or other fixed media.
<PAGE>
ELEMENTS OF INTERVU/ENTERTAINMENT BLVD., INC. AGREEMENT
FINANCIAL CONSIDERATIONS:
During the Term, the InterVU/ENTERTAINMENT BLVD., INC. Agreement will
consist of the following elements:
BROADCAST SERVICES AND AUDIO/VIDEO-ON-DEMAND
MONTHLY RECURRING
InterVU will provide a content management and delivery solution for
ENTERTAINMENT BLVD., INC. as described on page #2; ENTERTAINMENT BLVD.,
INC. is in turn responsible for the digitization and transmission of the
encoded material to InterVU. InterVU will provide monthly usage reports
for.
Content will be delivered from an archive server(s) on InterVU's
network. Pricing for these services will be per the attached pricing
addendum. (see attachment 1-2) AS AN INCENTIVE FOR ENTERTAINMENT BLVD.,
INC EXECUTING THIS CONTRACT PRIOR TO 2/10/99 INTERVU IS OFFERING A 25%
DISCOUNT OFF OF THE ATTACHED PRICE LIST WHEN USED IN CONJUNCTION WITH
THIS ONE YEAR AGREEMENT.
SETUP FEE
In addition, InterVU shall charge ENTERTAINMENT BLVD., INC. a $5,000
setup fee/deposit which shall be paid to InterVU prior to account
activation. This setup fee will be applied to ENTERTAINMENT BLVD.,
INC.'S 1 year contract.
IVU SERVICE AGREEMENTS:
IVU's standard terms and conditions are contained in Exhibit I attached
(the InterVU Service Agreement) which are included herein by reference.
AGREED AND ACCEPTED
To indicate your acceptance of the terms and conditions contained in
this Agreement, including the Addendum and Exhibit I, please sign in the
space provided below.
ACKNOWLEDGED AND AGREED
Edward Hughes /s/ Stephen Brown
- ------------------------ -------------------------
InterVU (PRINT) ENTERTAINMENT BLVD., INC.
(PRINT)
Edward Hughes /s/ Stephen Brown 2-8-99
- ------------------------- -------------------------
InterVU (signature) Date ENTERTAINMENT BLVD., INC.
(signature) Date
<PAGE>
[GRAPHIC]
INTERVU
Where the Web is moving Exhibit I
INTERVU SERVICE AGREEMENT
This agreement (the "Agreement") is by and between InterVU Inc. ("InterVU")
and Customer for the provision by InterVU of delivery for electronic video
content services as more particularly described below. The parties hereby
agree as follows:
1. INTERVU SERVICE DESCRIPTION. The InterVU service (the "Service") supports
dissemination of Customer's electronic audio/video content through
InterVU servers and the global Internet. Content may include multimedia
based advertisement, product information, announcements, news, or other
information or data, collectively called the "Content".
2. SERVICE COMMENCEMENT AND FEES. Service commencement shall be upon
InterVU's receipt of the completed InterVU Service Order Form ("Order
Form") and signed Agreement.
3. TERM/EXTENSION/TERMINATION.
A. INITIAL TERM AND EXTENSIONS. Service commencement shall be upon
InterVU's receipt of the completed InterVU Service Order Form and
shall last 3 months. This agreement is subject to month-to-month
automatic extensions following the initial three month period until
written notice of cancellation is provided to InterVU as provided in
3(B)(3) below.
B. TERMINATION.
(1) BY INTERVU FOR NON-PAYMENT. After forty-five (45) days of
non-payment from InterVU invoice due date, InterVU may terminate
this Agreement and the Service in InterVU's sole discretion. To
re-enable Service, repayment of the Service Start-Up charge will
be required and payment of any past due balances. Termination for
non-payment does not relieve Customer's responsibilities under
this Agreement, including but not limited to, its obligation to
pay fees up to the date of termination.
(2) BY INTERVU WITHOUT NOTICE. Should Customer's Content directly or
indirectly, actually or allegedly (1) violate any international,
United States, foreign, state, local or other applicable law,
regulation, rule or order of any applicable regulatory authority
or court of competent jurisdiction, (2) infringe or constitute the
unauthorized use of any patent right, copyright, trademark,
service mark, trade name or other intellectual property right of
any third party, (3) constitute, be based on or involve the
misappropriation of any trade secret or other intellectual
property right of any third party, or (4) be for or involve any
defamatory, threatening or obscene purpose or in violation of any
community standard, then InterVU may terminate this Agreement and
the Service without notice to Customer, but provide a refund to
Customer for any unused Service fees.
(3) BY EITHER PARTY FOR CONVENIENCE. After the initial term of
Service, the term shall be month-to-month and either party may
terminate this Agreement and the Service for any reason upon
thirty (30) days prior written notice.
4. SERVICE USAGE RESTRICTIONS.
<PAGE>
A. Customer hereby represents and warrants to InterVU, as of the date
of this Agreement, as of each date on which Customer continues and/or
adds new or modified Content to be hosted by use of the Service, and
as of each date on which the term of this Agreement is extended
pursuant to Section 3.A above, that neither the Content nor
Customer's use of the Service (1) violated any international, United
States, foreign, state, local or other applicable law, regulations,
rule or order of any applicable regulatory authority or court of
competent jurisdiction, (2) infringes or constitutes the unauthorized
use of any patent right, copyright, trademark, service mark, trade
name or other intellectual property right of any third party, (3)
constitutes, is based on or involves the misappropriation of any
trade secret or other intellectual property right of any third
party, or (4) is used for or involves any defamatory, threatening or
obscene purpose.
B. Customer shall not use the Service, whether in general or with
respect to any particular Content, in any manner which directly or
indirectly would (1) violate any international, United States,
foreign, state, local or other applicable law, regulation, rule or
order of any applicable regulatory authority or court of competent
jurisdiction, (2) infringe or constitute the unauthorized use of any
patent right, copyright, trademark, service mark, trade name or other
intellectual property right of any third party, (3) constitute, be
based on or involve the misappropriation of any trade secret or other
intellectual property right of any third party, or (4) be for or
involve any defamatory, threatening or obscene purpose.
5. SERVICE USAGE STATISTICS. Customer authorizes InterVU to distribute the
Customer's Service usage statistics to selected and approved recipient
without identifying Customer by name.
6. VIDEO GUIDE. Customer authorizes InterVU the right to list and link to
the Customer's Web Site from within InterVU's Content Developers Kit and
from within InterVU's "Video Guide" or any replacement and/or additional
section of its World Wide Web site. InterVU shall have the right to use
the name of Customer for InterVU's own promotional use or as required by
law.
7. CUSTOMER USE ONLY. This Service is for the Customer's global Internet
content offerings only. Customer shall not use the Service as a primary
business vehicle of reselling the InterVU Service. Co-Marketing
Value-Added Reseller Agreements are available for qualified candidates,
subject to the prior express written agreement of InterVU in its sole
discretion.
8. CONTENT PREPARATION AND MANAGEMENT.
A. Customer has full obligation and responsibility for preparation of
Content, including encoding of Content to digital formats as required
by the Service, except as otherwise agreed in writing.
B. Company has full obligation and responsibility for placement and
removal of Content hosted on InterVU video servers, except as
otherwise agreed in writing. InterVU shall provide Customer with all
necessary information, including InterVU video server IP addresses,
computer directory name, user account and password information,
regarding actions necessary to remove and add Content onto the
Service.
9. NO HISTORICAL ARCHIVAL OF CONTENT. While InterVU backs up its server
computers as a regular part of its internal systems administration, the
Service is for Content hosting and display. InterVU advises Customer that
it does not provide or gaurantee any storage or backup of Customer's
Content. Customer is responsible for providing any storage, backup and
archival history support with respect to its Content, whether created by
Customer or for Customer by a different party.
10. CUSTOMER INDEMNITY. Customer expressly acknowledges (1) that Customer is
solely responsible for the Content which it selects to be hosted by use of
the Service and for all claims, losses, liabilities, damages and expenses
that may relate in any manner whatsoever to the Content, and (2) that
InterVU is in no way responsible for such Content or for any claims,
<PAGE>
losses, liabilities, damages and expenses that may relate in any manner
whatsoever to such Content. Customer shall defend, indemnify and hold
harmless InterVU and its subsidiaries, directors and employees, its
agents, shareholders and subcontractors, against any and all claims,
losses, liabilities, damages and expenses (including reasonable
attorneys' fees and costs) which it or they may suffer or incur in
connection with any actual or threatened claim, demand, action or other
proceeding by any third party (including any governmental authority)
arising from or relating to (1) any misrepresentation or breach of
warranty by Customer hereunder, (2) the breach by Customer of any
obligation hereunder, or (3) Customer's design, creation, provision or
use of information and technologies in their Content, including, but not
limited to, any related copyrights, trade secrets, trade names, patents,
intellectual property rights or obscenity laws in any country or
jurisdiction in which the Content can be viewed or retrieved.
11. WARRANTIES. INTERVU WARRANTS AND REPRESENTS THAT IT HAS THE RIGHT TO
ENTER INTO THIS AGREEMENT AND ITS EXECUTION WILL NOT INFRINGE UPON
RIGHTS OF ANY 3RD PARTY. INTERVU ALSO INDEMNIFIES CUSTOMER FOR SUCH
WARRANTY AND REPRESENTATION. CUSTOMER'S INDEMNITY OF INTERVU SHALL, IN
NO EVENT, EXCEED THE AGGREGATE FEES PAYABLE HEREUNDER TO INTERVU.
12. LIMITATION OF LIABILITY. THE LIABILITY OF INTERVU FOR ANY BREACH OF ITS
OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE RELATING TO THIS AGREEMENT
SHALL BE LIMITED TO THE AGGREGATE AMOUNTS ACTUALLY PAID BY CUSTOMER TO
INTERVU UNDER THIS AGREEMENT EXCEPT UNDER THE INDEMNITY PROVISION OF
SECTION 10 ABOVE. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES
ARISING OUT OF OR IN RELATION TO THIS AGREEMENT. EXCEPT FOR THE PAYMENT
OF ANY MONIES OWED UNDER THIS AGREEMENT, NEITHER PARTY SHALL BE HELD
LIABLE OR RESPONSIBLE TO THE OTHER PARTY, NOR BE DEEMED TO HAVE
DEFAULTED UNDER OR BREACHED THIS AGREEMENT, FOR FAILURE OR DELAY IN
FULFILLING OR PERFORMING ANY TERM OF THIS AGREEMENT TO THE EXTENT, AND
FOR SO LONG AS, SUCH FAILURE OR DELAY IS CAUSED BY OR RESULTS FROM
CAUSES BEYOND THE REASONABLE CONTROL OF THE AFFECTED PARTY INCLUDING BUT
NOT LIMITED TO FIRE, FLOODS, EMBARGOES, WAR, ACTS OF WAR (WHETHER WAR BE
DECLARED OR NOT), INSURRECTIONS, RIOTS, CIVIL COMMOTIONS, STRIKES,
LOCKOUTS, OR OTHER LABOR DISTURBANCES, ACTS OF GOD, ACTS, OMISSIONS OR
DELAYS IN ACTING BY ANY GOVERNMENTAL AUTHORITY OR THE OTHER PARTY. UNDER
NO CIRCUMSTANCES, SHALL EITHER PARTY BE LIABLE UNDER ANY THEORY OF
LIABILITY OR FOR ANY CLAIMS OR DAMAGES INCLUDING, WITHOUT LIMITATION,
INDIRECT, GENERAL, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR
OTHER SIMILAR DAMAGES ARISING OUT OF THE USE OF OR INABILITY TO USE ANY
PRODUCT, OR SERVICE PROVIDED HEREUNDER OR OTHERWISE RELATING TO THIS
AGREEMENT (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION OR ANY
OTHER PECUNIARY LOSS), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
13. INTELLECTUAL PROPERTY RIGHTS. Except as otherwise provided in this
Agreement, under no circumstances shall a party, as a result of this
Agreement, obtain any ownership interest or other right in any patents,
pending patent applications, trade secrets, copyrights, trademarks,
tradenames or other intellectual property rights of the other party.
14. INDEPENDENT CONTRACTORS. The parties acknowledge that InterVU and
Customer are independent contractors, and that nothing in this Agreement
shall be construed to create a joint venture, partnership or agency
relationship between them.
15. NO ASSIGNMENT. Customer shall not assign, transfer or otherwise dispose
of this Agreement or any interest therein, whether voluntarily, by
operation of law or otherwise, except to an entity either wholly owned
by or which substantially or wholly owns Customer, without the prior
express written consent of InterVU. Customer shall give express written
notice to
<PAGE>
InterVU of any permitted assignment, transfer for other disposition
and the permitted assignment or transfer shall expressly agree in writing
to be bound by the terms and conditions hereof. Any purported assignment
transfer or other disposition shall be void.
16. GENERAL TERMS . In the event of termination of Service hereunder for any
reason. Customers's obligations with respect to unpaid Service usage and
Section 5, the second sentence of 6, 10, 11, 12 and 13 shall survive
this Agreement. If any provision of this Agreement is held by a court of
competent jurisdiction to be contrary to law, the remaining provisions of
this Agreement will remain in full force and effect. This Agreement
represents the complete agreement and understanding of this portion, with
respect to the subject matter herein, and supersedes any other
representation, agreement or understanding, written or oral. In the event
of any conflict arising between Customer's purchase under terms and this
Agreement, this Agreement shall take precedence. This agreement may be
modified only in writing, signed by both parties. This Agreement shall
be governed by and construed in accordance with the Laws of the State
of California, without regard to the conflicts of law principles thereof.
Any action must be brought in the courts of New York or California.
The parties represent and warrant that they have full corporate power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder, and that the person whose signature appears below is
duly authorized to enter into this Agreement on behalf of the party of whom
they represent. Each party also represents and warrents that this Agreement
is a valid binding and uneforceable agreement against it in accordance with
its terms.
In Witness Whereof, the Parties have entered into this Agreement:
/s/ Stephen Brown, CEO
- ----------------------------------------------------------------------
ENTERTAINMENT BLVD., INC. Representative Title (Print)
/s/ Stephen Brown, CEO 2-8-99
- ----------------------------------------------------------------------
ENTERTAINMENT BLVD., INC. Representative Title (Signature) Date
/s/ Ed Hughes
- ----------------------------------------------------------------------
InterVU Representative (Print)
/s/ Edward Hughes 2-23-99
- ----------------------------------------------------------------------
InterVU Representative (Signature) Date
<PAGE>
[LOGO] VOD PRICING AND PACKAGING
INTERVU
The Video Delivery Company
ENCODING
- --------
<TABLE>
<CAPTION>
Netshow, RealAudio and Video, Quicktime, MPEG or AVI
----------------------------------------------------
<S> <C> <C>
0 to 3 minutes $100 for the 1st clip (including set up fee)
each add'l clip $ 50
each add'l minute $ 10
each add'l format $ 4
each add'l rate $ 4
JPEG
----
1 to 3 images $100 per job (including set up)
each add'l image $ 40
</TABLE>
VOD DELIVERY For clips less than 3 minutes
- ------------
Premium: $5000 per month, including set up and administration costs and:
50,000 viewers @ 28.8kbps or 25,000 viewers @ 56kbps
$1 per subsequent viewer
WEBSITE INTEGRATION
-------------------
Standard: Includes HTML integration, Java scripting, embed or spawning
statements to enable website to meet InterVU spec.
Up to 5 hrs. $1000 per job (including set up)
each add'l hour $ 150
Premium: Includes Standard plus splash page design (w/o hosting).
Minimum fee $3000 per job (including set up)
each add'l hour $ 150
<PAGE>
STORAGE
- -------
First 50MB N/C
Each Additional 1GB $250 per Month for Each Distribution Location.
Please call your InterVU representative for clips longer than 3 minutes in
length or for greater volume and/or greater bandwidth considerations.
<PAGE>
[LOGO] LIVE BROADCAST PRICING AND
PACKAGING
INTERVU
The Video Delivery Company
<TABLE>
<CAPTION>
BROADCAST DELIVERY ONLY - AUDIO AND VIDEO
-----------------------------------------
<S> <C>
Basic: $1,000 for set up and administration per 0 to 2 hour event.
$2,000 for set up and administration per 2 to 6 hour event.
$3,000 for set up and administration per 6 to 10 hour event.
Includes up to 100 simultaneous viewers @ 28.8kbps or 50
simultaneous viewers @ 56kbps
Standard: $2,000 for set up and administration per 0 to 2 hour event.
$4,000 for set up and administration per 2 to 6 hour event.
$6,000 for set up and administration per 6 to 10 hour event.
Includes up to 1,000 simultaneous viewers @ 28.8kbps or 500
simultaneous viewers @ 56kbps
Premium: $ 4,000 for set up and administration per 0 to 2 hour event.
$ 8,000 for set up and administration per 2 to 6 hour event.
$12,000 for set up and administration per 6 to 10 hour event.
Includes up to 5,000 simultaneous viewers @ 28.8kbps or 2,500
simultaneous viewers @ 56kbps
</TABLE>
Please call your InterVU representative for broadcast events not specified
here.
<PAGE>
LICENSE AGREEMENT
This Agreement is dated as of February 25, 1999 ("Agreement") and is entered
into by and between Dimension Music, Inc., 127 Town View Drive, Wappingers
Falls, New York 12590 ("Licensee") and Entertainment Boulevard, Inc., 4052 Del
Rey Avenue Suite 108, Marina Del Rey, California 90292 ("EBLD").
1. CONTENT AND RECIPROCAL LINKS
EBLD distributes entertainment-related content, including streaming music videos
through a web site located at www.vidnetusa.com ("EBLD Site"). EBLD hereby
grants to Licensee a royalty-free, non-exclusive license to distribute such
content from the EBLD Site as is mutually agreed by the parties ("Content") on
the Dimension Music web site, located at www.dmusic.com ("Licensee Site").
In consideration for the above, EBLD shall produce, host and serve a co-branded
pop-up window or pop-up windows within the Dimension Music Site (hereinafter
Collectively referred to as "Co-Branded Page") for the distribution of the
Content. The Co-Branded Page is defined as a web page or web pages that contain
both parties' logos, trademarks, tradenames, service marks, and/or content as
mutually agreed upon.
EBLD agrees that the Content shall not be defamatory or knowingly in breach of
any person's rights, including any intellectual property rights, privacy or any
other rights. Licensee shall have the right not to distribute the Content, or
any portion thereof, at any time if in the reasonable opinion of Licensee any of
the above conditions are breached and until EBLD has made the requisite
editorial changes.
Both parties shall have the right to sell and shall use best efforts to sell
advertising and sponsorships on the Co-Branded Page and shall split 50/50 all
revenue received in connection therewith less any third party agency fees or
commissions actually paid in connections with such advertising and sponsorships.
Such advertising shall consist of any of the following: banner ads, corporate
sponsorships, audio, video, or audio/video ads which are broadcast exclusively
through the web site, or any other promotional text, graphic, audio clip or
combination of these which generates revenue in exchange for broadcast over the
web site. EBLD shall have the right to approve all pricing schedules for such
advertising. Such approval shall not be unduly withheld, and EBLD shall respond
to all requests for such approval within three (3) business days. Should
advertising generated by Licensee conflict with advertising generated by EBLD,
advertising generated by EBLD shall take priority, but both parties shall make
all possible efforts to prevent such situation from occurring by informing each
other of all advertising campaigns as they occur.
Each party will account to the other and pay its share of revenue within fifteen
(15) days after the end of each calendar month. Along with such payment, each
party will furnish a written statement reflecting the number of advertising
impressions on, and number of visitors to, the Co-Branded Page during the
applicable month. Any such statement shall be deemed accepted unless (i) the
recipient notifies the sender in writing within eighteen months (18) from the
date of receipt of such statement setting forth specific objections thereto and
(ii) the recipient commences a lawsuit to contest such statement within two (2)
years from the date of receipt of such statement. EBLD or EBLD's designated
representative shall have the right, at Licensee's usual place of business,
during business hours and on reasonable notice to Licensee (but in no event more
than once annually), to examine and copy (provided EBLD keeps such copies
confidential and uses them solely in connection with EBLD's audit rights
hereunder, in any proceeding hereunder, or in any necessary business disclosures
to a third party subject to such third party's agreement to retain such
confidentiality) Licensee's books and records to confirm the accuracy of any
such statements not otherwise deemed accepted. In the event that such audit
reveals a discrepancy in the amounts owed EBLD from what was actually paid,
Licensee shall pay EBLD
<PAGE>
the amount of such discrepancy. If such discrepancy is in excess of five
percent (5%) of the amounts actually paid to EBLD, Licensee shall reimburse
EBLD for the cost of such audit.
Conversely, Licensee or Licensee's designated representative shall have the
right, at EBLD's usual place of business, during business hours and on
reasonable notice to EBLD (but in no event more than once annually), to examine
and copy (provided Licensee keeps such copies confidential and uses them solely
in connection with Licensee's audit rights hereunder, in any proceeding
hereunder, or in any necessary business disclosures to a third party subject to
such third party's agreement to retain such confidentiality) EBLD's books and
records to confirm the accuracy of any such statements not otherwise deemed
accepted. In the event that such audit reveals a discrepancy in the amounts owed
Licensee from what was actually paid, EBLD shall pay Licensee the amount of such
discrepancy. If such discrepancy is in excess of five percent (5%) of the
amounts actually paid to Licensee, EBLD shall reimburse Licensee for the cost of
such audit.
EBLD and Licensee agree to explore other, non-Internet means of promoting their
Sites and brands.
2. REPRESENTATIONS AND WARRANTIES.
EBLD represents and warrants that it licenses the rights to the Content and that
it has the authority to enter into this Agreement and to fully perform all of
its obligations hereunder. EBLD represents and warrants that the grant of rights
to the Content herein, does not violate the rights of any third parties and will
adhere to applicable Federal, State and Local law and regulation in the
performance of its obligations hereunder. Licensee represents and warrants that
it has the authority to enter into this Agreement and to fully perform its
obligations hereunder, and that it will adhere to applicable Federal, State and
Local law and regulation in the performance of such obligations.
3. TRADEMARK OWNERSHIP AND LICENSE.
EBLD and Licensee will retain all right, title and interest in and to their
respective trademarks, service marks and trade names worldwide, subject to
limited cross-licenses necessary to perform this Agreement. Neither party shall
alter the other party's respective trademarks or other intellectual property
without the other party's express written consent. All references to the other
party's intellectual property shall include the appropriate trademark, copyright
or other legal notices, and shall be subject to the other party's prior written
approval.
4. TERM.
This Agreement shall continue for one (1) year from the last date of execution
of this Agreement. The Term shall be automatically renewed for additional one
(1) year increments unless either party notifies the other at least thirty (30)
days prior to the expiration of the then-current Term that it does not wish to
renew the Term of the Agreement.
5. TERMINATION.
Either party may terminate this Agreement if the other party breaches the
Agreement and the breach remains uncured for thirty (30) days (or, if such
breach is not susceptible to cure within thirty (30) days, the breaching party
must initiate steps to cure the breach within said thirty (30) day period and
continue its efforts to cure such breach), unless such breach is caused by the
alteration of a party's trademark or other intellectual property, or failure to
obtain an approval as required in this Agreement, in which case the breaching
party shall have, upon notice, two (2) business days in which to cure. Either
party may terminate this Agreement if the other party is the subject of a
bankruptcy filing which is not dismissed within sixty (60) days. Either party
may terminate this Agreement on thirty (30) days advance written notice to the
other party. This
<PAGE>
Agreement shall terminate with no further obligations between the parties
except the confidentiality obligation set out in Paragraph 6 below and the
obligation contained in the next sentence of this Paragraph 5, if either the
Licensee's Site or EBLD Site is removed from the Web and/or ceases operation
for a period of more than two (2) consecutive weeks. Upon any termination,
each party (i) will account to and pay the other party its share of revenues
for all periods prior to the date of termination within thirty (30) days of
termination and (ii) will promptly return to the other party any materials
containing the Content. In addition, Paragraphs 2, 6, 7, 9 and 10 shall
survive termination of this Agreement.
6. CONFIDENTIALITY.
The terms and conditions of this Agreement shall be strictly confidential. All
information about the development of the EBLD Site and the development and
launch of the Co-Branded Page disclosed to Licensee, its officers, directors,
employees and/or agents shall be treated as confidential. All information about
the development of the Licensee Site and the development and launch of the
Co-Branded Page disclosed to EBLD, its officers, directors, employees and/or
agents shall be treated as confidential. Such confidentiality is of the essence
to this Agreement.
7. INDEMNITY.
Each party will indemnify the other, its parent, subsidiary and affiliated
companies, their employees, officers, directors and agents from third party
claims, losses, causes of action, costs (including reasonable attorney's fees)
arising from the breach of any warranty, representation or covenant in the
Agreement.
8. LIMITATION ON WARRANTY.
Neither party makes any warranty regarding the quality of their goods and
services. Neither party makes any warranty that all errors or failures in their
respective sites will be corrected. The parties expressly disclaim all
warranties of merchantability or fitness for a particular purpose. Beyond the
warranties contained in this paragraph, the parties do not warrant that their
sites are error-free or that operation of their sites will be secure or
uninterrupted.
9. LIMITATION ON LIABILITY.
In no event will either party be liable for any representation or warranty made
to any end user or third party by the other party, or any agent of the other
party. In no even will either party be liable for failure of its network or
support services. These limitations shall survive and apply notwithstanding the
validity of the limited remedies provided for in this agreement. Except for
liability for indemnity, neither party shall have liability for any damages
other than direct damages.
10. DISPUTE RESOLUTION.
Disputes about trademarks, service marks, trade names and confidentiality may be
resolved in court. All other disputes arising out of this Agreement shall be
resolved through mediation and then binding arbitration in accordance with the
rules and procedures of the American Arbitration Association, to take place in
the County of Los Angeles, California.
11. GENERAL.
Neither party may assign or otherwise transfer this Agreement without the other
party's prior written consent. The parties hereto are neither partners nor joint
venturers hereunder, and neither party shall have the power or authority to bind
or obligate the other in any way. This Agreement may not be modified and none of
its terms may be waived, except in writing signed by both parties. This
Agreement shall not be binding until fully executed and delivered to each of the
parties hereto. Neither party's failure or delay to enforce any rights hereunder
shall be
<PAGE>
considered a waiver of such rights or a modification of this Agreement. This
Agreement shall be governed by and interpreted in accord with the laws of the
State of California applicable to agreements entered into and to be performed
wholly in California. The parties hereby consent to the exclusive
jurisdiction of any State or Federal court empowered to enforce this
Agreement in the State of California, County of Los Angeles, and the parties
waive any objection thereto on the basis of personal jurisdiction or venue.
This Agreement constitutes the entire understanding between the parties with
respect to the subject matter of this Agreement ad supersedes all prior
agreements.
AGREED TO AND ACCEPTED BY:
DIMENSION MUSIC, INC. ENTERTAINMENT BOULEVARD, INC.
By: /s/ Angelo Sotiracopoulos By: /s/ Stephen Brown
--------------------------- ------------------------------
Name: Angelo Sotiracopoulos Name: Stephen Brown
------------------------- ----------------------------
Title: CEO Title: CEO
------------------------ ---------------------------
Date: 2/25/99 Date: 2/25/99
------------------------- ----------------------------
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT made and entered into this 4th day of March, 1999,
between SRN Broadcasting & Marketing, Inc. (An Illinois corporation), 208 N.
Waukegan Rd. Suite C, Lake Bluff, IL 60044; its sublicensees, designees,
successors and permitted assigns (Hereinafter individually and collectively
referred to as "Licensor") of the first part
and
ENTERTAINMENT BOULEVARD, INC., 4052 Del Rey Avenue, Suite 106, Marina
Del Rey, CA 90292 USA, its sublicensees, designees, successors and permitted
assigns (hereinafter individually and collectively referred to as
"Licensee"), of the second part
WHEREAS, Licensor is actually engaged in the production of radio
broadcasts; and
WHEREAS, Licensee agrees in accordance with the terms hereof, to provide
design, marketing and on-line service for such Programming/Content in the
Licensed Territory, as the same shall be hereinafter defined.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and subject always to the terms and provisions hereinafter
set forth, the parties hereto agree as follows:
1. Licensor hereby exclusively licenses to Licensee the exclusive
license to use the following Programming/Content in and for the Licensed
Territory:
a) The Programming/Content listed on Exhibit "A" attached
hereto and incorporated herein by this reference embodying that
Programming/Content entitled "Bears -- Packers Showdown" and any other
permutations it may take on (hereinafter referred to as the "First Content").
This Programming/Content will be available from the Entertainment Boulevard
"Pro Sports Net" front page, and/or any other mutually agreed upon location
on the Licensee's Internet domain.
2. The rights herein granted by Licensor to Licensee are the
following for the Licensed Territory during the Term hereof:
a) The Term of this License Agreement shall commence March 1,
1999, and expire on the date one (1) year from the date of Delivery to
Licensee of all Content for which Licensee exercises its option, pursuant to
Paragraph 2.a)2) hereof (hereinafter, individually and collectively referred
to as "the Term").
1) "Delivery" or words of similar connotation - shall
mean delivery to Licensee by Licensor, for the purpose of distribution via
the Internet, of: a digitally converted version of the content listed on
Exhibit "A" via FTP, T1, ISDN or satellite. Licensee may carry the radio show
live. If content is not delivered via FTP, T1, ISDN or satellite, the cost of
the DAT tape and the delivery of the DAT tape to Entertainment Boulevard
shall be at Entertainment Boulevard's sole expense. These tapes are to be
technically satisfactory to Licensee and shall be commercial free. Licensor
shall also mean delivery to Licensee of all consents, approvals, copyright
information, credits corresponding to these master tapes, all at Licensor's
sole cost and expense.
2) Options: Licensor further grants to Licensee
one (1) option to acquire the exclusive license for the Licensed Territory
for a period of one (1) year. Should Licensor elect to exercise this Option,
Licensor shall notify Licensee in writing within thirty (30) days prior to
the end of the Initial Term. Failure by Licensee to exercise
<PAGE>
this Option shall be deemed termination of this Agreement. Should Licensee
exercise its option, all of the same terms and conditions as the Initial Term
hereunder shall apply.
b) The right to use the name of "Bears -- Packers Showdown" in
the Licensed Territory, Licensor and any other person rendering services in
connection with the Content only in connection with the marketing of Content.
During the Term, Licensee may refer to SRN Broadcasting as Licensee's
Internet Content Provider, only in the Licensed Territory. Licensor shall
promote Entertainment Boulevard and Pro Sports Net via in-program billboards.
c) The unfettered right to market, promote, exploit, use and
control the said Content or derivatives thereof, the Content produced
therefrom and embodied therein, throughout the Licensed Territory. All such
Content and derivatives, and any and all copyrights therein and other rights
pertaining thereto, are and shall remain the sole and exclusive property of
Licensor. Licensor acknowledges this ownership and undertakes to protect such
ownership at its sole cost and expense. Licensee shall give Licensor prompt
written notice of any apparent or alleged infringement of any of Licensee's
rights hereunder, or of Licensor's ownership rights in and to the Content. In
this regard, Licensee shall have the sole right, but not the obligation to
take all reasonable and practical steps necessary to protect the copyright
and trademark of Content in the Licensed Territory and, if applicable, to
renew and extend such protection. Licensor shall additionally have the sole
and exclusive right, but not the obligation, to take all reasonable legal
steps necessary to protect said interests and to obtain redress and/or
restrain any third party from any unauthorized use of the Content in the
Licensed Territory or in doing of any act which infringes upon any Content.
Licensee shall be able to participate in any such action, PARI PASSU with the
repayment to Licensor of its expenses. Should Licensor receive any
judgment, settlement or action, after the reimbursement therefrom to Licensor
(and Licensee, if applicable) of their respective legal fees and costs
incurred therein, any remaining proceeds shall be divided between the parties
hereto in the following percentages: Licensor; 75%, Licensee; 25%.
Notwithstanding the foregoing, should Licensor fall or refuse to take any of
the foregoing actions, then, in addition to any of the rights which Licensee
shall have hereunder, either at law or in equity, Licensee may (but shall not
be obligated to) take such action in Licensor's and/or Licensee's name, in
which event any recovery from such action undertaken by Licensee shall be the
sole property of Licensee.
d) All rights in and to the Content licensed hereunder which
are not specifically granted to Licensee hereunder, are reserved by Licensor.
3. Both Licensee and Licensor agree not to grant to any other
person, firm or corporation in the Licensed Territory, and rights in the
Content which are contrary to the grant of rights herein.
4. For the purpose of the Agreement, the term "Licensed Territory"
and/or "Territory" shall be defined as The Internet.
5. In consideration for the rights herein granted, and Licensor's
full and faithful performance of all material terms and conditions hereof,
Licensee shall pay to Licensor with respect to all revenues generated a sum
equal to that percent of the gross revenues actually received by or on behalf
of the Content hereunder, less any fixed costs that are approved by Licensor.
For the purposes hereof, the Revenue Split will be as follows: Licensor 50%,
Licensee 50%.
6. Licensor shall have the right, but not the obligation, to
sell Internet-only advertising to be presented in the section of the Pro
Sports Net website which broadcasts the content outlined in Exhibit A. Such
advertising shall consist of any of the following: banner ads, corporate
sponsorships, audio, video, or audio/video ads which are broadcast
exclusively through the web site, or any other promotional text, graphic,
audio clip or combination of these which generates revenue in exchange for
broadcast over the web site. For the purposes hereof,
<PAGE>
the Revenue Split for any of the promotions outlined in this Paragraph 6
shall be as follows: Licensor 50%, Licensee 50%. Should Licensor elect to
sell such internet-only advertising, Licensee shall have the right to approve
all pricing schedules for such advertising. Such approval shall not be
unduly withheld, and Licensee shall respond to all requests for such approval
within three (3) business days. Should advertising generated by Licensor
conflict with advertising generated by Licensee, advertising generated by
Licensee shall take priority, but both parties shall make all possible
efforts to prevent such situation from occurring by informing each other of
all advertising campaigns as they occur.
7. Licensor shall provide Licensee with one-minute
advertisements to run in between program segments. These advertisements
shall run until such time that Licensee's commercial inventory has been
filled. Blocks of advertisements in between program segments shall not
exceed three (3) minutes in length. Licensee may provide Licensor with an
on-air commercial to run on SRN shows at no charge, which Licensor may run
when space is available.
8. Licensor has the right to reject any internet-only
advertising, as defined in Paragraph 6, that Licensor deems unsuitable.
Advertisements considered unsuitable shall include, but are not limited to,
those advertisements regarding or soliciting gambling or sex. Permission to
display ads on the site shall not be unreasonably withheld.
9. Payments between parties of revenues due hereunder shall be made
in currency of the United States of America and shall be accompanied by a
detailed statement. Each payment shall be made monthly, within fifteen (15)
days following the end of each month. Such statement shall be forwarded to
the other party, regardless of whether or not any monies are due and owing.
All statements and payments made shall be binding on the receiving party and
shall not be subject to any objection for any reason, unless specific
objection is made in writing stating the basis thereof within eighteen (18)
months after the date of each such statement. No action, claim or proceeding
against in any form shall be maintained with respect to any such statement or
payment unless a written objection notice is made and such action, claim or
proceeding is commenced in a court of competent jurisdiction within two (2)
years after the date of any such statement. Either party has the right, at
its sole cost and expense, to appoint an independent certified public
accountant to audit only those books and records of the other party which
pertain to the revenues generated hereunder and only for the purposes of
verifying accounting statements. Each party will cooperate fully with such
audit, which shall be during ordinary business hours, after at least thirty
(30) days notice at the recipient's regular place of business where the
recipient keeps said books and records and be conducted so as to minimize
disruption to business. All information derived during such audit shall be
kept confidential, as same constitutes trade secrets. Only one audit may be
conducted in any calendar year and only once per statement.
10. In the event that:
Either party shall fail to perform any of the material
obligations required of it hereunder and should the allegedly failing party
fail to cure any such alleged failure within thirty (30) days after receiving
written notice from the other party detailing same, or, if not possible to
cure within such thirty (30) day period, not commence such cure during such
thirty (30) day period and continue do pursue same; the non-failing,
non-bankrupt and/or non-insolvent party shall have the right to terminate
this Agreement forthwith, by written notice to the other party. In the event
of such termination, all executory obligations contained in this Agreement
shall cease. Any monies collected and/or received by a party shall be deemed
to be monies held in trust on behalf of the other party. In the event of
termination of the Agreement pursuant to Paragraphs 11 and 12, the rights
granted to the Licensee hereunder shall cease and terminate and shall, without
notice or process, revest in Licensor, and Licensor shall in no way waive any
royalties due hereunder. However, any such termination by Licensor or
Licensee shall not affect the Sell-Off Period provided for hereunder.
3
<PAGE>
11. Each party represents and warrants as follows:
a) That each party has not made and does not contemplate
making an assignment for the benefit of creditors, that no bankruptcy or
other proceedings based upon insolvency are pending or threatened against it
and that there are no impediments, against it and that there are no
impediments, agreements or litigation, actual or threatened, which would
prevent or impair that party from performing its duties hereunder.
b) That Licensee is now and will use its best efforts to
remain, during the Term hereof, an active Internet Content provider within
the Internet industry.
c) Licensor warrants and represents that none of the Content,
nor its exploitation by Licensee will violate or infringe any common or
statutory right of any person or entity.
d) Licensee's acceptance of the Content or the materials
related to the content will not constitute a waiver of any of Licensor's
warranties, representations or agreements hereunder.
e) Each party is free to enter into and perform this Agreement
and each party's warranties and representations shall be true and correct
upon execution hereof, upon Delivery of the Content shall remain in effect
for so long as Licensee has any rights to the Content.
12. Each party hereto agrees to and does hereby indemnify, save and
hold harmless, the other, its permitted assigns, licensees and its directors,
officers, shareholders, agents and employees from any and all liabilities,
claims, demands, loss and damage (including reasonable attorneys' fees and
court costs) arising out of or connected with any claim by a third party
which is inconsistent with any of the warranties, representations, covenants
or agreements made by the indemnitor herein and agrees to reimburse
indemnitee, on demand, for any payment made by indemnitor at any time after
the date hereof with respect to any liability or claim to which the foregoing
indemnity applies.
13. This Agreement is entire and sets forth the entire understanding
and agreement of the parties hereto, in respect of the matters herein
contained. This Agreement may not be altered, modified, canceled or
terminated in any way except upon agreement of the parties hereto in writing,
and all rights and remedies hereunder shall be cumulative and not limited by
specification. All signatures at the foot hereof shall make this a valid,
binding and enforceable Agreement between the parties hereto. In the event
any payments due Licensor are delayed or prohibited by currency restrictions
or other government regulations, Licensor shall be entitled to designate a
local depository in the Licensed Territory into which Licensee, at Licensor's
expenses, shall deposit such monies. In the event of any action, suit or
proceeding hereunder, the prevailing party shall be entitled to recover its
attorneys' fees and costs from the nonprevailing party. This Agreement does
not create any partnership joint venture, agency or employment relationship
between the parties hereto, their relationship being that of independent
contractors. No waiver of any breach, conditions or covenants herein shall
be deemed to be a waiver or consent to any other breach, condition or
covenant hereunder.
14. Any notice to be given under the terms of this Agreement will be
properly given if delivered in person to the addresses first given above, or
if mailed by prepaid postage, registered or certified mail, return receipt
requested or to such other addresses as any party may advise and if such
notice as aforesaid is delivered by mail, it shall be deemed to have been
received at noon on the fourth business day following posting.
Notwithstanding the immediately foregoing, in the event of the occurrence of
a postal strike or disruption of postal service occurring within six (6) days
before or six (6) days after the giving of any notice of as aforesaid,
4
<PAGE>
then and in that event such notices shall be delivered in person and the
option of giving notice by prepaid registered mail or certified shall not be
available to any party until the sixth (6th) day following the termination of
any such postal strike or disruption of postal services.
15. This Agreement shall be construed only under the laws of the
State of California and the parties hereto irrevocably submit to the
jurisdiction of the Courts of the State of California, located in Los
Angeles, California. Any proceeding or action or process commenced in said
Courts arising out of any such claim, dispute or disagreement may, among
other methods, be served upon either by delivering or mailing same, via
registered or certified mail, addressed to that party at the address as set
out above and any such delivery or mail service shall be deemed to have the
same force and effect as personal service within the State of California. If
any part of this Agreement shall be invalid or unenforceable, it shall not
affect the validity of the balance of this Agreement.
16. This Agreement and the execution thereof shall inure to the
benefit of and be binding upon all of the parties hereto, and their
respective heirs, executors, administrator, successors and assigns, this
Agreement to be executed by their duly authorized officers on the day and
date first above written. Notwithstanding anything to the contrary
foregoing, either party shall have the right to assign this Agreement, in its
good faith business judgment, so long as the assigning party agrees to remain
primarily liable for its obligations hereunder to the non-assigning party and
further so long as any such assignee agrees in writing to be bound by the
terms and conditions of this Agreement.
17. Neither party shall be in breach or default hereunder if its
performance becomes impossible, impracticable or is hampered by reason of any
act of God, war, fire, earthquake, labor controversy, sickness, accident,
civil commotion, epidemic, act of Government, its agencies or officers,
failure of technical or transportation facilities or any other cause of a
similar or dissimilar nature not reasonably within that party's control or
which that party could not, with reasonable diligence, have avoided
(hereinafter, individually and collectively referred to as a "Force Majeure
Event"). Upon the happening of any such Force Majeure Event, Licensee, in
addition to any other rights or remedies it may have, including the right to
terminate this Agreement, the non-breaching or defaulting party may elect by
notice to the other party to suspend the Term of this Agreement for that
period of time which any such Force Majeure Event continues. In the event of
any such suspension, the Term as applicable to any Content, shall be
automatically extended by adding a period of time equal to the number of days
of such suspension to the end of the applicable Term. In such event,
specific dates, periods and time requirements referred to herein shall be
postponed and extended accordingly. During any such suspension, all
agreements, covenants, and obligations of each party hereunder shall continue
in full force and effect. Notwithstanding anything to the contrary
foregoing, should any such Force Majeure Event continue for a consecutive
period of time equivalent to Two Hundred Seventy (270) days, then, in such
event, either party shall have the right to terminate this Agreement by
notice to the other party. However, in the event of any such termination,
Licensee shall still be entitled to a thirty (30) day shut-down period
hereunder, once the Force Majeure Event has ceased.
5
<PAGE>
The number of pages preceding this page is five (5).
IN WITNESS WHEREOF, the parties hereto have hereunto set their hand and
seals on the day and date first above written.
SRN BROADCASTING AND MARKETING, INC.
By: /s/David J. Rusch Dated: 3/4/99
------------------------------- ------------------------------
David J. Rusch, VP
ENTERTAINMENT BOULEVARD, INC.
By: /s/Stephen Brown Dated: 3-4-99
------------------------------- ------------------------------
Stephen Brown, CEO
6
<PAGE>
Exhibit "A"
One hour per week program of "Bears-Packers Showdown."
7
<PAGE>
Exhibit 10.20
EARTHLINK NETWORK
SALES AGENT AGREEMENT
THIS SALES AGENT AGREEMENT is made as of the Effective Date set forth
below among EarthLink Network, Inc., a Delaware corporation ("EarthLink") and
the Agent named below.
AGREEMENT DATA:
1. Agent: Entertainment Boulevard, Inc.
2. Effective Date: March 11, 1999
3. Notice information per Section 9:
(a) If intended for Agent: (b) If intended for EarthLink:
Company Entertainment Boulevard, Inc.
Email Address [email protected] EarthLink Network, Inc.
Address: 4052 Del Rey Avenue Suite 108 3100 New York Drive
Marina Del Rey, CA 90292 Pasadena, California 91107
Attn: Stephen Brown Attn: Joel Felix
Facsimile No: (310) 578-6304 Facsimile No.: (626) 296-4176
Phone No: (310) 578-5404
4. Applicable Exhibits:
INITIALS
[ILLEGIBLE] | A. Definitions
[ILLEGIBLE] | B. EarthLink Trademarks
N/A | N/A C. EarthLink General Guidelines for Use of Marks
[ILLEGIBLE] | D. Special Terms
THE REFERENCED EXHIBITS ARE A PART OF THIS AGREEMENT.
5. Total pages in this Agreement: __ 10_(ten) __ (including this cover page).
SIGNATURES:
Agent and EarthLink acknowledge that they have read and fully understand
this Agreement and hereby agree to its terms. In witness whereof, the parties
have executed this Agreement under seal.
<TABLE>
<CAPTION>
<S> <C>
EARTHLINK: AGENT:
/s/ Julie S. Mantis /s/ Stephen Brown
- ------------------------------------------- --------------------------------------------------
(Signature of Authorized Representative) (Signature of Authorized Representative if a corporation)
Julie S. Mantis Stephen Brown
- -------------------------------------------- --------------------------------------------------
(Printed Name of Authorized Representative) (Print Name of Authorized Representative)
VP, Sales CEO
- -------------------------------------------- --------------------------------------------------
(Title) (Title)
</TABLE>
<PAGE>
1. DEFINITIONS. Certain terms used in this Agreement have the meanings
defined on the Definitions Exhibit hereto.
2. LICENSE GRANT; ORDERS.
2.1 NON-EXCLUSIVE LICENSE. EarthLink hereby grants to Agent royalty free,
non-exclusive and non-transferable license during the Term to market and
solicit orders for the Services in the Territory (the "License"). To the
extent that Agent receives any Licensed Material from EarthLink, the License
shall include a royalty free, non-exclusive and non-transferable license
during the Term to demonstrate the Licensed Material in connection with
Agent's marketing and solicitation efforts hereunder.
2.2 ORDERS. All orders solicited by Agent are subject to approval and
acceptance by EarthLink, which approval and acceptance shall be at
EarthLink's sole discretion. EarthLink may reject any order for any reason.
2.3 PROHIBITION ON OTHER SALES OR LICENSE. Agent shall market and solicit
orders for the Services only in accordance with the terms of this Agreement.
2.4 NO OTHER RIGHT. Agent shall have no right to distribute, sell or
otherwise transfer any Licensed Material. Agent shall have no authority to
accept any orders for the Services or otherwise on behalf of EarthLink or to
bind EarthLink to any contract, agreement or other understanding, whether oral
or written. To the extent that Agent possesses any Licensed Material, Agent
shall not, nor shall it permit others to: reproduce or otherwise make copies
of any portion of the Licensed Material or modify, reverse engineer,
disassemble, decompile, or otherwise determine or attempt to determine or
have or attempt to obtain access to, the source code or internal design of
the Software or to create any derivative works based upon the Software.
Nothing in this Agreement shall be construed as granting Agent any rights of
any kind with respect to any portion of the Services or Licensed Material
except as expressly and unambiguously set forth in this Agreement. All rights
title and interest in and to, and ownership of, the Services and Licensed
Material shall remain at all times exclusively with EarthLink and EarthLink's
third-party licensors, as appropriate.
3. COMMISSIONS; MAINTENANCE OF RECORDS; AUDIT.
3.1 COMMISSIONS. As compensation for and in consideration of the services
to be rendered hereunder by Agent, EarthLink shall pay to Agent the
commissions outlined on the Special Terms Exhibit (the "Commissions").
EarthLink shall pay the Commissions on a monthly basis within forty-five (45)
days of the end of each calendar month. Each payment shall include therewith
a reasonably detailed statement by EarthLink setting forth each closed sale
on which Commissions are paid.
3.2 COSTS AND EXPENSES. Agent shall be responsible for the costs and
expenses of performing its duties and obligations hereunder and shall not be
entitled to reimbursement from EarthLink for same.
3.3 MAINTENANCE OF RECORDS; AUDIT. Each party shall maintain proper books
and records so as to allow for the verification of amounts paid or owed to
the other party. Each party agrees to allow the other party's auditors to
audit and analyze its applicable records ensure compliance with all terms of
this Agreement. Any such audit shall be permitted by the party to be audited,
during normal business hours, upon at least fifteen (15) days notice given in
accordance with Section 9. The cost of this audit shall be borne by the
auditing party, unless the results identify a bona fide underpayment to the
auditing party by more than five percent (5%) of the total amount paid or
owed during the audited period or over-reporting by the audited party
resulting in overpayment to the audited party by more than five percent (5%)
of the total amount paid or owed during the audited period, in which case the
cost of the audit shall be borne by the audited party.
4. REPRESENTATIONS AND WARRANTIES.
4.1 EARTHLINK AUTHORITY. EarthLink represents and warrants to Agent that
(i) EarthLink owns or has a valid license to all portions of the Services and
Licensed Material and to EarthLink Trademarks, (ii) EarthLink has the full
power and authority to enter into this Agreement and grant the License, and
(iii) EarthLink is a functional Internet access provider (the "Authority
Warranty").
4.2 EARTHLINK MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT
TO THE SERVICES OR THE SOFTWARE, WHETHER EXPRESS OR IMPLIED, EITHER IN FACT
OR BY OPERATION OF LAW. EARTHLINK EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EARTHLINK DOES NOT
WARRANT THAT THE SERVICES OR SOFTWARE ARE ERROR-FREE OR THAT OPERATION OF THE
SERVICES OR SOFTWARE OR INTERNET ACCESS WILL BE SECURE, UNINTERRUPTED OR
ERROR-FREE.
4.3 TRADEMARK NON-INFRINGEMENT WARRANTY. EarthLink warrants to Agent that
the EarthLink Trademarks do not infringe upon the patents, copyrights,
trademarks or other intellectual property rights of any third party (the
"Trademark Non-infringement Warranty").
4.4 PROHIBITION ON EXTENTION OF WARRANTIES. Agent shall not make or pass
on, or attempt to make or pass on, to any third party any representation or
warranty on behalf of EarthLink or its third-party licensors.
4.5 REMEDY FOR BREACH OF TRADEMARK NON-INFRINGEMENT WARRANT. In the event
any EarthLink Trademark fails to conform to the Trademark Non-infringment
Warranty, Agent shall immediately upon notice from EarthLink cease use of
such alleged infringing EarthLink Trademark. In such event, Earth-Link, at
its sole option, shall either obtain a valid license for Agent to use such
EarthLink Trademark or select an alternative non-infringing mark which is
similar as possible to the unavailable EarthLink
<PAGE>
Trademark, and that new mark shall then be governed by the terms of this
Agreement as an Earth-Link Trademark.
4.6 INDEMNIFICATION FOR THIRD PARTY INFRINGEMENT CLAIMS. EarthLink agrees
to indemnify, and hold harmless, Agent from and against all reasonable costs
and expenses related to claims made by third parties against Agent that the
EarthLink Trademarks infringe the copyrights, trademarks or service marks or
other intellectual property rights of such third parties.
4.7 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, AND EXCEPT FOR THE OBLIGATIONS SET FORTH IN
SECTION 10, NEITHER PARTY SHALL, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE
OTHER PARTY FOR CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, INCLUDING LOST
PROFITS, EVEN IF SUCH PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH
DAMAGES OCCURRING.
5. MARKETING OF THE SERVICES.
5.1 PROMOTION. Agent shall use its best efforts to promote, advertise and
market the Services promote the goodwill of EarthLink and the market
reputation of EarthLink's products and services. Agent shall at all times
conduct itself in a manner which promotes EarthLink's best interests and
shall refrain from any and all conduct which in any way disparages EarthLink,
its services or its products. Agent shall make no representations regarding
the Services which exceed those made by EarthLink in its promotional
materials. In the event that EarthLink provides Agent with promotional and
other marketing material, Agent shall use reasonable efforts to insure that
such materials are distributed in such a way as to maximize the benefit to
EarthLink with respect to the Services.
5.2 AGENT OBLIGATIONS. Agent agrees to perform the following activities:
5.2.1 To participate in such training courses and other instructional
programs which EarthLink may, from time to time, require;
5.2.2 To provide written notice to EarthLink of any prospective customer for
the Services;
5.2.3 To make available at all times an Agent representative to serve as the
principal contact between Agent and EarthLink and to notify EarthLink in
writing of any change in such representative;
5.2.4 To meet the Minimum Production Standards set forth in the Special Terms
Exhibit;
5.2.5 To meet with EarthLink and its representatives from time to time,
telephonically or in person, to discuss Agent's performance hereunder, the
marketing of the Services, and any other matter which EarthLink reasonably
considers to be related to Agent and its obligations hereunder;
5.2.6 To provide EarthLink with all necessary information needed to approve
and process any order and close any sale solicited by Agent, including:
(a) Order from describing the Services being ordered and background
information of the prospective customer;
(b) Credit information with respect to the prospective customer; and
(c) Such other information as EarthLink may require.
5.2.7 If Agent is not an individual, to insure that it's employees and
representatives at all times comply with the terms of this Agreement and to
be responsible for their actions.
5.3 PUBLICITY. Each party shall have the right to refer to the other party
and its services and products in advertisements, press releases, news
releases and general releases to professional and trade publications;
provided, however, that any such item shall be presented to such other party
not less than ten (10) days prior to the intended publication date for
approval by such other party, which approval shall not be unreasonably
withheld or delayed, and which shall be deemed to be given if no written
response is provided within said ten (10) day period.
6. TRADEMARKS, TRADE NAMES AND OTHER DESIGNATIONS. Agent undertakes to
faithfully reproduce all Marks as they may appear in respect of the Services.
The Agent shall not use the Marks except as provided herein. All such use of
the Marks shall be in accordance with the "EarthLink General Guidelines for
Use of Marks" Exhibit B. Agent undertakes to reproduce faithfully all Marks
and proprietary notices, slogans, designs and distinct advertising as may
appear in respect of the Services. Notwithstanding the foregoing, any such
use or proposed use shall be presented to EarthLink for approval, in
EarthLink's sole discretion, not less than ten (10) business days prior to
the intended date of use, which approval shall be deemed given if no written
response is provided to Agent within said ten (10) business day period.
Notwithstanding the authorization granted in this section, EarthLink and its
third party licensors shall own all right, title and interest in and to the
Marks. Other than as expressly and unambiguously provided in this Agreement,
Agent shall not have, under any circumstances whatsoever, any right to use
the Marks.
7. TERM; TERMINATION.
7.1 TERM. This Agreement shall commence on the Effective Date, and unless
sooner terminated in accordance with this Section, shall continue for one (1)
year, whereupon it shall automatically renew for consecutive one (1) year
terms unless notice of non-renewal is given by either party in writing no
less than thirty (30) calendar days and no more than ninety (90) calendar
days prior to the end of the then current term.
7.2 TERMINATION FOR CAUSE. Either party shall have the right to terminate
this Agreement at any time, effective upon written notice of termination to
the other party, in the event of a breach of this agreement which is
unremedied for a period of thirty (30) days after written notice.
Notwithstanding the foregoing, either party
<PAGE>
may terminate this Agreement immediately upon a breach of Section 8.
7.3 TERMINATION BY EARTHLINK. EarthLink shall have the right
immediately to terminate this Agreement upon the occurrence of any of the
following:
7.3.1 If Agent is an individual, the death or disability of Agent;
or if Agent is a corporation or partnership, the discontinuance, dissolution,
liquidation or winding-up of its business;
7.3.2 The sale, merger or consolidation of Agent to or with any
other person or entity;
7.3.3 The making by Agent of any general assignment for the benefit
of creditors; the filing of a petition in bankruptcy with respect to the
Agent; the appointment of a trustee or receiver to take possession of the
Agent's assets; the attachment, execution or other seizure of Agent's assets;
or
7.3.4 Agent's failure to meet the Minimum Production Standards set
forth on the Special Terms Exhibit.
7.3 EFFECT OF TERMINATION OF THIS AGREEMENT. Upon termination of this
Agreement for any reason whatsoever Agent shall: (i) immediately cease to
replicate copies of any advertising and marketing materials with respect to
the Services; (ii) return to EarthLink all other existing copies (including
original copies) of any of the Licensed Material in the possession or under
the control of Agent; (iii) immediately cease the marketing of, and
solicitation of, orders for the Services; and (iv) immediately return to
EarthLink all advertising and marketing related to the Services.
7.4 NO DAMAGES OR INDEMNIFICATION FOR TERMINATION. Neither party shall
be liable to the other party for any costs or damages of any kind, including
incidental or consequential damages, or for indemnification, solely on
account of the lawful termination of this Agreement, even if informed of the
possibility of such damages.
7.5 SURVIVAL OF TERMS UPON TERMINATION. The provisions of this
Agreement that by their sense and context are intended to survive termination
of this Agreement, shall so survive this Agreement, including Sections 4.2,
4.7, 7.3, 7.4, 7.5, 10 and 11.
8. CONFIDENTIALITY. Each party shall: (i) hold in confidence, and not
disclose or reveal to any person or entity, any Confidential Information
disclosed under this Agreement without the clear and express prior written
consent of a duly authorized representative of the disclosing party; and (ii)
not use or disclose any of the Confidential Information for any purpose at
any time, other than for the limited purpose of performance under this
Agreement. These obligations shall continue indefinitely for so long as the
Confidential Information is a trade secret under applicable law and shall
continue for two (2) following termination of this Agreement with respect to
Confidential information which does not rise to the level of a trade secret.
9. NOTICES. Except as specifically provided in this Agreement, all
notices required hereunder shall be in writing and shall be given by personal
delivery, overnight courier service, or first class mail postage prepaid, to
the parties at their respective addresses set forth on the first page hereof,
or at such other address(es) as shall be specified in writing by such party
to the other parties in accordance with the terms and conditions of this
Section. All notices shall be deemed effective upon personal delivery, or
three (3) business days following deposit with any overnight courier service
or with the U.S. Postal System, first class postage attached, in accordance
with this Section.
10. INDEMNIFICATION. Agent shall defend, at its sole expense, any
claim, suit or proceeding brought against EarthLink, insofar as such claim,
suit or proceeding is based upon a claim by a third party alleging facts or
circumstances that, if true, would constitute a breach of any covenant,
representation or warranty of the Agent, provided EarthLink gives written
notice of any such suit or proceeding promptly upon first learning of such
suit or proceeding, and provides Agent, at no cost, with such assistance and
cooperation as Agent may reasonably request in the defense thereof. Agent
shall pay any damages and costs assessed against EarthLink (or paid or
payable by EarthLink pursuant to a settlement agreement or any other
resolution, formal or informal) in connection with such claim, suit or
proceeding, Agent shall indemnify and hold EarthLink harmless from and with
respect to any such loss or damage (including reasonable attorneys' fees and
costs).
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement, and supersedes any and all prior or
contemporaneous representations, understandings and agreements between the
parties with respect to the subject matter of this Agreement, all of which
are merged in this Agreement.
11.2 INDEPENDENT PARTIES. The parties are independent parties and
nothing herein shall be construed as creating an employment relationship
between the parties. Neither party is authorized as an agent or legal
representative of the other party. Neither party is granted any right or
authority to assume or to create, any obligation or responsibility, express
or implied, on behalf or in the name of the other party, or to bind such
other party in any manner. Each party is solely responsible for its own taxes.
11.3 WAIVER. No waiver of any provision of this Agreement, or any
rights or obligations of either party under this Agreement, shall be
effective, except pursuant to a written instrument signed by the party or
parties waiving compliance, and any such waiver shall be effective only in
the specific instance and for the specific purpose stated in such writing.
11.4 AMENDMENT. All amendments or modifications of this Agreement
shall be binding upon the parties despite any lack of consideration so long
as such amendment or modifications are in writing and executed by the parties.
<PAGE>
11.5 SEVERABILITY OF PROVISIONS. In the event that any provision of this
Agreement is found to be invalid or unenforceable pursuant to judicial decree
or decision, the remainder of this Agreement shall remain valid and
enforceable according to its terms.
11.6 ASSIGNMENT. This Agreement may not be assigned by Agent without the
written consent of EarthLink. This Agreement shall be binding upon and inure
to the benefit of each of the parties and their respective legal successors
and permitted assigns.
11.7 GOVERNING LAW; JURISDICTION; ATTORNEYS' FEES. This Agreement shall be
governed by the laws of California without giving effect to applicable
conflict of laws provisions. All actions with respect of this Agreement shall
be brought in the federal and state courts having jurisdiction within
Pasadena, California and the parties expressly consent to the personal
jurisdiction of such courts. In the event any litigation or other proceeding
is brought by either party in connection with this Agreement, the prevailing
party in such litigation or other proceeding shall be entitled to recover
from the other party all costs, attorney's fees and other expenses incurred
by such prevailing party in such litigation.
11.8 FORCE MAJEURE. Neither EarthLink nor Agent shall be deemed in default
of this Agreement if its performance or obligations under this Agreement are
delayed or become impossible or impractical by reason of any act of God, war,
civil disobedience or any other cause beyond the control of such party.
Notwithstanding the foregoing, a change in economic conditions or technology
shall not be deemed a force majeure event.
11.9 EXPORT RESTRICTIONS. None of the Services or underlying information or
technology may be sold, exported or re-exported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, North Korea, Yugoslavia, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders.
<PAGE>
EXHIBIT A
DEFINITIONS
1.1 CONFIDENTIAL INFORMATION means any information or material which : (i)
is confidential or proprietary to the disclosing party, which derives
economic value from not being generally known and is the subject of
reasonable efforts by the disclosing party to maintain its secrecy; or (ii)
the disclosing party obtains from any third party, which the disclosing party
treats as proprietary, whether or not owned by the disclosing party.
Confidential Information shall not include information which the receiving
party can show is: (i) known by the receiving party at the time of receipt
from the disclosing party and not subject to any other nondisclosure
agreement between the parties; (ii) now, or which hereafter becomes,
generally known to the public through no fault of the receiving party; (iii)
otherwise lawfully and independently developed by the receiving party without
reference to Confidential Information of the disclosing party; or (iv)
lawfully acquired by the receiving party from a third party without any
obligation of confidentiality.
1.2 COMMISSIONS means the compensation payable by EarthLink to Agent as set
forth on the Special Terms Exhibit.
1.3 DOCUMENTATION means the documentation customarily supplied by EarthLink
with the Software.
1.4 EARTHLINK TRADEMARKS means the trademarks, service marks, logos, trade
names and slogans of EarthLink identified in the EarthLink Trademarks Exhibit B.
1.5 EFFECTIVE DATE means the date first set forth above which, upon
execution of this Agreement by both parties, shall be the effective date of
this Agreement.
1.6 LICENSED MATERIAL means the Software and the related Documentation.
1.7 MARKS means the EarthLink Trademarks and copyright and proprietary
notices associated with EarthLink's products and services as well as the
trademarks, trade names, service marks, logos, slogans and copyright and
proprietary notices of EarthLink's third-party licensors.
1.8 MINIMUM PRODUCTIONS STANDARDS means the minimum number of prospective
sales for the Services set forth on the Special Terms Exhibit which are
generated by Agent and which are closed within a reasonable period of time so
as to be attributable to Agent's efforts hereunder.
1.9 PROPRIETARY SOFTWARE means the object code form only of EarthLink's
proprietary software contained in the EarthLink Network TotalAccess software
suite.
1.10 SOFTWARE means the Proprietary Software and the Third Party Software.
The Software shall include all enhancements, updates, upgrades and/or new
versions released during the term of this Agreement.
1.11. SERVICES means the EarthLink services, as described on the Special
Terms Exhibit, which Agent is licensed to market hereunder.
1.12. TERRITORY means the territory, described in the Special Terms Exhibit,
in which Agent may market and solicit orders for the Services.
1.13. THIRD PARTY SOFTWARE means the object code form only of software
EarthLink licenses from other third parties and which is included in
EarthLink Network TotalAccess, including but not limited to: Netscape
Navigator, Microsoft Internet Explorer and software from Apple Computer,
Inc. and Network Telesystems.
<PAGE>
EXHIBIT B
EARTHLINK GENERAL GUIDELINES FOR USE OF MARKS
NOTE: THIS EXHIBIT B MAY BE AMENDED FROM TIME TO TIME AS REQUIRED BY
COMPANY AND ALL SUCH AMENDMENTS SHALL BE INCORPORATED HEREIN.
TRADEMARKS, TRADE NAMES, LOGOS AND OTHER PRODUCT AND PROPRIETARY
IDENTIFIES.
EarthLink Network-Registered Trademark-
EarthLink Network TotalAccess-TM-
Netscape Communication Corporation's Netscape Navigator-TM-
EarthLink Network-Registered Trademark- is a registered trademark of
EarthLink Network, Inc.
EarthLink Network Total Access-TM- is a trademark of EarthLink
Network, Inc.
Netscape Navigator-TM- is a trademark of the Netscape Communications
Corporation.
Copyright-C- 1997, Netscape Communications Corporation
Copyright-C- 1997 by Network Telesystems, Inc.
Copyright-C- 1997 EarthLink Network, Inc.
All Rights Reserved.
<PAGE>
EXHIBIT C
EARTHLINK NETWORK, INC.
TRADEMARK AND COPYRIGHT NOTICE REQUIREMENTS FOR
EARTHLINK NETWORK TOTAL ACCESS-TM- SOFTWARE
INTENTIONALLY LEFT BLANK
<PAGE>
EXHIBIT D
SPECIAL TERMS
- ------------------------------------------------------------------------------
TERRITORY
- ---------
TERRITORY (IF NOT COMPLETED, THE TERRITORY SHALL BE THE FIFTY (50) STATES OF
THE UNITED STATES):__________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SERVICES
- --------
SERVICES INCLUDE, BUT ARE NOT LIMITED TO THE FOLLOWING: ANALOG DIAL-UP
ACCESS, ISDN ACCESS (DYNAMIC IP ADDRESSING), ISDN LAN (DYNAMIC IP
ADDRESSING), T1 FRAME RELAY SERVICES, AND WORLD WIDE WEB HOSTING SERVICES.
THE AGENT PROGRAM PAYS COMMISSIONS FOR SERVICES IN TWO CATEGORIES: INITIAL
COMMISSIONS ONLY AND INITIAL COMMISSIONS PLUS RECURRING COMMISSIONS. A
COMMISSION SCHEDULE ON THE FOLLOWING PAGE DEFINES WHICH SERVICES FALL INTO
THESE TWO CATEGORIES.
EARTHLINK RESERVES THE RIGHT TO ALTER, CHANGE, MODIFY, ADD OR DISCONTINUE ANY
OF THE SERVICES OFFERED. WHERE FEASIBLE, EARTHLINK WILL TRY TO PROVIDE
REASONABLE NOTICE TO THE AGENT.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
MINIMUM PRODUCTION STANDARDS
- ----------------------------
DESCRIBE THE MINIMUM PRODUCTION STANDARDS APPLICABLE TO AGENT'S PERFORMANCE
(E.G., NUMBER OF CLOSED SALES RESULTING FROM PROSPECTIVE CUSTOMERS PRODUCED BY
AGENT, ETC.):
PRODUCTION STANDARDS APPLY TO THOSE SERVICES THAT ARE ELIGIBLE FOR INITIAL
COMMISSIONS PLUS RECURRING COMMISSIONS. AGENT SHALL RECEIVE FROM EARTHLINK
NETWORK, A PERCENTAGE OF THE SETUP FEES UPON FIRST SALE FOR ALL ELIGIBLE
SERVICES. IN ADDITION AGENT SHALL RECEIVE A PERCENTAGE OF THE MONTHLY
RESIDUALS ONCE INITIAL QUALIFYING PRODUCTION QUOTAS ARE MET. IN ORDER TO BE
ELIGIBLE TO RECEIVE SAID PAYMENTS, AGENT MUST SELL A MINIMUM OF SIX (6)
ELIGIBLE SERVICES.
IN ORDER TO CONTINUE TO RECEIVE RECURRING COMMISSIONS AN AGENT MUST REMAIN IN
GOOD STANDING DURING THE TERM OF THE AGREEMENT. IN ORDER TO DO SO, AGENT MUST
SELL OF MINIMUM OF $400.00 IN NEW REVENUE PER QUARTER FOR ELIGIBLE RESIDUAL
BASED SERVICES. AGENT MAY CONTINUE TO RECEIVE INITIAL COMMISSIONS (PERCENTAGE
OF SET UP FEES FOR THOSE SERVICES ELIGIBLE FOR RECURRING COMMISSIONS)
REGARDLESS OF PERFORMANCE ON PRODUCTION STANDARDS AS LONG AS THE INITIAL
QUALIFYING PRODUCTION QUOTA HAS BEEN MET.
AGENT WILL NOT BE ELIGIBLE TO RECEIVE RESIDUAL PAYMENTS IF THESE PERFORMANCE
STANDARDS ARE NOT MET. IF AGENT FAILS TO SELL ANY NEW SERVICES FOR A PERIOD
OF 90 DAYS, THEN ALL RESIDUAL PAYMENTS WILL BE TERMINATED.
AGENT WILL BE ENTITLED TO RECEIVE PAYMENTS FOR UP TO ONE YEAR FOLLOWING THE
COMMENCEMENT OF SUCH PAYMENTS. THIS IS BASED SOLELY ON THE SERVICES SOLD BY
AGENT.
IN ORDER TO REGAIN ELIGIBILITY TO RECEIVE ON GOING COMMISSIONS, AGENT MUST ONCE
AGAIN MEET THE INITIAL QUALIFYING PRODUCTION STANDARDS OF SIX (6) ELIGIBLE
SERVICES.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMISSIONS:
- ------------
<PAGE>
Describe the Commissions structure:
Agreement shall receive remuneration for services sold as laid out in the
commission schedule below.
<TABLE>
<CAPTION>
Service Initial Payment Recurring Payment (monthly)
- ------- --------------- ---------------------------
<S> <C> <C>
Total Access 1-50 sign-ups $10.00 (set up waived) N/A
Total Access 51-1,000 sign-ups $20.00 (set up waived) N/A
Total Access 1,000 + sign-ups $25.00 (set up waived) N/A
ISDN $20.00 (set up waived) N/A
ISDN LAN 50% of set up fee N/A
Startersite (10MB) 50% of set up fee N/A
Web Hosting (15HB and above) 50% of set up fee 10% residual after 5 Sites Hosted
Frame Relay 50% of set up fee 5% residual after 5 Circuits Sold
</TABLE>
Commissions for Total Access are not paid until a subscriber has been a
paying customer for a period of 60 days and the Agent has produced the
minimum return of 10 sign-ups. All other commissions are payable only after
customer has paid for services. Commissions are paid on customers that are
active and current paying customers only.
OTHER:
Agent Program Roles and Responsibilities
Act as an Agent of EarthLink Network, Inc. by handling the marketing and
sales efforts necessary to close the sale. Represent to potential clients the
services, products and benefits of EarthLink Network services. Provide ELN
with all information necessary to process an order via web based order form
or fax. Provide customer with first level of customer support. Provide
customer with on-going maintenance and support.
Frame Relay and ISDN: Handle hardware sales as appropriate and provide
integration and post sales support for connectivity services as appropriate.
Provide EarthLink with installation dates and managed installation of
customer's internet connectivity. Provide customer with local area network
integration, hardware, software for internet connectivity.
Web Hosting: Handle all aspects of web design and maintenance of web site.
EarthLink Network will provide:
Assistance through our Business Customer Support Group, Customer Service, and
Dial Up Technical Support. EarthLink will provide sales support with a
dedicated telesales Account Executive and a field sales Account Manager.
Agreed to by the parties:
Initial:
/s/ illegible
- ---------------------------------- --------------------------------
Agent EarthLink
<PAGE>
Exhibit 10.21
LICENSE AGREEMENT
-----------------
This Agreement is dated as of December 21, 1998 ("Agreement") and is entered
into by and between American Interactive Media, Inc., 611 Broadway, Suite
308, New York, NY, Attn: Bill Zaccheo ("AIM") and Entertainment Boulevard,
Inc., 4052 Del Rey Avenue, Suite 108, Marina Del Rey, California 90292
("EBLD").
1. CONTENT AND RECIPROCAL LINKS.
AIM distributes comedy content, including video streaming of comedians across
the country showcasing their talent through a web site located at
www.comedynet.com ("ComedyNet Site"). AIM hereby grants to EBLD a
royalty-free, non-exclusive license to distribute such content from the
ComedyNet Site as is mutually agreed by the parties ("Content") on the EBLD
web site, located at www.entertainmentblvd.com ("EBLD Site").
In consideration for the above, EBLD shall produce, host and serve a
co-branded page or pages within the EBLD Site (hereinafter Collectively
referred to as "Co-Branded Page") for the distribution of the Content. The
Co-Branded Page is defined as a web page or web pages that contain both
PARTIES' logos, trademarks, tradenames, service marks, and/or content as
mutually agreed upon. EBLD shall include on the Co-Branded Page a mutually
agreeable prominent link to the ComedyNet Site. AIM SHALL INCLUDE A MUTUALLY
AGREEABLE PROMINENT LINK TO THE EBLD SITE ON THE COMEDYNET SITE.
AIM agrees that the Content shall not be defamatory or knowingly in breach of
any person's rights, including any intellectual property rights, privacy or
any other rights. EBLD shall have the right not to distribute the Content, or
any portion thereof, at any time if in the reasonable opinion of EBLD any of
the above conditions are breached and until AIM has made the requisite
editorial changes.
EBLD shall have the sole right to sell and shall use best efforts to sell
advertising and sponsorships on the Co-Branded Page and shall split 50/50
with AIM all revenue received by EBLD in connection therewith less any third
party agency fees or commissions actually paid by EBLD in connections with
such advertising and sponsorships. EBLD will account to AIM and pay AIM its
share of revenue within fifteen (15) days after the end of each calendar
month. Along with such payment, EBLD will furnish to AIM a written statement
reflecting the number of advertising impressions on, and number of visitors
to, the Co-Branded Page during the applicable month. Any such statement shall
be deemed accepted by AIM unless (i) AIM notifies EBLD in writing within
eighteen months (18) from the date of AIM's receipt of such statement setting
forth AIM's specific objections thereto and (ii) AIM commences a lawsuit to
contest such statement within two (2) years from the date of AIM's receipt of
such statement. AIM or AIM's designated representative shall have the right,
at EBLD's usual place of business, during business hours and on reasonable
notice to EBLD (but in no event more than once annually), to examine and copy
(provided AIM keeps such copies confidential and uses them solely in
connection with AIM's audit rights hereunder, in any proceeding hereunder, or
in any necessary business disclosures to a third party subject to such their
party's agreement to retain such confidentiality) EBLD's books and records to
confirm the accuracy of any such statements not otherwise deemed accepted. In
the event that such audit reveals a discrepancy in the amounts owed AIM from
what was actually paid, EBLD shall pay AIM the amount of such discrepancy. If
such discrepancy is in excess of five percent (5%) of the amounts actually
paid to AIM, EBLD shall reimburse AIM for the cost of such audit.
EBLD and AIM agree to explore other, non-Internet means of promoting their
Sites and brands.
2. REPRESENTATIONS AND WARRANTIES.
AIM represents and warrants that it owns or controls all right, title and
interest in and to the Content or licenses the rights to the Content and that
it has the authority to enter into this Agreement and to fully perform all of
its obligations hereunder. AIM represents and warrants that the grant of
rights to the Content herein, does not violate the rights of any third
parties and AIM will adhere to applicable Federal,
<PAGE>
State and Local law and regulation in the performance of its obligations
hereunder. EBLD represents and warrants that it has the authority to enter
into this Agreement and to fully perform its obligations hereunder, and that
it will adhere to applicable Federal, State and Local law and regulation in
the performance of such obligations.
3. TRADEMARK OWNERSHIP AND LICENSE.
EBLD and AIM will retain all right, title and interest in and to their
respective trademarks, service marks and trade names worldwide, subject to
limited cross-licenses necessary to perform this Agreement. Neither party
shall alter the other party's respective trademarks or other intellectual
property without the other party's express written consent. All references to
the other party's intellectual property shall include the appropriate
trademark, copyright or other legal notices, and shall be subject to the
other party's prior written approval.
4. TERM.
This Agreement shall continue for one (1) year from the last date of
execution of this Agreement. The Term shall be automatically renewed for
additional one (1) year increments unless either party notifies the other at
least thirty (30) days prior to the expiration of the then-current Term that
it does not wish to renew the Term of the Agreement.
5. TERMINATION.
Either party may terminate this Agreement if the other party breaches the
Agreement and the breach remains uncured for thirty (30) days (or, if such
breach is not susceptible to cure within thirty (30) days, the breaching
party must initiate steps to cure the breach within said thirty (30) day
period and continue its efforts to cure such breach), unless such breach is
caused by the alteration of a party's trademark or other intellectual
property, or failure to obtain an approval as required in this Agreement, in
which case the breaching party shall have, upon notice, two (2) business days
in which to cure. Either party may terminate this Agreement if the other
party is the subject of a bankruptcy filing which is not dismissed within
sixty (60) days. Either party may terminate this Agreement on thirty (30)
days advance written notice to the other party. This Agreement shall
terminate with no further obligations between the parties except the
confidentiality obligation set out in Paragraph 6 below and the obligation
contained in the next sentence of this Paragraph 5, if either the ComedyNet
Site or EBLD Site is removed from the Web and/or ceases operation for a
period of more than two (2) consecutive weeks. Upon any termination, EBLD (i)
will account to and pay AIM its share of revenues for all periods prior to
the date of termination within thirty (30) days of termination and (ii) will
promptly return to AIM any materials containing the Content. In addition,
Paragraphs 2, 6, 7, 9 and 10 shall survive termination of this Agreement.
6. CONFIDENTIALITY.
The terms and conditions of this Agreement shall be strictly confidential.
All information about the development of the EBLD Site and the development
and launch of the Co-Branded Page disclosed to AIM, its officers, directors,
employees and/or agents shall be treated as confidential. All information
about the development of the ComedyNet Site and the development and launch of
the Co-Branded Page disclosed to EBLD, its officers, directors, employees
and/or agents shall be treated as confidential. Such confidentiality is of
the essence to this Agreement.
7. INDEMNITY.
Each party will indemnify the other, its parent, subsidiary and affiliated
companies, their employees, officers, directors and agents from third party
claims, losses, causes of action, costs (including reasonable attorney's
fees) arising from the breach of any warranty, representation or covenant in
the Agreement.
<PAGE>
8. LIMITATION ON WARRANTY.
Neither party makes any warranty regarding the quality of their goods and
services. Neither party makes any warranty that all errors or failures in
their respective sites will be corrected. The parties expressly disclaim all
warranties of merchantability or fitness for a particular purpose. Beyond the
warranties contained in this paragraph, the parties do not warrant that their
sites are error-free or that operation of their sites will be secure or
uninterrupted.
9. LIMITATION ON LIABILITY.
In no event will either party be liable for any representation or warranty
made to any end user or third party by the other party, or any agent of the
other party. In no even will either party be liable for failure of its
network or support services. These limitations shall survive and apply
notwithstanding the validity of the limited remedies provided for in this
agreement. Except for liability for indemnity, neither party shall have
liability for any damages other than direct damages.
10. DISPUTE RESOLUTION.
Disputes about trademarks, service marks, trade names and confidentiality may
be resolved in court. All other disputes arising out of this Agreement shall
be resolved through mediation and then binding arbitration in accordance
with the rules and procedures of the American Arbitration Association, to
take place in the County of Los Angeles, California, or the County of New
York, New York.
11. GENERAL.
Neither party may assign or otherwise transfer this Agreement with the other
party's prior written consent; provided, however that AIM may assign or
otherwise transfer this Agreement to any parent, subsidiary or affiliated
entity without EBLD's prior written consent. The parties hereto are neither
partners nor joint venturers hereunder, and neither party shall have the power
or authority to bind or obligate the other in any way. This Agreement may not
be modified and none of its terms may be waived, except in writing signed by
both parties. This Agreement shall not be binding until fully executed and
delivered to each of the parties hereto. Neither party's failure or delay to
enforce any rights hereunder shall be considered a waiver of such rights or a
modification of this Agreement. This Agreement shall be governed by and
interpreted in accord with the laws of the State of California applicable to
agreements entered into and to be performed wholly in California. The parties
hereby consent to the exclusive jurisdiction of any State or Federal court
empowered to enforce this Agreement in the State of California, County of Los
Angeles or the State of New York, County of New York, and the parties waive
any objection thereto on the basis of personal jurisdiction or venue. This
Agreement constitutes the entire understanding between the parties with
respect to the subject matter of this Agreement ad supersedes all prior
agreements.
AGREED TO AND ACCEPTED BY:
AMERICAN INTERACTIVE MEDIA, INC. ENTERTAINMENT BOULEVARD, INC.
By: /s/ Victoria Johnson By: /s/ Stephen Brown
---------------------------- ----------------------------
Name: Victoria Johnson Name: Stephen Brown
--------------------------- --------------------------
Title: VP Business Development Title: CEO
-------------------------- -------------------------
Date: 12/21/98 Date: 12/21/98
-------------------------- -------------------------
<PAGE>
Exhibit 10.22
HEARME.COM-TM- SYNDICATION PARTNER PROGRAM AGREEMENT
This Agreement contains the terms and conditions that apply to an
individual's or entity's participation in the Hearme.com Syndication Partner
Program (the "Program"). As used in this Agreement, "we" means Hearme.com as
operated by Mpath Interactive, Inc., and "you" means the applicant. "Site"
means a World Wide Web site. "Partner" means someone who has been accepted
into the Program.
1. Program Applications
(a) You must complete and submit to us an application for the Program.
The application can be found online on our Web site at
www.hearme.com. We will evaluate your application and will notify
you of your status.
(b) We may reject your application if we determine (at our sole
discretion) that your Site is unsuitable for the Program. For
example, we may reject certain applications due to the volume of
pending applications, or the content on your Site. If you are
rejected, you may reapply at any time.
(c) If you are accepted, your e-mail will contain your unique Partner
code and instructions for accessing the information necessary to
participate in the Program.
2. Partner Responsibilities
(a) You must provide an active hyperlink, in a format of a Hearme.com
graphic image provided to you by us, from your Site to Hearme.com.
This Hearme.com graphic image must be displayed on your site no
smaller than 114 X 75 pixels on your home page. You may display this
Hearme.com hyperlink as often and in as many areas on your Site as
you desire. Such active Hearme.com hyperlink on your Site will
hyperlink to the download, registration and launch Site for the
Hearme.com client software. Use of these Hearme.com graphic images
(approved logos, buttons, banners, etc.) is subject to the Hearme.com
Trademark Guidelines at www.hearme.com.
(b) You must display, on your Site's home page and on any pages on your
Site that reference Hearme.com, the Hearme.com graphic image. We
will provide you with the Hearme.com graphic image that identifies
your Site as a Hearme Partner.
(c) Our template for Hearme.com Web pages to be displayed on your Web
site can be found online on our Web site at www.hearme.com. The Web
pages include, among other things, a description of the features and
functionality of Hearme.com. Once you have added your marks to the
Web pages you must maintain and include a link to them from your
home page as part of the Program. You must maintain such Web pages
on your Site. This page must include an active hyperlink, in a
format of a Hearme.com graphic image provided to you by us, from
your Site to Hearme.com.
(d) Allocate 10% of available Web banner advertising per quarter on your
Site to the promotion of Hearme.com. We will provide you with the
banner advertising to run to publicize your audio chat "Live
Communities by Hearme.com". If you do not run advertising on your
site, we will negotiate some alternate arrangement for the promotion
of Hearme.com.
3. Our Responsibilities
(a) We will host the servers required for Hearme.com and provide the
network operations support for such servers.
1
<PAGE>
(b) We will create a persistent branded area on Hearme.com with your brand
and send users directly into that persistent branded area. Users can
create an unlimited number of chat rooms.
(c) We will provide you with guidelines and graphical artwork to use in
linking to Hearme.com. These guidelines and artwork are located online
on our Web site at www.hearme.com.
(d) We will license you a Hearme.com graphic image that identifies your
Site as a Hearme Partner. We may modify the text or graphic image of
this notice from time to time and we may ask you to update your use of
the text or graphic image in a reasonable time thereafter.
(e) All people who register for Hearme.com are end users of Hearme.com.
Accordingly, all Hearme.com rules, policies, and operating procedures
concerning will apply to such end users. We may change our policies and
operating procedures at any time. Information on obtaining end users
mailing lists from us is available at www.hearme.com.
(f) We alone may sell, without restriction, advertising and sponsorships to
be displayed to users of the Hearme.com client software.
(g) We will remain the sole and exclusive owner of all right, title and
interest in the Hearme.com client software (except for any of your
trademarks incorporated into the Hearme.com client software screen
display user interface).
(h) We may list you and all other members of the Program on a Web page on
Hearme.com in order to enable visitors to Hearme.com to find our
Hearme.com Partners. You hereby authorize us to use certain of your
trademarks on such Web page, subject to reasonable quality control
restrictions as required by law to maintain the integrity of your
trademarks.
4. Site Responsibility
Your Site should continue to maintain the standards that enabled us to accept
your Site for the Program. We disclaim any responsibility or liability for
your Site. You will be solely responsible for the development, operation, and
maintenance of your Site and for all materials that appear on your Site. For
example, you will be solely responsible for: the technical operation of your
Site and all related equipment, the accuracy and appropriateness of materials
posted on your Site, ensuring that materials posted on your Site do not
violate or infringe upon the rights of any third party (including, for
example, copyrights, trademarks, privacy, or other personal or proprietary
rights), and ensuring that materials posted on your Site are not libelous or
otherwise illegal. We disclaim all responsibility and liability for these
matters. You will indemnify us and hold us harmless from all claims, damages,
and expense (including without limitation, attorneys' fees) relating to the
development, operation, maintenance and contents of your Site. The users of
Hearme.com must evaluate, and bear the risk associated with, the accuracy,
completeness or usefulness of any content found on Hearme.com. We do not
accept any responsibility or liability for the content found on Hearme.com.
We do not pre-screen content as a matter of policy, but we do reserve the
right, but not the responsibility, to remove content which is deemed, in our
discretion, harmful, or offensive. YOU SPECIFICALLY AGREE THAT WE ARE NOT
RESPONSIBLE OR LIABLE TO YOU, USERS OR ANYONE ELSE FOR ANY THREATENING,
DEFAMATORY, OBSCENE, OFFENSIVE OR ILLEGAL CONDUCT OR SPEECH OF ANY OTHER
PARTY OR ANY INFRINGEMENT OR VIOLATION OF ANOTHER'S RIGHTS, INCLUDING
INTELLECTUAL PROPERTY AND RIGHT OF PUBLICITY RIGHTS.
5. Terms of the Agreements
2
<PAGE>
This Agreement begins upon our acceptance of your Program application and
ends when terminated by either party. Either party may terminate this
Agreement at any time, with or without cause, by giving the other party 30
days prior written notice of termination. Upon any termination of this
Agreement, all rights granted under this Agreement shall immediately
terminate and you shall immediately remove from your Site and cease all
further use of our trademarks and graphic images. Termination of this
Agreement by either party shall not act as a waiver of any breach of this
Agreement and shall not act as a release of either party from any liability
for breach of such party's obligations under this Agreement.
6. Modification
We may modify any of the terms and conditions contained in this Agreement, at
any time and in our sole discretion, by posting a change notice or a new
agreement on our Site. Modifications may include, for example, changes in the
Program rules. IF ANY MODIFICATION IS UNACCEPTABLE TO YOU, YOUR ONLY RECOURSE
IS TO TERMINATE THIS AGREEMENT. YOUR CONTINUED PARTICIPATION IN THE PROGRAM
FOLLOWING OUR POSTING OF A CHANGE NOTICE OR NEW AGREEMENT ON OUR SITE WILL
CONSTITUTE BINDING ACCEPTANCE OF THE CHANGE.
7. Limitation of Liability
REGARDLESS WHETHER ANY REMEDY SET FORTH IN THIS AGREEMENT FAILS OF ITS
ESSENTIAL PURPOSE OR OTHERWISE, UNDER NO CIRCUMSTANCES WILL EITHER OF US BE
LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY, NEGLIGENCE OR OTHER
LEGAL THEORY, FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
OR LOST PROFITS OR REVENUE OF THE OTHER PARTY IN CONNECTION WITH THE SUBJECT
MATTER OF THIS AGREEMENT EVEN IF THE PARTY HAS BEEN INFORMED IN ADVANCE OF
SUCH DAMAGES. THE LIMITATION OF LIABILITY IS REFLECTED IN THE CONSIDERATION
EXCHANGED IN THIS AGREEMENT. Further, our aggregate liability arising with
respect to this Agreement and the Program will not exceed the total payments
made to you under this Agreement.
8. Disclaimers
We make no express or implied warranties or representations with respect to
the Program (including, without limitation, warranties of fitness,
merchantability, non-infringement, or any implied warranties arising out of a
course of performance, dealing, or trade usage). In addition, we make no
representation that the operation of Hearme.com will be uninterrupted or
error-free, and we will not be liable for the consequences of any
interruptions or errors.
9. Independence
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND AGREE TO ALL ITS TERMS
AND CONDITIONS. YOU UNDERSTAND THAT WE MAY AT ANY TIME (DIRECTLY OR
INDIRECTLY) OPERATE WEB SITES THAT ARE SIMILAR TO OR COMPETE WITH YOUR WEB
SITE. YOU HAVE INDEPENDENTLY EVALUATED THE DESIRABILITY OF PARTICIPATING IN
THE PROGRAM AND ARE NOT RELYING ON ANY REPRESENTATION, WARRANTY, OR STATEMENT
OTHER THAN AS SET FORTH IN THIS AGREEMENT. The parties to this Agreement are
independent contractors and nothing in this Agreement contained shall be
deemed to create a joint venture, franchise, partnership or agency
relationship between the parties to this Agreement. No party shall have any
power to enter into any contracts or commitments in the name of, or on behalf
of, the other party, or to bind the other party in any respect whatsoever.
3
<PAGE>
performance is so affected, including, without limitation, fire, war,
earthquake, strike, riot, labor dispute, or an act of God. In the event of
any such delay, preemption or failure, the affected performing party will
promptly notify the other party of the nature and anticipated length of
continuance of such force majeure, and during such period both parties will be
excused from performance hereunder. No such failure or delay constitutes a
material breach of this Agreement. You may not assign its rights under this
Agreement. Any assignment in violation of this prohibition is void. We may
assign this Agreement to an affiliate commonly owned and controlled by us or
to anyone else in connection with the merger or acquisition of us or sale of
all or substantially all of our assets used primarily in connection with this
Agreement. Each party agrees to provide no less than thirty (30) business
days' prior notification of any authorized assignment under this Agreement,
including assignment to an affiliate or as part of an asset sale. Any
attempted assignment except as allowed by the immediately preceding sentence
is null and void. Subject to the foregoing, this Agreement will benefit and
bind the successors and assigns of the parties. This Agreement will be
interpreted fairly in accordance with its terms and conditions and without
any strict construction in favor of or against either party. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter to this Agreement, and supersedes and replaces all prior or
contemporaneous understandings or agreements, written or oral, regarding such
subject matter.
Entertainment Boulevard, Inc. Mypath Interactive, Inc.
By: /s/ Stephen Brown By: /s/ Carl Ross
------------------------------ -----------------------------
Name: Stephen Brown Name: Carl Ross
------------------------------ -----------------------------
Title: CEO Title:
------------------------------ -----------------------------
Date: 3/18/99 Date: 3/18/99
------------------------------ -----------------------------
Fax: (310) 578-6304 Fax: (650)429-1954
Hearme.com, Hearme and the Hearme logo are trademarks of Mpath Interactive, Inc.
4
<PAGE>
Exhibit 10.23
AGREEMENT made as of March 30, 1999, between Entertainment Boulevard, Inc.
("Netfomercial"), 4052 Del Rey Avenue, Suite 108, Marina Del Rey, CA 90292
and L.A. Group, Inc. ("Grantor"), with offices at 39 Crystal Common Drive,
Rochester, NY 14624.
The parties hereby agree as follows:
1. Grant of Rights: Grantor hereby grants to Entertainment Boulevard, Inc.
the right to exhibit each infomercial on the Entertainment Boulevard web
site known as "Netfomercial" (www.netfomercial.com) an unlimited
number of times during the Licensing Period in the Territory as part of
Netfomercial's Program Service(s). The permission granted in this
Agreement is non-exclusive and Grantor will have no obligation to
refrain from using any infomercial or authorizing others to use them.
(I) "Infomercial" means any audio, visual or audiovisual work or
works listed on Exhibit A which is attached hereto and made a
part hereof, which is the entirety of an audiovisual work owned
and/or being marketed by Grantor.
(II) "License Period" means the two (2) year period commencing upon
initial exhibition of each infomercial. Either party may
terminate this agreement with thirty (30) days written notice at
any time during this term.
(III) "Territory" means the Internet.
(IV) "Netfomercial Program Service(s)" means any of Netfomercial's
affiliated Internet service, as transmitted for reception by its
respective designated affiliates, for viewing by its on line
users.
2. Materials: Immediately upon receipt by Grantor of this Agreement, Grantor
will deliver to Netfomercial, at the above address, a 3/4 inch (3/4")
videotape of the best available quality from which the infomercial can
be duplicated with accompanying stereophonic sound, if available.
Netfomercial will duplicate such 3/4 inch (3/4") videotape solely for
use in connection with this license and the Performance on the
Netfomercial website (www.netfomercial.com).
3. Consideration: It is the understanding of the parties that this grant is
being made for the purpose of promoting the product featured in each
Infomercial.
4. Compensation: In exchange for Netfomercial's display of the
Infomercial as defined by Exhibit "A" Grantor shall pay to
Netfomercial a commission from all dollars generated through the sale
of any and all items defined in Exhibit "A". This commission shall be
outlined in Exhibit "A." Grantor shall be responsible for all production
costs involved in the infomercial. Netfomercial shall be responsible
for any costs involved in adapting the Infomercial to the Internet.
Grantor shall be responsible for all product fulfillment.
5. If at any time during the License Period of this Agreement Grantor
designates other website(s) to broadcast Grantor's Infomercials,
Netfomercial shall develop a "pop-up" player for these designated
website(s) which shall be served by Netfomercial. This "pop-up" player
shall broadcast any of the Infomercials available through Netfomercial
that are designated by Grantor. In exchange for this service,
Netfomercial shall receive a mutually agreed upon fee for all products
sold through these designated websites, except for those products sold
which did not involve a viewing of the product(s) through the pop-up
player.
6. Should Grantor choose to use a "pop-up" player on the Ronco site,
Netfomercial will provide this player at no cost, and Grantor will
serve the player on the website (www.ronco.com).
<PAGE>
7. Incidental Rights:
Netfomercial shall also have the right for a period of one (1) year
(renewable subject to Grantor's written consent) from the date of
delivery of the Infomercial to use audio and visual (must not be
separated) from the Infomercial as part of its regular, review, special
and/or retrospective Internet programming.
8. Warranties: Grantor hereby warrants and represents that (I) Grantor has
the right to grant all rights granted herein and is free to enter into
and fully perform this Agreement, (II) Grantor has paid or will pay all
charges, taxes, license fees for the exercises of any rights granted
herein, including all reuse or residual payments and related pension and
welfare payments payable to any union or guild and all required
synchronization licenses (III) that there are no pending claims, liens,
charges, restrictions or encumbrances on the Infomercial or on such
rights, and (IV) the exercise of the rights granted herein will not
infringe on any rights of any trademark, unfair competition, contract,
defamation, copyrights, privacy or publicity rights. Grantor will
defend, indemnify and hold Netfomercial harmless from and against any
and all claims, demands, losses, damages or other payments, including
reasonable attorney fees, arising out of any breach of such warranties
and representations. In the event of any claim or service of process
upon Netfomercial involving the indemnification herein before set
forth, Netfomercial shall notify Grantor of the claim. Grantor will
promptly adjust, settle, defend or otherwise dispose of such claim at
its sole cost. If Netfomercial breaches any terms of this Agreement,
they will defend, indemnify and hold Grantor harmless from against any
and all claims, demands, losses, damages or other payments, including
reasonable attorney fees, arising out of any breach of such warranties
and representations. In the event of any claim or service of process
upon Grantor involving the indemnification hereinbefore set forth.
Grantor shall notify Netfomercial of the claim. Netfomercial will
promptly adjust, settle, defend or otherwise dispose of such claim at
its sole cost.
9. Additional infomercials: Netfomercial and Grantor anticipate that they
may, from time to time, wish to enter into additional agreements
relating to the exhibition of Infomercials. Such additional agreements
shall be evidenced by additions to Exhibit A agreed upon by
Netfomercial and Grantor and, unless otherwise specified on such
Exhibit A, shall be upon the same terms and conditions as set forth
herein.
10. Miscellaneous: This agreement contains the entire understanding and
supersedes all prior understanding of the parties hereto relating to the
subject matter hereof, and this agreement cannot be changed or
terminated orally. This agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York
applicable to contracts executed and performed entirely therein.
IN WITNESS WHEREOF, the parties hereto hereby execute this Agreement as the
date first specified above.
L.A. Group, Inc. Entertainment Boulevard, Inc.
("Grantor") ("Netfomercial")
/s/ Dan Fasano /s/ Stephen Brown
by: Dan Fasano By: Stephen Brown
Title: President Title: CEO
<PAGE>
EXHIBIT A
Made part of and incorporated into an agreement between Entertainment
Boulevard, Inc. and Ronco, Inc. dated as of March 30, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ITEM COMPENSATION PER ITEM ORDERED
- -------------------------------------------------------------------
<S> <C>
Showtime BBQ $19.00
- -------------------------------------------------------------------
Ronco Food Dehydrator $10.00
- -------------------------------------------------------------------
Popeli Pasta Maker $30.00
- -------------------------------------------------------------------
Ronco GLH Formula #9 $4.00
- -------------------------------------------------------------------
Popeli Pocket Fisherman $5.00
- -------------------------------------------------------------------
Ronco Dial-O-Matic $1.50
- -------------------------------------------------------------------
Ronco Drain Buster $1.00
- -------------------------------------------------------------------
Ronco Bagel Cutter $1.50
- -------------------------------------------------------------------
Ronco Door Saver $1.00
- -------------------------------------------------------------------
Inside Egg Scrambler $1.00
- -------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.24
LICENSE AGREEMENT
This Agreement is dated as of June 7, 1999 ("Agreement") and is entered into
by and between Synge.com, 151 Kalmus Dr. Suite D200, Costa Mesa, CA 92626
("Licensee") and Entertainment Boulevard, Inc., 4052 Del Rey Avenue Suite
108, Marina Del Rey, California 90292 ("EBLD").
1. CONTENT AND RECIPROCAL LINKS
EBLD distributes entertainment-related content, including streaming music
videos through a web site located at www.vidnet.com ("EBLD Site"). EBLD
hereby grants to Licensee a royalty-free, non-exclusive license to distribute
such content from the EBLD Site as is mutually agreed by the parties
("Content") on the Synge.com web site, located at www.synge.com ("Licensee
Site").
EBLD shall produce, host and serve a co-branded pop-up player or pop-up
players within the Licensee Site (hereinafter Collectively referred to as
"Co-Branded Player") for the distribution of the Content. The Co-Branded
Player is defined as a web page or web pages that contain both parties'
logos, trademarks, tradenames, service marks, and/or content as mutually
agreed upon.
Licensee shall include a link to the Co-Branded Player on the Licensee Site
in a mutually agreed upon place for the duration of the Term.
EBLD agrees that the Content shall not be defamatory or knowingly in breach
of any person's rights, including any intellectual property rights, privacy
or any other rights. Licensee shall have the right not to distribute the
Content, or any portion thereof, at any time if in the reasonable opinion of
Licensee any of the above conditions are breached and until EBLD has made the
requisite editorial changes.
Both parties shall have the right to sell and shall use best efforts to sell
advertising and sponsorships on the Co-Branded Player and shall split 50/50
all revenue received in connection therewith less any third party agency fees
or commissions actually paid in connections with such advertising and
sponsorships. Such advertising shall consist of any of the following: banner
ads, corporate sponsorships, audio, video, or audio/video ads which are
broadcast exclusively through the Co-Branded Player, or any other promotional
text, graphic, audio clip or combination of these which generates revenue in
exchange for broadcast over the Co-Branded Player. EBLD shall have the right
to approve all pricing schedules for such advertising. Such approval shall
not be unduly withheld, and EBLD shall respond to all requests for such
approval within three (3) business days. Should advertising generated by
Licensee conflict with advertising generated by EBLD, advertising generated
by EBLD shall take priority, but both parties shall make all possible efforts
to prevent such situation from occurring by informing each other of all
advertising campaigns as they occur.
Each party will account to the other and pay its share of revenue within
fifteen (15) days after the end of each calendar month. Along with such
payment, each party will furnish a written statement reflecting the number of
advertising impressions on, and number of visitors to, the Co-Branded Player
during the applicable month. Any such statement shall be deemed accepted
unless (i) the recipient notifies the sender in writing within eighteen
months (18) from the date of receipt of such statement setting forth specific
objections thereto and (ii) the recipient commences a lawsuit to contest such
statement within two (2) years from the date of receipt of such statement.
EBLD or EBLD's designated representative shall have the right, at Licensee's
usual place of business, during business hours and on reasonable notice to
Licensee (but in no event more than once annually), to examine and copy
(provided EBLD keeps such copies confidential and uses them solely in
connection with EBLD's audit rights hereunder, in any proceeding hereunder,
or in any necessary business disclosures to a third party subject to such
third party's agreement to retain such confidentiality) Licensee's books and
records to confirm the accuracy of any such statements not otherwise deemed
accepted. In the event that such audit reveals a discrepancy in the amounts
owed EBLD from what was actually paid, Licensee shall pay EBLD
<PAGE>
the amount of such discrepancy. If such discrepancy is in excess of five
percent (5%) of the amounts actually paid to EBLD, Licensee shall reimburse
EBLD for the cost of such audit.
Conversely, Licensee or Licensee's designated representative shall have the
right, at EBLD's usual place of business, during business hours and on
reasonable notice to EBLD (but in no event more than once annually), to
examine and copy (provided Licensee keeps such copies confidential and uses
them solely in connection with Licensee's audit rights hereunder, in any
proceeding hereunder, or in any necessary business disclosures to a third
party subject to such third party's agreement to retain such confidentiality)
EBLD's books and records to confirm the accuracy of any such statements not
otherwise deemed accepted. In the event that such audit reveals a discrepancy
in the amounts owed Licensee from what was actually paid, EBLD shall pay
Licensee the amount of such discrepancy. If such discrepancy is in excess of
five percent (5%) of the amounts actually paid to Licensee, EBLD shall
reimburse Licensee for the cost of such audit.
EBLD and Licensee agree to explore other, non-Internet means of promoting
their Sites and brands.
2. REPRESENTATIONS AND WARRANTIES.
EBLD represents and warrants that it licenses the rights to the Content and
that it has the authority to enter into this Agreement and to fully perform
all of its obligations hereunder. EBLD represents and warrants that the grant
of rights to the Content herein, does not violate the rights of any third
parties and will adhere to applicable Federal, State and Local law and
regulation in the performance of its obligations hereunder. Licensee
represents and warrants that it has the authority to enter into this
Agreement and to fully perform its obligations hereunder, and that it will
adhere to applicable Federal, State and Local law and regulation in the
performance of such obligations.
3. TRADEMARK OWNERSHIP AND LICENSE.
EBLD and Licensee will retain all right, title and interest in and to their
respective trademarks, service marks and trade names worldwide, subject to
limited cross-licenses necessary to perform this Agreement. Neither party
shall alter the other party's respective trademarks or other intellectual
property without the other party's express written consent. All references to
the other party's intellectual property shall include the appropriate
trademark, copyright or other legal notices, and shall be subject to the
other party's prior written approval.
4. TERM.
This Agreement shall continue for one (1) year from the last date of
execution of this Agreement. The Term shall be automatically renewed for
additional one (1) year increments unless either party notifies the other at
least thirty (30) days prior to the expiration of the then-current Term that
it does not wish to renew the Term of the Agreement.
5. TERMINATION.
Either party may terminate this Agreement if the other party breaches the
Agreement and the breach remains uncured for thirty (30) days (or, if such
breach is not susceptible to cure within thirty (30) days, the breaching
party must initiate steps to cure the breach within said thirty (30) day
period and continue its efforts to cure such breach), unless such breach is
caused by the alteration of a party's trademark or other intellectual
property, or failure to obtain an approval as required in this Agreement, in
which case the breaching party shall have, upon notice, two (2) business days
in which to cure. Either party may terminate this Agreement if the other
party is the subject of a bankruptcy filing which is not dismissed within
sixty (60) days. Either party may terminate this Agreement on thirty (30)
days advance written notice to the other party. This
<PAGE>
Agreement shall terminate with no further obligations between the parties
except the confidentiality obligation set out in Paragraph 6 below and the
obligation contained in the next sentence of this Paragraph 5, if either the
Licensee's Site or EBLD Site is removed from the Web and/or ceases operation
for a period of more than two (2) consecutive weeks. Upon any termination,
each party (i) will account to and pay the other party its share of revenues
for all periods prior to the date of termination within thirty (30) days of
termination and (ii) will promptly return to the other party any materials
containing the Content. In addition, Paragraphs 2, 6, 7, 9 and 10 shall
survive termination of this Agreement.
6. CONFIDENTIALITY.
The terms and conditions of this Agreement shall be strictly confidential.
All information about the development of the EBLD Site and the development
and launch of the Co-Branded Player disclosed to Licensee, its officers,
directors, employees and/or agents shall be treated as confidential. All
information about the development of the Licensee Site and the development
and launch of the Co-Branded Player disclosed to EBLD, its officers,
directors, employees and/or agents shall be treated as confidential. Such
confidentiality is of the essence to this Agreement.
7. INDEMNITY.
Each party will indemnify the other, its parent, subsidiary and affiliated
companies, their employees, officers, directors and agents from third party
claims, losses, causes of action, costs (including reasonable attorney's
fees) arising from the breach of any warranty, representation or covenant in
the Agreement.
8. LIMITATION ON WARRANTY.
Neither party makes any warranty regarding the quality of their goods and
services. Neither party makes any warranty that all errors or failures in
their respective sites will be corrected. The parties expressly disclaim all
warranties of merchantability or fitness for a particular purpose. Beyond the
warranties contained in this paragraph, the parties do not warrant that their
sites are error-free or that operation of their sites will be secure or
uninterrupted.
9. LIMITATION ON LIABILITY.
In no event will either party be liable for any representation or warranty
made to any end user or third party by the other party, or any agent of the
other party. In no even will either party be liable for failure of its
network or support services. These limitations shall survive and apply
notwithstanding the validity of the limited remedies provided for in this
agreement. Except for liability for indemnity, neither party shall have
liability for any damages other than direct damages.
10. DISPUTE RESOLUTION.
Disputes about trademarks, service marks, trade names and confidentiality may
be resolved in court. All other disputes arising out of this Agreement shall
be resolved through mediation and then binding arbitration in accordance with
the rules and procedures of the American Arbitration Association, to take
place in the County of Los Angeles, California.
11. GENERAL.
Neither party may assign or otherwise transfer this Agreement without the
other party's prior written consent. The parties hereto are neither partners
nor joint venturers hereunder, and neither party shall have the power or
authority to bind or obligate the other in any way. This Agreement may not be
modified and none of its terms may be waived, except in writing signed by
both parties. This Agreement shall not be binding until fully executed and
delivered to each of the parties hereto. Neither party's failure or delay to
enforce any rights hereunder shall be
<PAGE>
considered a waiver of such rights or a modification of this Agreement. This
Agreement shall be governed by and interpreted in accord with the laws of the
State of California applicable to agreements entered into and to be performed
wholly in California. The parties hereby consent to the exclusive
jurisdiction of any State or Federal court empowered to enforce this
Agreement in the State of California, County of Los Angeles, and the parties
waive any objection thereto on the basis of personal jurisdiction or venue.
This Agreement constitutes the entire understanding between the parties with
respect to the subject matter of this Agreement ad supersedes all prior
agreements.
AGREED TO AND ACCEPTED BY:
SYNGE.COM ENTERTAINMENT BOULEVARD, INC.
By: /s/ John Sos By: /s/ Stephen Brown
-------------------------------- ----------------------------------
Name: John Sos Name: Stephen Brown
------------------------------ --------------------------------
Title: Vice President Title: CEO
----------------------------- -------------------------------
Date: 6/3/99 Date: 6/7/99
------------------------------ --------------------------------
<PAGE>
CONFIDENTIAL
DIGITAL BITCASTING CORPORATION/ENTERTAINMENT BOULEVARD, INC
STRATEGIC ALLIANCE AGREEMENT
[BITCASTING LOGO]
This is an Agreement between, Digital Bitcasting Corp. ("Bitcasting") 35
Congress St., Salem MA 01970, USA, a Delaware corporation and Entertainment
Boulevard Inc ("EBlvd"), 4052 Del Rey Ave, Suite 108, Marina Del Rey, CA 90292,
USA, a corporation incorporated in the State of Nevada under which Bitcasting
and EBlvd ("Companies") in exchange for promises contained herein desire to
establish a Strategic Alliance.
I. OVERVIEW
EBlvd and Bitcasting desire to work together to leverage the respective
strengths of EBlvd's content, content partners, strategic & technical alliances
("EBlvd Partners") and Bitcasting's MPEG encoding and G2 client-server plug-in
that enables the G2 platform to stream MPEG-1, MPEG-2 and MP3 content ("G2
Upgrade") as well as Bitcasting's Customer, Infrastructure, Backbone and
End-Point Provider Partnerships ("Bitcasting Partners").
II. TERM
This Agreement shall commence as of the Effective Date, and continue thereafter
for a period of (1) year ("Term"), unless terminated earlier as provided herein
or unless a specific clause defines a different term, as in Section IV(b).
Thereafter, this Agreement may be renewed for subsequent one-year terms by
written agreement of the parties. Neither party shall have any right or
obligation to renew this Agreement.
III. STRATEGIC ALLIANCE
In exchange for the Conditions detailed below Bitcasting will provide the
following to EBlvd:
(a) Preferred Partner discounts of twenty-five-percent (25%) on Bitcasting G2
Upgrade licensed for the benefit of Eblvd
(b) Exclusive licensing rights to the G2 Upgrade solely for the Internet
distribution of music video and movie trailer content ("Content") at data
rates of five-hundred kilobits (500Kbps) and higher.
(c) Referral of potential customers and partners that express interest in EBlvd
content ("Interested Customer") to EBlvd.
<PAGE>
Bitcasting/EBlvd Strategic Alliance Agreement - 2/6
(d) Preferred placement of EBlvd logo with link and media on Bitcasting's own
WWW media samples page.
(e) Inclusion of EBlvd logo and link on Bitcasting's own WWW Partner page.
(f) Recognition and display of EBlvd content and logo at trade show booth when
Bitcasting is exhibitor.
(g) Joint Press release, within 30 days of this Agreement, detailing Strategic
Alliance and EBlvd's streaming media activities using Bitcasting
technologies.
In exchange for the Conditions detailed below EBlvd will provide the following
to Bitcasting:
(h) Referral of potential customers and partners that express interest in
Bitcasting technology ("Interested Customer") to Bitcasting.
(i) Preferred placement of "Broadband Powered by Bitcasting" logo with link on
Vidnet and Screen Clips WWW home page.
(j) Inclusion of Bitcasting's logo and link on EBlvd's own WWW Partner page.
(k) Recognition and display of Bitcasting logo at trade show booth when EBlvd
is exhibitor.
(l) Referral to Bitcasting as Broadband Technology Partner is all EBlvd public
relation efforts dealing with broadband arena using RealSystem G2(TM)
architecture.
(m) Joint press release, within 30 days of this Agreement, detailing Strategic
Alliance and EBlvd's streaming media activities using Bitcasting
technologies.
IV. PAYMENT TERMS & CONDITIONS
(a) The Agreement shall become effective only if executed by the Companies on or
before July 23, 1999, 5:00 PM EST
(b) Exclusive Bitcasting licensing rights to EBlvd, as defined in section III(b)
shall be granted for a period of six (6) months, commencing sixty (60 days) upon
execution of the Agreement, at the rate of eighteen-thousand-dollars
($18,000.00) per month. Funds are not refundable except for Termination as
defined in section VI. Total amount of one-hundred-eight-thousand-dollars
($108,000.00) must be wired to Bitcasting bank account as per Section V on or
before July 23, 1999, 5:00 PM EST.
(c) Total amount of forty-thousand-dollars ($40,000.00) for all hardware
enabling G2 Upgrade, as described in Bitcasting Quote #LICMICM4071599, must be
wired to Bitcasting bank account as per Section V on or before July 23, 1999,
5:00 PM EST.
(d) Total amount of fifteen-thousand-forty-four-dollars ($15,044.00) for server
software license enabling G2 Upgrade, as described in Bitcasting Quote
#LICMICM4071599, is payable on NET30 terms.
(e) Bitcasting Referrals - If Bitcasting customer or prospect acquires a license
to the content, or generates advertising or e-commerce revenues paid to EBlvd,
EBlvd shall pay Bitcasting a
<PAGE>
Bitcasting/EBlvd Strategic Alliance Agreement - 3/6
commission of 10% of the all gross revenues invoiced from such Interested
Customer for a period of 12 months.
(i) EBlvd will provide Bitcasting with a written report by the 20th
day of each month for the preceding calendar month setting forth (a)
names and addresses of customer; (b) description of product(s) or
service(s) sold; (c) price of service(s) sold; (d) gross revenue
receivable by EBlvd (whether or not actually collected); (e) the amount
due to Bitcasting pursuant to Section V(e.). The report shall be
accompanied by payment due. The amount of payment shall be based on
sales invoiced by EBlvd, whether or not the revenue is actually
collected. The payment shall be due and payable to Bitcasting within
thirty (30) days after EBlvd has invoiced its customer for such
product(s) or service(s).
(f) EBlvd Referrals - If EBlvd customer or prospect acquires a license to
the Bitcasting G2 Upgrade, Bitcasting shall pay EBlvd a commission of 10% of
the gross revenues from the licensing of the G2 Upgrade invoiced from such
Interested Customer for a period of 12 months.
(i) Bitcasting will provide EBlvd with a written report by the 20th day
of each month for the preceding calendar month setting forth (a) names
and addresses of customer; (b) description of product(s) or service(s)
sold; (c) price of service(s) sold; (d) gross revenue receivable by
Bitcasting (whether or not actually collected); (e) the amount due to
EBlvd pursuant to Section V(e.). The report shall be accompanied by
payment due. The amount of payment shall be based on sales invoiced by
Bitcasting, whether or not the revenue is actually collected. The
payment shall be due and payable to EBlvd within thirty (30) days after
Bitcasting has invoiced its customer for such product(s) or service(s).
(g) Books and Records - The Companies shall each keep books and accounts
with respect to the amounts due and the calculations required to be made
under Section IV (e)(i) and (f)(i). Upon Bitcasting's or EBlvd's reasonable
written request, and no more than once per year of the Term, the Companies,
as the case may be, may audit and inspect all such books of account, through
an independent third party auditor and during normal business hours, provided
that such auditor shall undertake in writing to protect the confidentiality
of the business data and records of the Companies, as the case may be. The
cost of any such audit shall be paid by the party conducting the audit;
provided, however, that in the event a party initiates an audit of the other
party under this Section IV(g) and it is finally determined that the amount
reported and paid by the other party pursuant to Section IV (e)(i) and (f)(i)
for the period(s) audited is, in the aggregate, less than ninety-five per
cent (95%) of the amount actually due, then the audited party, shall pay the
reasonable costs and expenses of said audit. If any such audit reveals an
underpayment of fees due, the audited party shall make any corresponding
payment within thirty (30) days. An underpayment shall be subject to interest
of one-and-one-half percent (1.5%) per month or the maximum allowed by law,
whichever is less. The Companies will each maintain their books and records
applicable to each reporting period for at least three (3) years following
the close of such period.
<PAGE>
Bitcasting/EBlvd Strategic Alliance Agreement - 4/6
V. WIRE INFORMATION
Bank Name = BankBoston, 100 Federal Street, Boston Ma. 02110, USA
Routing number = 0110-0039-0
Account number = 749-54841
Account Name = Digital Bitcasting
Corp., 35 Congress Street, Salem, Ma 01970, USA
VI. TERMINATION BY EITHER PARTY
Either party in the event of any of the following may terminate this Agreement:
(a) either party may terminate this Agreement if the other
party fails to perform any material term or condition of this
Agreement, which shall constitute a default of this Agreement, and such
default has not been corrected within thirty (30) days of written
notice from the non-breaching party. The right of either party to
terminate hereunder shall not be affected in any way by its waiver of
or failure to take action with respect to any previous default or
(b) either party may terminate this Agreement immediately
upon 60 days written notice if the other party (i) makes a general
assignment for the benefit of creditors; (ii) institutes proceedings
to be adjudicated a voluntary bankrupt, or consent to the filing of
a petition of bankruptcy against it; (iii) is adjudicated by a court
of competent jurisdiction as being bankrupt or insolvent; (iv) seeks
reorganization under any bankruptcy act, or consent to the filing of
a petition seeking such reorganization; or (v) has a decree entered
against it by a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or in
insolvency covering all or substantially all of such party's
property or providing for the liquidation of such party's property
or business affairs.
VII. CONFIDENTIALITY
All discussions regarding the Agreement shall be subject to the Non-Disclosure
Agreement between the parties dated May 21, 1999 ("NDA").
IIX. INTELLECTUAL PROPERTY LICENSES
Nothing in this Agreement is intended to constitute a license from one party to
the other to any hardware or software intellectual property.
IX. ANNOUNCEMENTS
Prior to the execution of the Agreement by the parties, neither party shall make
any public announcement about the subject matter or existence of the Agreement
or the parties' discussions in connection with this Agreement unless the other
party has consented in writing to the text of
<PAGE>
Bitcasting/EBlvd Strategic Alliance Agreement - 5/6
the intended announcement (including without limitation the exact context for
the use of any quote the other party has provided). Either of the parties may at
any time make announcements which are required by applicable law, regulatory
bodies, or stock exchange or stock association rules, so long as the party so
required to make the announcement, promptly upon learning of such a requirement,
notifies the other party of the requirement, discusses with the other party the
exact wording of any required announcement, and takes into account in good faith
such other party's comments on such exact wording.
X. COSTS AND EXPENSES:
Each of the parties agrees to pay all costs and expenses it incurs in connection
with this Agreement and the negotiation of the Agreement.
XI. JURISDICTION
The laws of Massachusetts shall govern this Agreement.
XII. INDEMNITY
EBlvd acknowledges that it holds rights to distribute music video and movie
trailer content and agrees to indemnify, except with respect any claim of
infringement with respect to the MPEG, defend and hold Bitcasting and its
directors, officers, agents, employees and representatives harmless from and
against all actions, claims, demands, suits, losses, liabilities, damages,
settlements, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses and expenses of investigation) in connection with
any third party claim that the original material created by Bitcasting and
included in the Bitcasting Products infringes any U.S. trademark, U.S. service
mark, issued U.S. patent, U.S. copyright, or misappropriates any U.S. trade
secret .
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL OR PUNITIVE DAMAGE OR LOSS OF ANY NATURE (E.G.,
DAMAGE TO PROPERTY, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOST SAVINGS, LOSS
OF USE, LOST OR DAMAGED FILES OR DATA, INJURY TO PERSON, OR ANY CLAIMS OF THOSE
NOT A PARTY TO THE AGREEMENT) WHICH MAY ARISE IN CONNECTION WITH THE USE,
ADAPTATION, MERGER, INCORPORATION, DISTRIBUTION, INSTALLATION, REMOVAL OR
SUPPORT OF THE LICENSED SOFTWARE AND/OR THE PARTNER PRODUCTS PURSUANT TO THIS
AGREEMENT, REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED IN WARRANTY, CONTRACT,
NEGLIGENCE, TORT, PRODUCTS LIABILITY OR OTHERWISE, EVEN IF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS. BECAUSE SOME
STATES/JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR
CONSEQUENTIAL OR
<PAGE>
Bitcasting/EBlvd Strategic Alliance Agreement - 6/6
INCIDENTAL, DAMAGES, THE ABOVE LIMITATION MAY NOT APPLY, AND THE PARTIES MAY
ALSO HAVE OTHER RIGHTS, WHICH VARY, FROM STATE TO STATE.
Digital Bitcasting Corp. Entertainment Boulevard, Inc
/s/ J. Peter Dougherty /s/ Stephen Brown
- ------------------------------- ----------------------------------
J. Peter Dougherty Stephen Brown
President President
Dated: July 23, 1999 Dated: July 23, 1999
------------------------ ---------------------------
<PAGE>
Exhibit 10.26
CONFIDENTIAL
WALL OF SOUND/VIDNET AGREEMENT
This is an agreement dated as of June 14, 1999, between Entertainment
Boulevard, Inc., a Nevada corporation located at 4052 Del Rey Avenue Suite
108, Marina Del Rey, CA 90292 d/b/a Vidnet ("Vidnet"), and ABC News/Starwave
Partners d/b/a ABC Internet Ventures ("AIV"), a New York general partnership
located at 605 Third Avenue, New York, New York, 10158. In consideration of
the mutual premises and undertakings stated herein and Exhibit A attached
hereto and made a part hereof, the parties hereto agree as follows (the
"Agreement"):
1. TRADEMARKS
1.1 AIV IDENTITIES ON VIDNET SITE. AIV hereby grants to Vidnet a
non-exclusive, cost-free license (without the right of sublicense) throughout
the Term of this Agreement to use the Wall of Sound name and logo and other
proprietary identities of AIV (collectively, "AIV Mark(s)") in connection
with the Vidnet multimedia player (the "Player") which is displayed on Wall
of Sound (defined below), solely as stated in Exhibit A.
1.2 VIDNET IDENTITIES ON AIV SITE. Vidnet hereby grants a
non-exclusive cost-free license (without the right of sublicense) throughout
the Term of this Agreement to AIV to use the Vidnet name and logo and other
proprietary identities of Vidnet (collectively, "Vidnet Mark(s)") in
connection with AIV's website called "Wall of Sound" ("Wall of Sound")
currently located at http://wallofsound.go.com, solely as stated in Exhibit A.
2. CONTENT
2.1 LICENSE.
(a) AIV LICENSE. AIV hereby grants a non-exclusive cost-free
license (without the right of sublicense) throughout the Term of this
Agreement to Vidnet to use certain content owned and/or controlled by
AIV, as described on Exhibit A (collectively, "AIV Content") in
connection with the Player, solely as stated on Exhibit A.
(b) VIDNET CONTENT. Vidnet hereby grants a non-exclusive cost-free
license (without the right of sublicense) throughout the Term of this
Agreement to AIV to use the certain content owned and/or controlled by
Vidnet, as described on Exhibit A (collectively, "Vidnet Content") in
connection with Wall of Sound, solely as stated on Exhibit A.
2.2 CREATION OF CONTENT. Each party will be responsible for the
creation, development and publication of its respective Content. The parties
will consult regularly regarding creation of mutually beneficial Content.
Neither party will use the Content of each other's site in any way whatsoever
without the other party's prior approval.
2.3 QUALITY CONTROL. Each party agrees to maintain the quality of the
content of its site to at least the same level as has existed heretofore. If
either party, in its reasonable discretion, determines that the content of
the other party's site falls below this pre-existing standard of quality
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and does not otherwise meet the editorial standards and quality of its own
site, that party will notify the other party to that effect in writing giving
specific details of the failure to meet such standards and the party
receiving that notice will remedy the deficiencies specified in such notice
within 30 days after the date of its receipt of that notice. If, following
such 30-day period, the quality of the applicable site has not sufficiently
improved, the party that gave the original notice may terminate the Agreement
effective immediately upon the receipt by the other party of notice of
termination.
2.4 LIMITATION OF RIGHTS. Each party's use of the other party's Marks
and Content, as well as the use of the any links described on Exhibit A, is
strictly limited to the uses stated in this Agreement. Neither party acquires
any rights in or to the other party's Marks and/or the goodwill inherent therein
by this Agreement or otherwise. All rights granted under this Agreement,
including the right to use the other party's Marks or Content, or to link to
the other party's Content shall revert to the granting party upon termination.
3. FINANCIAL
3.1 PRODUCTION EXPENSES. Each party will be solely responsible for
its own expenses incurred in undertaking its rights and responsibilities
under this Agreement and otherwise in operating its website.
3.2 ADVERTISING
(a) RETAINED RIGHTS. Each party will have the right to continue
to transact advertising and promotional programs for its own website, to
retain all advertising inventory and set all packaging and pricing for
any advertising thereon and to retain all revenue it receives related
thereto. No such arrangements by a party can allow for any third-party
use of the other party's Marks or Content without the prior written
approval of that other party. Notwithstanding the foregoing, the parties
hereby acknowledge and agree that (i) AIV shall have the exclusive right
to transact advertising and promotional programs related to, to retain
all advertising inventory and set all packaging and pricing for any
advertising on and to retain all revenue it receives related to any
co-branded pages developed pursuant to this Agreement; and (ii) Vidnet
shall have the exclusive right to transact advertising and promotional
programs related to, to retain all advertising inventory and set all
packaging and pricing for any advertising on and to retain all revenue
it receives related to the Player.
(b) NO INTERSTITIALS. Neither party will transmit any so-called
"interstitial advertising" to users as they link from Wall of Sound to
the Player or vice-versa.
(c) ADVERTISING GUIDELINES.
(i) Vidnet agrees that any and all advertising included
on the Player shall comply with the AIV advertising
guidelines set forth on Exhibit B attached hereto.
(ii) Vidnet will not provide include any advertising on
the Player from the parties listed on Exhibit C attached
hereto. Further, in the event that, subsequent to the
execution hereof, AIV notifies Vidnet that any other
competitor(s) of AIV or competitors of AIV's exclusive
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partners should be added to Exhibit C, Vidnet agrees that
the foregoing restriction shall apply to such parties.
(d) CUSTOMER DATA. AIV shall own and retain all right, title
and interest in all names, addresses and other identifying information of
users of Wall of Sound, including, without limitation, any co-branded
pages developed hereunder and Vidnet will have no right to use any such
customer data.
4. APPROVALS
4.1 PRIOR APPROVAL REQUIRED. All uses by either party of the other
party's Marks and Content and links to each other's Content must be submitted
to and approved by the other party prior to their use, with such approval not
to be unreasonably withheld. Failure to so seek and receive prior approval
will be grounds for immediate termination of this Agreement, and such
termination right will not constitute a waiver of any other rights available
to a party as a result thereof.
4.2 NO PUBLICITY WITHOUT CONSENT. Neither party will issue or permit
issuance of any press release regarding the other party or this Agreement
without prior coordination with and approval by the other party.
5. TERM
5.1 TERM. When executed by the parties, this Agreement is effective as
of the date specified above and will continue until June 15, 2000 (the
"Term"), provided, that AIV may terminate the Term hereof at any time, upon
thirty (30) days written notice to Vidnet.
5.2 EARLY TERMINATION. Each party shall have the right to terminate
this Agreement immediately on notice: (a) upon a breach of any material
obligation hereunder by the other party other than those specified in
section 4.1, if such breach is not cured within 30 days following the date
the breaching party receives notice from the non-breaching party describing
in reasonable detail the elements of such breach; (b) in the event the other
party becomes insolvent (I.E., unable to pay its debts in the ordinary course
as they come due); or (c) pursuant to section 4.1 above.
5.3 EVENTS UPON TERMINATION. Upon the expiration or termination of this
Agreement for any reason, both parties shall immediately remove all links to
the other party's Content and website(s) and cease all use of the other
party's Marks and any and all use of any kind whatsoever of the other party's
Content.
5.4 SURVIVAL. SECTIONS 2.4, 4.2, 7 AND 8 WILL SURVIVE THE TERMINATION OR
EXPIRATION OF THIS AGREEMENT.
6. REPRESENTATIONS AND WARRANTIES
Each party to this Agreement represents and warrants to the other that:
(a) such party has all necessary right, power and authority to enter into
this Agreement and to perform the acts required of it hereunder; (b) the
execution of this Agreement by such part and its
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performance of its obligations hereunder do not and will not violate any
agreement by which such party is bound; (c) such party has (and will
have throughout the Term) all necessary rights in and to its Marks,
content links and Content described in this Agreement to allow it to
make those indicia and materials available to the other party and
users of that party's website (including, without limitation, the
Player) as contemplated by this Agreement without violating the rights
of any third party; and (d) it has (and will have throughout the Term)
all necessary rights in and to all underlying technology (including
both hardware and software) utilized in connection with its website
(including, without limitation, the Player) and all such underlying
technology does not infringe on any patent, copyright, trademark,
trade secret or other intellectual property or proprietary right of
any third party.
7. INDEMNIFICATION
7.1 MUTUAL INDEMNIFICATION. Each party hereby agrees to indemnify and
hold harmless the other party, its parent and subsidiary companies and
their respective officers, agents, directors, employees and authorized
representatives and from and against any costs, losses, liabilities
and expenses, including court costs, reasonable expenses and
reasonable attorney's fees that any of them may suffer, incur or be
subjected to by reason of any legal action, arbitration or other claim
by a third party arising out of or as a result of a breach of the
indemnifying party's representations and warranties made hereunder,
the operations of the indemnifying party's website (including, without
limitation the Player) as authorized by this Agreement or otherwise,
any allegations that the use of the indemnifying party's Marks,
Content, links and/or content on its website (including, without
limitation, the Player) violates any intellectual property rights of
any third party, any allegation that any content on its website
(including, without limitation, the Player) is defamatory or violates
any privacy or publicity rights of any third party, and/or any of its
other obligations under this Agreement.
7.2 INDEMNIFICATION PROCEDURES. If either party entitled to
indemnification hereunder (an "Indemnified Party") makes an
indemnification request to the other, the Indemnified Party shall
permit the other party (the "Indemnifying Party") to control the
defense, disposition or settlement of the matter at its own expense;
provided that the Indemnifying Party shall not, without the consent of
the Indemnified Party enter into any settlement or agree to any
disposition that imposes an obligation on the Indemnified Party that is
not wholly discharged or dischargeable by the Indemnifying Party, or
imposes any conditions or obligations on the Indemnified Party other
than the payment of monies that are readily measurable for purposes of
determining the monetary indemnification or reimbursement obligations
of Indemnifying Party. The Indemnified Party shall notify Indemnifying
Party promptly of any claim for which Indemnifying Party is
responsible and shall cooperate with Indemnifying Party in every
commercially reasonable way to facilitate defense of any such claim;
provided that the Indemnified Party's failure to notify Indemnifying
Party shall not diminish Indemnifying Party's obligations under this
Section except to the extent that Indemnifying Party is materially
prejudiced as a result of such failure. An Indemnified Party shall
at all times have the option to participate in any matter or litigation
through counsel of its own selection and at its own expense.
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8. GENERAL
8.1 COSTS. Each party shall be responsible for all costs and expenses
incurred by it in connection with the performance of its obligations under
this Agreement.
8.2 ASSIGNMENT. None of the rights and obligations of the parties to
this Agreement may be assigned by either party, except (a) to the
transferee of substantially all of the business operations of such party
(whether by asset sale, stock sale, merger or otherwise) or (b) to any
entity that is controlled by, or is under common control with, such
party.
8.3 RELATIONSHIP OF PARTIES. This Agreement does not create a joint
venture, partnership or principal/agent relationship between the parties
hereto, nor imposes upon either party any obligations for any losses,
debts or other obligations incurred by the other party except as
expressly set forth herein.
8.4 ENTIRE AGREEMENT. This Agreement states the entire agreement
between the parties with respect to its subject matter and supersedes any
prior oral or written agreements. This Agreement may not be amended
except in writing signed by both parties.
8.5 APPLICABLE LAW. This Agreement will be construed according to the
laws of the State of New York, without regard to principles of conflicts
of law.
8.6 INVALIDITY OF PROVISIONS. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, in whole or in
part, then the parties will be relieved of all obligations arising under
such provision, but only to the extent that it is illegal, unenforceable,
or void, it being the intent and agreement of the parties that this
Agreement be deemed amended by modifying such provision to the extent
necessary to make it legal and enforceable while preserving its intent
or, if that is not possible, by substituting therefor another provision
that is legal and enforceable and achieves the same objectives.
8.7 NOTICE. Any notice due by one party to the other will be given to
the address listed above and marked to the attention of the signatory
specified below, unless a party hereafter designates a successor address
or contact person. All notices will be transmitted by private courier or
facsimile transmission, and will be deemed given as of the date of a
written courier's receipt or electronic facsimile confirmation report.
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<PAGE>
ACKNOWLEDGED AND AGREED ACKNOWLEDGED AND AGREED
ENTERTAINMENT BOULEVARD, INC. ABC NEWS/STARWAVE PARTNERS
D/B/A VIDNET D/B/A ABC NEWS INTERNET VENTURES
By: /s/ Stephen Brown By: /s/ Andrew E. Newton
--------------------------- --------------------------
Name: Stephen Brown Name: Andrew E. Newton
--------------------------- --------------------------
Title: CEO Title: VP and General Counsel
--------------------------- --------------------------
6
<PAGE>
CONFIDENTIAL
EXHIBIT A -- DESCRIPTION OF LICENSED CONTENT
Co-branded Vidnet/Wall of Sound Music Video Index Page
1) This video index page would be promoted from the Wall of Sound homepage,
artist pages, and in the music center on go.com. Will receive a weekly
feature homepage callout on Wall of Sound.
2) Hosted on the wallofsound.go.com domain entertainment center on Go.com at
Infoseek's discretion.
a) Branded as "Wall of Sound Top Ten Videos, presented by Vidnet".
b) Includes links to Wall of Sound's top ten music videos, updated weekly
or bi-weekly.
3) Includes image of No. 1 artist and others to be mutually agreed.
a) Links open co-branded Vidnet/Wall of Sound Video Player, with streaming
content and player pages served by Vidnet.
b) Page and/or player Includes links to Vidnet's video subsections: Videos
A-Z, New on Vidnet, Rock/Metal, Pop/Dance, Jazz/Swing, Christian, Country,
Reggae, Urban, Latin, and Live. Top 20 is omitted so as not to compete
with the Wall of Sound Top 10, which may be the same as the Vidnet Top 10
(how the Wall of Sound Top Ten is listed will be determined by mutual
consent of both parties). The videos will be available in 28k, 56k, 80k,
and 300k transfer rates.
4) Ad revenues from banners on this page belong to Wall of Sound.
5) Wall of Sound will be serving co-branded pages for Vidnet with music news
and reviews. Both parties to agree on co-branding, provided, however, that
the parties agree that Wall of Sound/GO Network shall be the dominant brand
on such co-branded pages.
a) The headlines and the individual articles will be co-branded.
b) Any additional links to Wall of Sound created content will be branded
Wall of Sound exclusively.
OTHER LINKS
Wall of Sound artist pages will contain links to respective videos by that
artist on Vidnet. Each link would launch the co-branded player described
above.
7
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EXHIBIT B
AIV ADVERTISING GUIDELINES
8
<PAGE>
CONFIDENTIAL
EXHIBIT C
COMPETITORS
1. Launch.com
2. JamTV.Com/Tunes.Com/RollingStone.com
3. Sonicnet.com/atm.com/mtv.com
4. borders.com
5. msn.com
6. yahoo.com
7. excite.com
8. lycos.com
9. snap.com
10. cnet.com
11. nbc.com
12. cbs.com
13. aol.com
14. cnnsi.com
15. altavista.com, av.com
16. goto.com
17. go2net.com
18. sportsline.com
19. home.net, home.com
20. netscape.com
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Exhibit 10.27
CONTENT PROVIDER AGREEMENT
This Content Provider Agreement ("Agreement") is made this 21st day of
July, 1999, by and between ChannelSEEK, Inc., an Indiana corporation
("ChannelSEEK") and Entertainment Boulevard, Inc., a Nevada corporation
("Content Provider").
RECITALS
1. ChannelSEEK is a global Internet distribution company that offers the
most comprehensive guide to web-delivered broadcast media. Content Provider
produces and/or distributes broadcast media for delivery over the Internet
(the "Content").
2. Content Provider desires to include its Content in ChannelSEEK's
program guide and to access certain other value-added services offered by
ChannelSEEK, all in accordance with the terms and conditions of this
Agreement. ChannelSEEK is willing to include Content Provider's Content in
its program guide and provide other value-added services, all in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereby agree as follows:
1. TERM: The term of this Agreement shall commence on the date hereof
and continue until one party shall give the other party notice of its
intention to terminate, whereupon this Agreement shall terminate on the date
set forth in the notice.
2. AGREEMENT OF CONTENT PROVIDER: Content Provider agrees that, in
consideration of the value-added services to be provided by ChannelSEEK as
described in Paragraph 3, below, during the Term, it shall: (a) make its
Content available to ChannelSEEK for inclusion at its website; (b) permit
ChannelSEEK to have remote access to the Content, in accordance with the
technologies and procedures, and subject to the conditions and restrictions,
to be agreed upon by the parties; (c) provide information and feedback to
ChannelSEEK pertaining to the ChannelSEEK website or any of the value-added
services provided by ChannelSEEK; and (d) not permit any Objectionable
Materials to be included in the Content. As used herein, the term
"Objectionable Material" includes any Content that: (i) is factually
inaccurate, misleading, deceptive or otherwise inappropriate; (ii) is not the
most current version of such Content available from Content Provider; (iii)
infringes or may be perceived as infringing any intellectual property rights
of third persons; and (iv) is or may be deemed to be libelous, defamatory,
racist, vulgar, abusive, obscene or pornographic or which may violate other
civil or criminal laws, including those regulated in the use and distribution
of content on the Internet and protection of personal privacy.
3. AGREEMENT OF CHANNELSEEK: During the Term, ChannelSEEK shall: (a)
grant to Content Provider a non-exclusive non-assignable, license to use
ChannelSEEK's Event Notification Service ("Remind Me") service; and (b)
promote Content through ChannelSEEK's website and through websites maintained
by other parties displaying ChannelSEEK Content.
4. NO REVENUE SHARING/NO LIABILITY: The parties have not entered into
and there is no agreement regarding the sharing of revenues of any nature
whatsoever, including, without limitation, any advertising revenues.
Excepting only pursuant to Paragraph 7 of this Agreement, in no event will
either party be liable to the other for any loss, damage, expense or damage
of
-1-
<PAGE>
any kind whatsoever, direct or indirect, including, without limitation any
liability for incidental consequential damages or lost profits. NEITHER PARTY
MAKES ANY WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESSED
OR IMPLIED (INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY.
5. INTELLECTUAL PROPERTY OWNERSHIP: Both parties shall retain ownership
and control use of their respective marks, copyrights, logos and other
proprietary materials and content.
6. PUBLICITY: Either party may make public announcement regarding the
fact of the establishment of the relationship described in this Agreement,
subject to the approval of the other party, which approval shall not be
unreasonably delayed or withheld.
7. INDEMNIFICATION BY CONTENT PROVIDER: Content Provider agrees to hold
harmless, indemnify and defend ChannelSEEK, its officers, directors and
employees from and against any losses, damages, fines, or liability of any
nature whatsoever (including without limitation, reasonable attorneys fees
and costs) arising out of or relating to any claim that any Content contains
Objectionable Material.
8. NOTICES: All notices to be provided under this Agreement shall be
sent to:
IF TO CHANNELSEEK: IF TO CONTENT PROVIDER:
ChannelSEEK, Inc. Entertainment Boulevard, Inc.
8021 Knue Road, Suite 112 4052 Del Rey Avenue, Suite 108
Indianapolis, IN 46250 Marina Del Rey, CA 90292
Phone: 317-585-6111 x. 100 Phone: 310-578-5404
Fax: 317-585-6112 Fax: 310-578-6304
E-mail: [email protected] E-mail:[email protected]
9. MISCELLANEOUS: In the course of performing under this Agreement, each
of the parties will operate as, and have the status of, an independent
contractor, and will not act as or be an agent, co-venturer, employer or
fiduciary of the party. Neither party shall have the right to assign or
delegate any obligations under this Agreement without the prior consent of
the other. This Agreement shall be governed and construed under, and in
accordance with, the laws of the state of Indiana, and constitutes the entire
Agreement of the parties with respect to the subject matter hereof, and
supersedes any and all prior or contemporaneous, written or oral
negotiations, correspondence, understandings or agreements with respect to
the subject matter of this Agreement.
10. PREFERRED PLACEMENT: Given the quality and quantity of the Content
Provider's media, ChannelSEEK will, whenever possible, give Content Provider
preferred placement within the ChannelSEEK website in the appropriate
channel(s). Placement of the Content Provider's logo and links is solely at
the discretion of ChannelSEEK and must be approved prior to usage by the
Content Provider.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
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CHANNELSEEK, INC. ENTERTAINMENT BOULEVARD, INC.
By: /s/ Thomas Britt By: /s/ Stephen Brown
----------------------------------- ----------------------------------
Printed: Thomas Britt Printed: Stephen Brown
------------------------------ -----------------------------
Title: President Title: CEO
------------------------------- -------------------------------
("ChannelSEEK") ("Content Provider")
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<PAGE>
S. McKeag Note
SECURED BRIDGE NOTE
$50,000 July 30, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of Steve McKeag (the "Payee"), at 27301
Viewpoint Circle, San Juan Capistrano, CA 92675, or at such other place as
the Payee may designate in writing, in lawful money of the United States of
America, the principal sum of fifty thousand dollars ($50,000) together with
interest from the date hereof at the rate of 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months. The principal of this Note
shall be payable in full 60 days from the date hereof. Interest shall accrue
from the date hereof and shall be paid when the principal amount of this
Note has been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any representation
of warranty of the Maker contained in the Loan and Security Agreement dated
as of the date hereof between the Maker and the Payee shall not be true and
correct in all material respects and the same shall not be cured within 30
days after written notice thereof by the Payee to the Maker or the Maker shall
have breached any covenant contained in the Loan and Security Agreement and
such breach shall not be cured within 30 days; (iii) a proceeding being filed
or commenced against the Maker for bankruptcy, dissolution or liquidation
which shall not be dismissed within 60 days, or the Maker voluntarily or
involuntarily terminating or dissolving or being terminated or dissolved;
(iv) the Maker filing a petition under bankruptcy, insolvency or debtor's
relief law or making an assignment for the benefit of creditors; or (v) the
<PAGE>
appointment of a custodian, trustee, liquidator or receiver for any of the
property of the Maker, which shall not be dismissed, released or vacated
within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note shall
immediately become due and payable without notice or demand. If an Event of
Default occurs, the Maker agrees to pay to the holder all reasonable expenses
incurred by the holder, including reasonable attorneys' fees, in enforcing
and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in part
or in any respect, or in the event that any one or more of the provisions of
this Note operate to invalidate this Note, then and in either of those
events, such provision or provisions only shall be deemed null and void and
shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
2
<PAGE>
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California without giving any effect
to principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
Sandfer Note
SECURED BRIDGE NOTE
$25,000 August 02, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of Richard Sandfer (the "Payee"), at 27301
Viewpoint Circle, San Juan Capistrano, CA 92675, or at such other place as
the Payee may designate in writing, in lawful money of the United States of
America, the principal sum of twenty-five thousand dollars ($25,000) together
with interest from the date hereof at the rate of 10% per annum, computed on
the basis of a 360-day year of twelve 30-day months. The principal of this
Note shall be payable in full 60 days from the date hereof. Interest shall
accrue from the date hereof and shall be paid when the principal amount of
this Note has been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any
representation or warranty of the Maker contained in the Loan and Security
Agreement dated as of the date hereof between the Maker and the Payee shall
not be true and correct in all material respects and the same shall not be
cured within 30 days after written notice thereof by the Payee to the Maker
or the Maker shall have breached any covenant contained in the Loan and
Security Agreement and such breach shall not be cured within 30 days; (iii) a
proceeding being filed or commenced against the Maker for bankruptcy,
dissolution or liquidation which shall not be dismissed within 60 days, or
the Maker voluntarily or involuntarily terminating or dissolving or being
terminated or dissolved; (iv) the Maker filing a petition under bankruptcy,
insolvency or debtor's relief law or making an assignment for the benefit of
creditors; or (v) the
<PAGE>
appointment of a custodian, trustee, liquidator or receiver for any of the
property of the Maker, which shall not be dismissed, released or vacated within
60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note shall
immediately become due and payable without notice or demand. If an Event of
Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any respect, or in the event that any one or more of the
provisions of this Note operate to invalidate this Note, then and in either
of those events, such provision or provisions only shall be deemed null and
void and shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
2
<PAGE>
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California without giving any effect
to principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
J. McKeag Note
SECURED BRIDGE NOTE
$25,000 August 03, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of John McKeag (the "Payee"), at 27301 Viewpoint
Circle, San Juan Capistrano, CA 92675, or at such other place as the Payee
may designate in writing, in lawful money of the United States of America,
the principal sum of twenty-five thousand dollars ($25,000) together with
interest from the date hereof at the rate of 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months. The principal of this Note
shall be payable in full 60 days from the date hereof. Interest shall accrue
from the date hereof and shall be paid when the principal amount of this Note
has been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any
representation or warranty of the Maker contained in the Loan and Security
Agreement dated as of the date hereof between the Maker and the Payee shall
not be true and correct in all material respects and the same shall not be
cured within 30 days after written notice thereof by the Payee to the Maker
or the Maker shall have breached any covenant contained in the Loan and
Security Agreement and such breach shall not be cured within 30 days; (iii) a
proceeding being filed or commenced against the Maker for bankruptcy,
dissolution or liquidation which shall not be dismissed within 60 days, or
the Maker voluntarily or involuntarily terminating or dissolving or being
terminated or dissolved; (iv) the Maker filing a petition under bankruptcy,
insolvency or debtor's relief law or making an assignment for the benefit of
creditors; or (v) the
<PAGE>
appointment of a custodian, trustee, liquidator or receiver for any of the
property of the Maker, which shall not be dismissed, released or vacated
within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note
shall immediately become due and payable without notice or demand. If an
Event of Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any respect, or in the event that any one or more of the
provisions of this Note operate to invalidate this Note, then and in either of
those events, such provision or provisions only shall be deemed null and void
and shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
2
<PAGE>
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California without giving any effect
to principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
Guillemot Note
SECURED BRIDGE NOTE
$25,000 August 03, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of Dominick Guillemot (the "Payee"), at 27301
Viewpoint Circle, San Juan Capistrano, CA 92675, or at such other place as
the Payee may designate in writing, in lawful money of the United States of
America, the principal sum of twenty-five thousand dollars ($25,000) together
with interest from the date hereof at the rate of 10% per annum, computed on
the basis of a 360-day year of twelve 30-day months. The principal of this
Note shall be payable in full 60 days from the date hereof. Interest shall
accrue from the date hereof and shall be paid when the principal amount of
this Note has been paid in full.
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note: (i) the failure to pay principal of or
interest on this Note as and when due; (ii) any representation or warranty of
the Maker contained in the Loan and Security Agreement dated as of the date
hereof between the Maker and the Payee shall not be true and correct in all
material respects and the same shall not be cured within 30 days after
written notice thereof by the Payee to the Maker or the Maker shall have
breached any covenant contained in the Loan and Security Agreement and such
breach shall not be cured within 30 days; (iii) a proceeding being filed or
commenced against the Maker for bankruptcy, dissolution or liquidation which
shall not be dismissed within 60 days, or the Maker voluntarily or
involuntarily terminating or dissolving or being terminated or dissolved;
(iv) the Maker filing a petition under bankruptcy, insolvency or debtor's
relief law or making an assignment for the benefit of creditors; or (v) the
<PAGE>
appointment of a custodian, trustee, liquidator or receiver for any of the
property of the Maker, which shall not be dismissed, released or vacated
within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note
shall immediately become due and payable without notice or demand. If an Event
of Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any respect, or in the event that any one or more of the provisions
of this Note operate to invalidate this Note, then and in either of those
events, such provision or provisions only shall be deemed null and void and
shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time to
time without premium. This Note shall be paid without deduction by reason of
any set-off, defense or counterclaim of the Maker.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
2
<PAGE>
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California without giving any effect
to principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement made this 6th day of August, 1999, by and
between Entertainment Boulevard Inc., a Nevada corporation (the "Company"),
and Beeston Investment Ltd., a foreign corporation (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company desires to borrow certain amounts from the Investor
and the Investor desires to make a loan (the "Loan") to the Company;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties contained herein, the parties hereby agree as follows:
1. LOAN. The Investor hereby lends to the Company the aggregate
principal amount of $250,000. The Loan shall be evidenced by a bridge note
(the "Note") in the form attached hereto as Exhibit A, shall bear interest at
the rate of 10% per annum and shall be due and payable 60 days from the date
of funding, or earlier as provided in the Note. The Note may be converted at
any time by the Investor prior to repayment thereof into shares of Common
Stock of the Company at $2.00 per share and will be entitled to resale
registration rights. In consideration for such Loan, the Company will pay
the Investor and/or its designee a commitment fee consisting of a cash
payment of $15,000 and 75,000 shares (the "Payment Shares") of the Company's
Common Stock to be registered in the name of the Investor or its designee.
2. CONDITIONS TO LOAN. The obligation of the Investor to make the
Loan is subject to the conditions that the following shall have occurred
prior to or concurrently with the Loan:
<PAGE>
(a) The Company shall have granted to the Investor a valid
security interest in all its assets pursuant to this agreement dated the date
hereof.
(b) The Company agrees that various UCC statements will have to be
filed after the date hereof to perfect the Investor's security interest in
the Company's assets as set forth in subsection (a). As such, the Company
grants Stroock & Stroock & Lavan LLP ("SSL") power of attorney to sign as
debtor on its behalf on the requisite UCC filings. The Company also agrees
it will prepare such filings as needed (such decision to be at the sole
discretion of SSL).
(c) The Company agrees to enter into a Registration Rights
Agreement regarding the Payment Shares and the shares underlying the Note
(upon conversion), which shall be reasonably acceptable to the Investor.
3. COMMON STOCK. In consideration of the Investor making the Loan,
the Company hereby issues to the Investor the Payment Shares to be registered
in a registration statement as defined in the Registration Rights Agreement.
4. GRANT OF SECURITY INTEREST. The Company hereby grants to the
Investor all of the right, title, and interest in and to the Company's
assets, whether now existing or hereafter from time to time acquired,
including: (i) each and every Receivable; (ii) all Contracts, together with
all Contract Rights arising thereunder; (iii) all Inventory; (iv) all
Equipment; (v) all Marks, together with the registrations and right to all
renewals thereof, and the goodwill of the business of the Company symbolized
by the Marks; (vi) all Patents and Copyrights; (vii) all computer programs of
the Company and all intellectual property rights therein and all other
proprietary information of the Company, including, but not limited to, trade
secrets; (viii) all Stock; (ix) the Cash Collateral Account and all monies,
securities, and investments deposited or required to be deposited in the Cash
Collateral Account; (x) all other Goods, General Intangibles, Chattel Paper,
Documents, and
2
<PAGE>
Instruments; and (xi) all Proceeds and products of any and all of the
foregoing. Until such time as there is an Event of Default, the investor
will not collect any revenues from the collateral described in this Section 4.
5. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants to the Investor as follows:
5.1 The issuance of the Note and the Payment Shares pursuant to
the provisions of this Agreement has been duly and validly authorized. No
approval or authorization of the shareholders or the directors of the Company
or of any governmental authority or agency which has not been obtained will
be required by the Company for the issuance and sale of the Note or the
Payment Shares, as contemplated by this Agreement. When issued and sold to
the Investor, the Payment Shares will be duly and validly issued, fully paid
and non-assessable, and will be free and clear of any liens or encumbrances
created by the Company.
5.2 The Company has the full corporate power and authority to
enter into this Agreement and to perform all of its obligations hereunder.
The execution, delivery and performance of this Agreement and the Note by the
Company have been duly authorized by all necessary corporate action. This
Agreement and the Note constitute legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
5.3 Neither the sale of the Note, the Payment Shares, the
execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice
of lapse of time or each, would be a breach of or default under or violation
of the Certificate of Incorporation or By-Laws of the Company or would be a
breach of or default under or violation of
3
<PAGE>
any agreement, document, lease or other instrument or undertaking by which
the Company is bound or to which any of its properties are subject, would be
a violation of any law, administrative regulation, judgment, order or decree
applicable to the Company, or (ii) subject to the listing approval
requirements of the OTC Stock Market, require the consent which has not been
obtained of any other person or entity under any agreement, lease, document
or other instrument or undertaking by which the Company is bound or to which
any of its properties are subject.
5.4 Subject to the filing of UCC-1 Financing Statements in appropriate
jurisdictions, the security interest in all of the assets of the Company (the
"Assets") granted pursuant to Section 4 hereto constitutes a valid security
interest in the Assets.
6. REPRESENTATIONS OF THE INVESTOR. The Investor understands that the
Payment Shares have not been registered under the Securities Act of 1933 (the
"Securities Act"). The Investor is an accredited investor within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act. The
Investor is acquiring the Payment Shares for his own account and not with a
present view to, or for sale in connection with, any distribution in
violation of the Securities Act. The Investor acknowledges that a
restrictive legend will be placed on the Payment Shares.
7. COVENANTS OF THE COMPANY. The Company covenants with the Investor
as follows:
(a) The proceeds of the Loan will be used for working capital and
general corporate purposes.
(b) At all times while the Note is outstanding, the Company will
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Note,
the full number of shares of Common Stock deliverable upon conversion of the
Note.
4
<PAGE>
8. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document, exhibit, schedule
or certificate delivered in connection herewith shall survive the execution
and delivery of this Agreement and the closing of the Loan and any
investigation at any time made by the Investor or on his behalf.
9. MISCELLANEOUS PROVISIONS.
9.1. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of New York
without giving any effect to principles of conflicts of laws.
9.2. All notices hereunder shall be in writing and shall be
deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given,
or to such changed address as such party may have fixed by notice:
To the Company:
Entertainment Boulevard, Inc.
4502 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
Attn: Stephen Brown
To the Investor:
Beeston Investment Ltd.
P.O. Box 65
Duke Street
Gretton House
Grand Turks, Caicos
provided, however, that any notice of change of address shall be effective
only upon receipt.
9.3. This Agreement shall be binding upon and inure to the
benefit of the Company, the Investor and the successors and assigns of the
Investor. The Company may not
5
<PAGE>
assign this Agreement without the prior written consent of the Investor. The
Investor may assign all or any part of his rights and obligations hereunder
to any affiliate of the Investor, without the consent of the Company.
9.4 This Agreement and all exhibits and schedules hereto set
forth the entire understanding of the parties with respect to the
transactions contemplated hereby. This Agreement may be amended, the Company
or the Investor may take any action herein prohibited or omit to take action
herein required to be performed by it or him, and any breach of or compliance
with any covenant, agreement, warranty or representation may be waived, only
if the Company or the Investor has obtained the written consent of the other
party to this Agreement.
9.5 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
9.6 The headings in this Agreement are for reference purposes
only and shall not constitute a part hereof.
9.7 On or prior to December 31, 1999, the Company will reimburse
the Investor for the reasonable attorneys fees and expenses, incurred by the
Investor in connection with the preparation, execution and delivery of this
Agreement, the Note, the Pledge and Security Agreement and the Registration
Rights Agreement. Such fees shall not exceed $[ ] without the consent of
the Company.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
--------------------------
By: Stephen Brown
Title: Chairman of the Board
BEESTON INVESTMENT LTD.
/s/ [Illegible Signature]
--------------------------
By:
Title:
7
<PAGE>
- ------------------------------------------------------------------------------
EXHIBIT A
- ------------------------------------------------------------------------------
<PAGE>
SECURED BRIDGE NOTE
$250,000 August__, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of Beeston Investment Ltd. (the "Payee"), at
P.O. Box 65, Duke Street, Gretton House, Grand Turks, Caicos, or at such
other place as the Payee may designate in writing, in lawful money of the
United States of America, the principal sum of two hundred fifty thousand
dollars ($250,000) together with interest from the date hereof at the rate of
10% per annum, computed on the basis of a 360-day year of twelve 30-day
months. The principal of this Note shall be payable in full 60 days from the
date hereof. Interest shall accrue from the date hereof and shall be paid
when the principal amount of this Note has been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any
representation or warranty of the Maker contained in the Loan and Security
Agreement dated as of the date hereof between the Maker and the Payee shall
not be true and correct in all material respects and the same shall not be
cured within 30 days after written notice thereof by the Payee to the Maker
or the Maker shall have breached any covenant contained in the Loan and
Security Agreement and such breach shall not be cured within 30 days; (iii) a
proceeding being filed or commenced against the Maker for bankruptcy,
dissolution or liquidation which shall not be dismissed within 60 days, or
the Maker voluntarily or involuntarily terminating or dissolving or being
terminated or dissolved; (iv) the Maker filing a petition under bankruptcy,
insolvency or debtor's relief law or making an assignment for the benefit of
creditors;
<PAGE>
or (v) the appointment of a custodian, trustee, liquidator or receiver for
any of the property of the Maker, which shall not be dismissed, released or
vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note
shall immediately become due and payable without notice or demand. If an
Event of Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any respect, or in the event that any one or more of the
provisions of this Note operate to invalidate this Note, then and in either
of those events, such provision or provisions only shall be deemed null and
void and shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
The principal and accrued interest on this Note may be converted into
shares of Common Shares (the "Common Shares") of the Maker at the option of
the Payee at $2.00 per share and the
2
<PAGE>
Maker agrees to cause such Common Shares to be registered for resale under
the Securities Act of 1933, as amended.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
--------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
[LOGO]
Exhibit 10-30
PROMISSORY NOTE
$ 400,000.00 Date: 8/20/99
- ---------------- -------------------
FOR VALUE RECEIVED the undersigned, jointly and severally, promise to PAY TO THE
ORDER OF Riz Alikhan and/or Arthur Brown the principal sum of Four Hundred
Thousand dollars ($400,000.00) together with the interest thereon from 8/20/99
at the rate of eight (8%) percent per annum until maturity, all payable in
lawful money of the United States of America, as follows:
Due and payable on or before November 30, 1999.
All payments shall apply first to accrued interest, and the remainder, if any,
to reduction of principal. If any installment of principal or interest is not
paid when due, or upon any default in the performance of any of the covenants or
agreements of this note, or of any instrument now or hereafter evidencing or
securing this note or the obligation represented hereby, the whole indebtedness
(including principal and interest) remaining unpaid, shall, at the option of the
holder, become immediately due, payable and collectible, and while in default,
this note and deferred interest shall bear interest at the rate of eight (8%)
percent per annum. Each maker and endorser severally waives demand, protest and
notice of maturity, non-payment or protest and all requirements necessary to
hold each of them liable as makers and endorsers. Each maker and endorser
further agrees, jointly and severally, to pay all costs of collection, including
reasonable attorney fees in case the principal of this note or any payment on
the principal or any interest hereon is not paid at the respective maturity
thereof, or in case it becomes necessary to protect the security hereof, whether
suit be brought or not.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown, CEO
-----------------------------
Stephen Brown, CEO
<PAGE>
Exhibit 10.31
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SEDMET EXPLORATION, INC.
AND
INTERNATIONAL NET BROADCASTING, INC.
1
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of January 15,
1999, by and between Sedmet Exploration, Inc., a Nevada corporation
("Sedmet"), and International Net Broadcasting, a California limited
liability company, (as used herein "Broadcasting" includes, as context
dictates, International Broadcasting, Inc. and/or its stockholders).
WHEREAS, Sedmet desires to purchase all the shares of capital stock of
Broadcasting ("Broadcasting Common Stock"), and Broadcasting desires to sell
all the Broadcasting Common Stock to Sedmet, subject to the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants set
forth herein, the parties hereto (the "Parties" and, individually, a "Party")
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, Sedmet will purchase at the Closing (as hereinafter
defined), and Broadcasting will sell to Sedmet at the Closing, all the
Broadcasting Common Stock;
1.2 PURCHASE PRICE. In consideration for the Broadcasting Common Stock and
in full payment therefor, Sedmet will pay to Broadcasting at the
Closing the following amount (the "Purchase Price"); delivery of
certificate(s) for 2,600,000 shares of Sedmet common stock, $.001 par
value per share ("Sedmet Shares of Common Stock").
1.3 EXEMPTION FROM REGISTRATION. The Sedmet Shares to be issued to
Broadcasting will be issued in a transaction exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act").
1.4 DIRECTOR AND OFFICER OF SEDMET. The officer and director of Sedmet is
as follows:
Akbar Alikban President, Secretary/Treasurer and a Director
ARTICLE 2
CLOSING
2.01 CLOSING. The transactions contemplated by this Agreement shall be
completed on the first business day on which the last of the conditions
contained in Article 6 hereof is fulfilled or waived (the "Time of
Closing"), with the expectation that the Closing shall occur on or
before January 22, 1999 at 1:00 P.M., Western Time. The Closing shall
take place at the offices of Sedmet, Unit 597, 1027 Davies Street,
Vancouver, British Columbia V6E 4L2. The "Closing" shall mean the
deliveries to be made by the Parties hereto at the Time of Closing in
accordance with this Agreement.
2.02 DELIVERIES BY BROADCASTING. At the Closing, Broadcasting shall deliver
to Sedmet certificates, all duly and properly executed, representing
all the issued and outstanding shares of Broadcasting Common Stock,
with stock powers attached which validly evidence the transfer of the
certificates.
2.03 DELIVERIES BY SEDMET. At the Closing, Sedmet shall deliver or cause to
be delivered to Broadcasting all duly and properly executed,
certificates or certificates representing the Sedmet shares issuable to
the stockholders of Broadcasting, as provided in Section 1.2 of this
Agreement in the names and denominations as shall be provided at the
Closing by Broadcasting.
2.04 FURTHER ASSURANCES. At or after the Time of Closing, each Party shall
prepare, execute, and deliver, at the preparer's expense, such further
instruments of conveyance, sale, assignment, or transfer, and shall
take or cause to be taken such other or further action, as any Party
shall reasonably request of
2
<PAGE>
any other Party at any time or from time to time in order to consummate,
in any other manner, the terms and provisions of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BROADCASTING
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect"
with respect to any entity or group of entities means any event, change or
effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations or results of operations of such
entity.
In this Agreement, any reference to a Party's "knowledge" means such
Party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such Party reasonably believed to have knowledge of such
matters.
Broadcasting represents and warrants to Sedmet as follows:
3.01 ORGANIZATION, STANDING AND POWER. Broadcasting is a corporation duly
organized, validly existing and in good standing under the laws of
California. Broadcasting has the corporate power to own its properties
and to carry on its business as now being conducted and as proposed to
be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect on
Broadcasting. Broadcasting is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Broadcasting has the corporate power to own its
properties and to carry on its business as now being conducted.
Broadcasting has delivered a true and correct copy of the certificate
of incorporation and bylaws or other charter documents, as applicable,
of Broadcasting, each as amended to date, to Sedmet. Broadcasting is
not in violation of any of the provisions of its certificate of
incorporation or bylaws or equivalent organizational documents.
Broadcasting is the owner of all outstanding shares of Broadcasting
Common Stock (there being no other classes of capital stock
outstanding) and all such shares are duly authorized, validly issued,
fully paid and nonassumable. Broadcasting does not directly or
indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other
business association or entity.
3.02 AUTHORITY. Broadcasting has all requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of Broadcasting. This Agreement has been duly executed and
delivered by Broadcasting and constitutes the valid and binding
obligation of Broadcasting enforceable against Broadcasting in
accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors' rights generally, and is subject
to general principles of equity. The execution and delivery of this
Agreement by Broadcasting does not, and the consummation of the
transaction contemplated hereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
or acceleration of any material obligation or loss of any material
benefit under (i) any provision of the certificate of incorporation or
bylaws of Broadcasting, or (ii) any material mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgement, order, decree, statute, law, ordinance,
rule or regulation applicable to Broadcasting or any of its properties
or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect
to Broadcasting or
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Broadcasting in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any
foreign country, and (ii) such other consents, authorizations,
filings, approvals and resignations which, if not obtained or made,
would not have a Material Adverse Effect on Broadcasting and/or and
would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
3.03 FINANCIAL STATEMENTS. Broadcasting will deliver to Sedmet its
financial statements for each of the fiscal years ended December 31,
1997 and 1998, respectively (the "Financial Statements"). The
Financial Statements will be complete and correct in all material
respect and will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods indicated and with each other. The Financial Statements will
accurately set out and describe in all material respects the financial
condition and operating results of Broadcasting as of the dates, and
for the periods, indicated therein, subject to normal year-end
adjustments. Broadcasting maintains and will continue to maintain a
standard system of accounting established and administered in
accordance with generally accepted accounting principles.
3.04 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, (the
"Broadcasting Financial Statement Date") except as otherwise
disclosed, Broadcasting has conducted its business in the ordinary
course consistent with past practice and there has not occurred:
(i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to
result in, a Material Adverse Effect to Broadcasting; (ii) any
acquisition, sale or transfer of any material asset of
Broadcasting other than in the ordinary course of business
and consistent with past practice; (iii) any material change in
accounting methods or practices (including any change in depreciation
or amortization policies or rates) by Broadcasting; (iv) any
declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Broadcasting, or any direct
or indirect redemption, purchase or other acquisition by Broadcasting
of any of an shares of Broadcasting Capital Stock; (v) any material
contract entered into by Broadcasting, other than in the ordinary
course of business and as provided to Sedmet, or any material
amendment or termination of, or default under, any material contract
to which Broadcasting is a part or by which it is bound; (vi) any
material amendment or change to the certificate of incorporation or
bylaws of Broadcasting; (vii) any increase in or modification of the
compensation or benefits payable or to become payable by Broadcasting
to any of its directors or employees other than in the ordinary
course of business and consistent with past practice or (viii) any
negotiation or agreement by Broadcasting or Broadcasting to do any of
the things described in the preceding clauses (i) through (vii) (other
than negotiations with Sedmet and its representatives regarding the
transactions contemplated by this Agreement).
3.05 ABSENCE OF UNDISCLOSED LIABILITIES. Broadcasting has no material
obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided
for in the Broadcasting Financial Statements; (ii) those incurred in
the ordinary course of business and not required to be set forth in
the Broadcasting Financial Statements under generally accepted
accounting principles; (iii) those incurred in the ordinary course of
business since the Broadcasting Financial Statements and consistent
with past practice; and (iv) those incurred in connection with the
execution of this Agreement.
3.06 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the knowledge
of Broadcasting, threatened against Broadcasting or any of its
properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on
Broadcasting except as has been previously disclosed to Sedmet. There
is no judgment, decree or order against Broadcasting, or, to the
knowledge of Broadcasting, any of its directors or officers (in their
capacities as such), that could
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prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to
have a Material Adverse Effect on Broadcasting.
3.07 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgement, injunction, order or decree binding upon Broadcasting which
has or could reasonably be expected to have the effect of prohibiting
or materially impairing any current or future business practice of
Broadcasting, any acquisition of property by Broadcasting or the
conduct of business by Broadcasting as currently conducted or as
proposed to be conducted by Broadcasting.
3.08 GOVERNMENTAL AUTHORIZATION. Broadcasting has obtained each federal,
state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to
which Broadcasting currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of
Broadcasting (i) and (ii) herein collectively called "Broadcasting
Authorizations"), and all of such Broadcasting Authorizations are in
full force and effect, except where the failure to obtain or have any
such Broadcasting Authorizations could not reasonably be expected to
have a Material Adverse Effect on Broadcasting.
3.09 TITLE TO PROPERTY. Broadcasting has good and marketable title to all
of its respective properties, interests in properties and assets, real
and personal, reflected in the Broadcasting Financial Statements or
acquired after the Broadcasting Financial Statements. The property and
equipment of Broadcasting that are used in the operations of its
businesses are in all material respects in good operating condition
and repair, ordinary wear and tear excepted.
3.10 INTELLECTUAL PROPERTY.
(a) Broadcasting owns or is licensed or otherwise possesses legally
enforceable rights to use all trademarks, trade names,, service
marks, copyrights, and any applications therefor, and tangible or
intangible proprietary information or material ("Intellectual
Property") that are used in the business of Broadcasting as
currently conducted by Broadcasting, except to the extent that
the failure to have such rights has not had and would not
reasonably be expected to have a Material Adverse Effect on
Broadcasting.
(b) Broadcasting has not been sued in any suit, action or proceeding
which involves a claim of not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of
any license or agreement involving Intellectual Property against
any third part. The conduct of its business does not infringe any
trademark, service mark, copyright, trade secret or other
proprietary right of any third part, where such infringement
would have a Material Adverse Effect on Broadcasting.
3.11 INTERESTED PARTY TRANSACTIONS. Broadcasting is not indebted to any
director, officer, employee or agent of Broadcasting (except for
amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to Broadcasting.
3.12 INSURANCE. Broadcasting has policies of insurance and bonds of the
type and in amounts customarily carried by business entities similar
to those of Broadcasting. There is no material claim pending under any
of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds
have been paid and Broadcasting is otherwise in compliance with the
terms of such policies and bonds. Broadcasting has no knowledge of
any threatened termination of, or material premium increase with
respect to, any of such policies.
3.13 COMPLIANCE WITH LAWS. To Broadcasting's best knowledge, Broadcasting
has complied with, is not in violation of, and have not received any
notices of violation with respect to, any federal, state, local or
foreign statute, law or regulation with respect to the conduct of its
business, or the ownership or operation of its business, except for
such violations or failures to comply as could not be reasonably
expected to have a Material Adverse Effect on Broadcasting.
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3.14 MINUTE BOOKS. Broadcasting will prepare and make available to Sedmet
contain a complete and accurate summary of all meetings of directors
and shareholders or actions by written consent since the time of
incorporation of Broadcasting, and reflect all transactions referred to
in such minutes accurately in all material respects.
3.15 COMPLETE COPIES OF MATERIALS. Broadcasting has delivered or made
available true and complete copies of each agreement not in the
ordinary course of business to which Broadcasting is a party.
3.16 BROKERS' AND FINDERS' FEES. Broadcasting has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment brokers' fees or any similar
charges in connection with this Agreement or any transaction
contemplated hereby.
3.17 BOARD APPROVAL. The Board of Directors and stockholders of
Broadcasting have unanimously approved this Agreement.
3.18 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Broadcasting, or schedules, exhibits or certificates furnished
by Broadcasting pursuant to this Agreement or any written statement
furnished to Sedmet pursuant hereto or in connection with the
transactions contemplated hereby, when all such documents are read
together in their entirety, contains or will contain at the Time of
Closing any untrue statement of a material fact, or omits or omit at
the Time of Closing to state any material fact necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading, provided, however, that
for purposes of this representation, any document attached hereto as a
"Superseding Document" (even if not attached hereto) that provides
information inconsistent with or in addition to any other written
statement furnished to Sedmet in connection with the transaction
contemplated hereby, shall be deemed to supersede any other document
or written statement furnished to Sedmet with respect to such
inconsistent or additional information.
3.19 AUTHORIZATION. All acts and conditions required by law on the part of
Broadcasting to authorize the execution and delivery of this Agreement
by Broadcasting and the transactions contemplated herein and the
performance of all obligations of Broadcasting hereunder have been
duly performed and obtained, and this Agreement constitutes a valid
and legally binding obligation of the Broadcasting, enforceable in
accordance with its terms, subject, as to the enforcement of remedies,
to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally,
to general equitable principles and to limitations on the
enforceability of indemnification provisions as applied to certain
types of claims arising hereafter, if may, under the federal
securities laws.
3.20 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provision of any instrument, judgment, order, writ, decree or contract
to which Broadcasting is a party or by which it is bound, or require
any consent under or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a violation
or default under any such provision.
3.21 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing
with, any federal, regional, state or local governmental authority of
the United States on the part of Broadcasting is required in
connection with the consummation of the transactions contemplated by
this Agreement except for filings, if any, required pursuant to
applicable federal and state securities laws, which filings will be
made within the required statutory period.
3.22 LITIGATION. There is no action, suit, proceeding, or investigation
pending or, to Broadcasting's knowledge, currently threatened against
Broadcasting or Broadcasting which questions the validity
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of this Agreement or the right of Broadcasting to enter into this
Agreement or to consummate the transactions contemplated hereby.
3.23 TITLE TO STOCK. Stockholders of Broadcasting have good title to the
capital stock to be transferred to Sedmet under this Agreement, free
and clear of any lien, pledge, security, interest or other encumbrance
(other than restrictions on transfer arising under applicable
securities laws) and, upon delivery of the shares of capital stock at
the Closing as provided for in this Agreement, and assuming Sedmet is
acquiring the capital stock in good faith and without notice of any
adverse claim, Sedmet will acquire good title thereto, free and clear
of any lien, pledge, security interest or encumbrance (other than
restrictions on transfer arising under applicable securities laws).
3.24 DISCLOSURE. Broadcasting has fully provided Sedmet and Sedmet's legal
counsel with all the information in Broadcasting's possession that
Sedmet has requested in determining whether to purchase the capital
stock offered by Broadcasting. Neither Article 3 of this Agreement nor
any schedule attached to this Agreement nor any certificate delivered
pursuant hereto that, in any such case, has been or will be provided
by or on behalf of Broadcasting contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements made herein or therein not misleading in light of the
circumstances under which they were made.
3.25 DELIVERY OF DOCUMENTS. Broadcasting has delivered or will deliver to
Sedmet at or prior to the Closing all documents required to be
delivered under this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SEDMET
Sedmet hereby represents and warrants to Broadcasting as follows:
4.01 ORGANIZATION, STANDING AND POWER. Sedmet is a corporation duly
organized, validity existing and in good standing under the laws of
Nevada. Sedmet has the corporate power to own its properties and to
carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be as qualified and in
good standing would have a Material Adverse Effect on Sedmet. Sedmet
has delivered a true and correct copy of its certificate of
incorporation and bylaws or other charter documents, as applicable,
each as amended to date, to Broadcasting. Sedmet is not in violation
of any of the provisions of its certificate of incorporation or bylaws
or equivalent organizational documents. Sedmet does not directly or
indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other
business association or entity.
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4.02 AUTHORITY. Sedmet has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Sedmet. This Agreement has been duly executed and delivered by Sedmet
and constitutes the valid and binding obligations of Sedmet. The
execution and delivery of this Agreement do not, and the consummation
of the transaction contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any material obligation or loss of a
material benefit under (i) any provision of the certificate of
incorporation or bylaws of Sedmet, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Sedmet or its
properties or assets. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity,
is required by or with respect to Sedmet in connection with the
execution and delivery of this Agreement by Sedmet or the consummation
by Sedmet of the transactions contemplated hereby.
4.03 CURRENT STATUS OF SEDMET. Sedmet Common Stock currently trade on the
NASD Electronic Bulletin Board. It does not file periodic reports with
the United States Securities and Exchange Commission.
4.04 AUTHORIZATION. All acts and conditions required by law on the part of
the Sedmet to authorize the execution and delivery of this
agreement by Sedmet and the transactions contemplated herein and the
performance of all obligations of Sedmet hereunder have been duly
performed and obtained, and this Agreement constitutes a valid and
legally binding obligation of the Broadcasting, enforceable in
accordance with its terms, subject, as to the enforcement of remedies,
to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors rights generally, to general
equitable principles and to limitations on the enforceability of
indemnification provisions as applied to certain types of claims
arising hereafter, if any, under the federal securities laws.
4.05 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provision of any instrument, judgment, order, writ, decree or
contract to which Sedmet is a party or by which it is bound, or
require any consent under or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a
violation or default under any such provision.
4.06 TITLE TO STOCK. Sedmet has good title to the capital stock to be
transferred pursuant to this Agreement, free and clear of any lien,
pledge, security interest or other encumbrance (other than restriction
on transfer arising under applicable securities laws) and, upon
delivery of the shares of capital stock at the Closing as provided for
in this Agreement, Broadcasting will acquire good title thereto, free
and clear of any lien, pledge, security interest or encumbrance (other
than restrictions on transfer arising under applicable securities laws).
ARTICLE 3
COVENANTS OF BROADCASTING
CONDUCT OF BUSINESS OF BROADCASTING. During the period from the date of
this Agreement and continuing until the earlier of the termination of
this Agreement or the Time of Closing, except as expressly contemplated
by this Agreement, Broadcasting and Broadcasting shall not do, cause or
permit any of the following, or allow, cause or permit Broadcasting's
subsidiary, Broadcasting, to do, cause or permit any of the following,
without the prior written consent of Sedmet:
(a) MATERIAL CONTRACTS. Enter into any material contract or
commitment or violate, amend or otherwise modify or waive any
of the terms of any of its material contracts, other than in
the ordinary course of business consistent with past practice.
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(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other
convertible securities;
(c) INTELLECTUAL PROPERTY. Transfer to any person or entity any
rights to its intellectual Property other than in the ordinary
course of business consistent with past practice;
(d) EXCLUSIVE RIGHTS. Enter into or amend any material agreements
pursuant to which any other party is granted exclusive
marketing or other exclusive rights of any type or accept with
respect to any of Broadcasting's services;
(e) DISPOSITIONS. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material,
individually or in subsidiaries' business, taken as a whole,
except in the ordinary course of business consistent with past
practices;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(g) LEASES. Enter into any operating lease in excess of $10,000 per
annum;
(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount
in excess of $10,000 in any one case of $100,000 in the
aggregate, any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise)
arising other than in the ordinary source of business, other
than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Broadcasting Financial
Statements;
(i) CAPITAL EXPENDITURES. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course
of business and consistent with past practices;
(j) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) TERMINATION OF WAIVER. Terminate or waive any rights of
substantial value, other than in the ordinary course of
business;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or
amend any employee benefit or stock purchase or option plan,
or hire any new officer level employee, or increase the
salaries or wage rates of its employees except in the ordinary
course of business in accordance with its standard past
practice;
(m) SEVERANCE ARRANGEMENTS. Grant any severance or termination pay
(i) to any director or officer or (ii) to any other employee
except (A) payments made pursuant to written agreements
outstanding on the date hereof or (B) grants which are made in
the ordinary course of business in accordance with its
standard past practice;
(n) LAWSUITS. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business,
provided that it consults with Sedmet prior to the filing of
such a suit, or (iii) for a breach of this Agreement;
(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually
or in the aggregate, to its and its parent's subsidiaries'
business, taken as a whole;
(p) TAXES. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any
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material Tax Return or any amendment to a material Tax Return,
enter into any closing agreement, settle any material claims
or assessment in respect of Taxes, or consent to any extension
of waiver of the limitations period applicable to any material
claim or assessment in respect of Taxes;
(q) NOTICES. Broadcasting shall give all notices and other
information required to be given to the employees of
Broadcasting any collective bargaining unit representing any
group of employees of Broadcasting, the National Labor
Relations Act, the Internal Revenue Code, the Consolidated
Omnibus Budget Reconciliation Act, and other applicable law
in connection with the transactions provided for in the
Agreement;
(r) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course
of business; or
(s) OTHER. Take or agree in writing or otherwise to take, any
action which would cause a material breach of its
representations or warranties contained in this agreement or
prevent it from materially performing or cause it not to
materially perform its covenants hereunder.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SEDMET AND BROADCASTING
The obligations of Sedmet on the one hand, and Broadcasting, on the
other hand, to the following conditions on or prior to the Closing:
6.01 CONSENTS AND APPROVALS. The Parties hereto shall have obtained all
consents and approvals of third parties and Governmental Authorities,
if any, required to consummate the transactions contemplated by this
Agreement.
6.02 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations and
warranties made herein by Sedmet and Broadcasting, shall be true,
accurate and correct in all respects as of the date made and as of
the Closing. Sedmet and Broadcasting shall have performed all
obligations and agreements undertaken by each of them herein to be
performed at or prior to the Closing.
6.03 CERTIFICATE. Sedmet shall have received from Broadcasting, and
Broadcasting shall have received from Sedmet, a certificate, dated as
of the Closing and executed by the President and Secretary of Sedmet
or Broadcasting, as the case may be, to the effect that the conditions
set forth in Section 6.1 and 6.2 respectively, shall have been
satisfied.
6.04 NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, operations or results of
operations of Sedmet, Broadcasting, Broadcasting, if any, taken as a
whole.
6.05 NO ACTIONS. Consummation of the transactions contemplated by this
Agreement shall not violate any order, decree or judgment of any court
or governmental body having jurisdiction.
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6.06 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transaction contemplated hereby and all documents
and instruments incident to such transactions shall be in form and
substance reasonably satisfactory to counsel for each of the Parties
hereto, and each such Party (or its counsel) shall have received all
such counterpart originals or certified or other copies of such
documents as it may reasonably request.
6.07 ACCURACY OF DOCUMENTS AND INFORMATION. The copies of all material
instruments, agreements, other documents and written information
delivered to any Party by any other Party or its representatives shall
be complete and correct in all material respects as of the Closing.
ARTICLE 7
INDEMNIFICATION
7.01 INDEMNIFICATION. Broadcasting will indemnify and hold harmless Sedmet
and its respective officers, directors, agents and employees, and each
person, if any, who controls or may control Sedmet within the meaning
of the Securities Act from and against any and all losses, costs,
damages, liabilities and expenses arising from claims, demands,
actions, causes of action, including, without limitation, reasonable
legal fees, net of any recoveries under existing insurance policies,
tax benefits received by Sedmet or its affiliates as a result of such
damages, indemnities from third parties or in the case of third party
claims, by any amount actually recovered by Sedmet or its affiliates
pursuant to counterclaims made by any of them directly relating to the
facts giving rise to such third party claims (collectively, "Damages")
arising out of any misrepresentation or breach of or default in
connection with any of the representation, warranties, covenants, and
agreements given or made by Broadcasting in this Agreement, or any
exhibit or schedule to this Agreement. Sedmet and its affiliates shall
act in good faith and in a commercially reasonable manner to
estimate any Damages they may suffer.
ARTICLE 8
TERMINATION
8.01 TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing, this
Agreement may be terminated by written consent of Sedmet and
Broadcasting.
8.02 TERMINATION BY SEDMET. Sedmet may terminate this Agreement at any time
prior to the Closing by delivery of written notice to Broadcasting if
(1) Broadcasting has breached or violated any covenant or agreement
contained in this Agreement in any material respect and, if such
breach or violation is curable, has failed to cure such violation
within ten (10) days of receiving written notice thereof; (2)any
representation or warranty made by Broadcasting relating to
Broadcasting or otherwise is false or inaccurate in any material
respect or there is any material misrepresentation or omission by
Broadcasting; or (3) the Closing has not occurred by January 22, 1999.
8.03 EFFECT OF TERMINATION. In the event of termination as provided above,
all Parties hereto shall bear their own costs associated with this
Agreement and all transactions mentioned herein and there shall be no
obligation on the part of any Party's officers, director or
shareholder; provided, however, that (a) Sections 9.5 and 9.9 shall
survive such termination and continue in full force and effect and (b)
nothing herein will relieve any Party from liability for any breach of
this Agreement prior to such termination.
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ARTICLE 9
MISCELLANEOUS
9.01 NOTICES. Any notice given hereunder shall be in writing and shall be
deemed effective upon the earlier of personal delivery (including
personal delivery by facsimile) or the third day after mailing by
certified or registered mail, postage prepaid, as follows:
(a) If to Sedmet:
Sedmet Exploration, Inc.
Unit 597
1027 Device Street,
Vancouver, British Columbia V6E 4LZ
Canada
(b) If to Broadcasting:
4052 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
or to such other address as any Party may have furnished in writing to
the other Party in the manner provided above.
9.02 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the
documents and instruments and other agreements specifically referred
to herein constitutes the final, exclusive and complete
understanding of the Parties with respect to the subject matter
hereof and supersedes any and all prior agreements,
understandings and discussions with respect thereto. No
variation or modification of this Agreement and no waiver of any
provision or condition hereof, or granting of any consent
contemplated hereby, shall be valid unless in writing and signed by
the Party against whom enforcement of any such variation,
modification, waiver or consent is sought. The rights and remedies
available to each Party pursuant to this Agreement and all exhibits
hereunder shall be cumulative.
9.03 CAPTIONS. The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
9.04 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which whom so executed shall constitute an
original copy hereof, but all of which together shall constitute one
agreement.
9.05 PUBLICITY. Except for disclosure (if any) required by any law to which
any Party is subject, the timing and content of any announcements,
press releases and public statements to be made prior to the Closing
concerning the transactions contemplated hereby shall be determined
solely by Sedmet in consultation with Broadcasting.
9.06 SUCCESSORS AND ASSIGNS. No Party may, without the prior express
written consent of such other Party, assign this Agreement in whole
or in part. This Agreement shall be binding upon and inure to the
benefit of the respective successors and permitted assigns of the
Parties hereto.
9.07 GOVERNING LAWS. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada as applied to
contracts to be performed entirely within the State of Nevada.
9.08 FURTHER ASSURANCES. At the request of any of the Parties, and
without further consideration, the other Parties agree to execute such
documents and instruments and to do such further acts as may be
necessary or desirable to effectuate the transactions contemplated
hereby, required by law, statute, rule or regulation, all confidential
information.
9.09 CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS. Except as which shall
have been furnished or disclosed by one Party to the other pursuant to
this Agreement, including without limitation,
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business, financial and customer development plans, forecasts,
strategies and information, shall be held in confidence pursuant hereto
and shall not be disclosed to any person other than their respective
employees, directors, legal counsel, accountants or financial advisors,
with a need to have access to such information, and shall not make any
use whatsoever of such information except to evaluate such information
internally. The confidentiality provisions set forth herein shall
survive until two years from the date hereof, unless the Party desiring
to disclose the information can document that (i) such information is
(through no improper action or inaction by such Party or any affiliate,
agent, consultant or employee) generally available to the public, or
(ii) was in its possession or known by it prior to receipt from the
other Party, or (iii) was rightfully disclosed to it by a third party,
or (iv) was independently developed by employees of such Party who have
had no access to such information.
9.10 TRANSFER OF BROADCASTING BOOKS AND ASSETS. Broadcasting agrees, upon
the request of Sedmet to do, execute, acknowledge and deliver or to
cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, power of
attorney and assurances as may be required for the better assigning,
transferring, conveying and confirming to Sedmet, or to its successors
and assigns, or for the aiding, assisting, collecting and reducing to
possession of any or all of the books and records of Broadcasting.
9.11 SEVERABILITY. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or provisions of this Agreement shall not
affect the validity or enforceability of the remaining portions of
this Agreement or any part thereof.
IN WITNESS WHEREOF, each Party has executed this Agreement as of the
date first above written.
SEDMET EXPLORATION, INC.
By: /s/ Akbar Alikban
-----------------------------
Akbar Alikban
Its President
INTERNATIONAL NET BROADCASTING, INC.
By: /s/ Stephen Brown
------------------------------
Stephen Brown
Its Chairman of the Board
And Attorney-in-fact for its Stockholders
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Exhibit 10.32
SECURITIES PURCHASE AGREEMENT
Among
ENTERTAINMENT BOULEVARD, INC.,
H.A.A. INC.,
LOWEN HOLDINGS
and
BEESTONS INVESTMENT LTD.
Dated as of September 3, 1999
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
ARTICLE I PURCHASE AND SALE OF THE SECURITIES. . . . . . . . . . . . . . . . . .4
1.1 Purchase and Sale; Purchase Price . . . . . . . . . . . . . . . . . . . . . .4
1.2 The Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE II REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . .5
2.1 Representations, Warranties and Agreements of the Corporation . . . . . . . .5
2.2 Representations and Warranties of the Purchasers. . . . . . . . . . . . . . 12
ARTICLE III OTHER AGREEMENTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . 13
3.1 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Stop Transfer Orders; Suspension of Qualification . . . . . . . . . . . . . 14
3.3 Furnishing of Information . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Listing and Reservation of Underlying Shares; Compliance with Law . . . . . 15
3.8 Listing on Nasdaq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Filing the Form 10 or Form S-1 and Form 8-A . . . . . . . . . . . . . . . . 16
3.10 Notice of Breaches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Conversion Obligations of the Corporation . . . . . . . . . . . . . . . . . 16
3.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.13 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Sales of the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Subsequent Sales and Registrations. . . . . . . . . . . . . . . . . . . . . 18
3.16 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Board Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Employee Inventions and Confidentiality Agreement . . . . . . . . . . . . . 19
3.19 Year 2000 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Incorporation of the Certificate of Designation By Reference. . . . . . . . 19
ARTICLE IV CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Conditions Precedent to Sale of the Securities. . . . . . . . . . . . . . . 19
ARTICLE V MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Entire Agreement; Amendments. . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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5.9 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Consent to Jurisdiction; Attorneys' Fees. . . . . . . . . . . . . . . . . . 25
5.13 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Independent Nature of Purchasers' Obligations and Rights. . . . . . . . . . 27
</TABLE>
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SCHEDULES AND EXHIBITS
Schedule 1 - Purchasers of the Securities
Schedule 2.1(a) - Organization and Qualification
Schedule 2.1(c) - Capitalization
Schedule 2.1(c)(i) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(c)(v) - Capitalization; 5% holders
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(h) - No Default or Violation
Schedule 2.1(k) - Financial Statements; No Adverse Change
Schedule 2.1(s) - Registration Rights, Rights of Participation
Schedule 2.1(t) - Title
Schedule 2.1(w) - Insurance
Schedule 2.1(z) - Year 2000 Compliance
Exhibit A - Certificate of Designation
Exhibit B - Registration Rights Agreement
Exhibit C - Legal Opinion of Counsel
Exhibit D - Employee Inventions and Confidentiality Agreement
Exhibit E - Transfer Agent Instructions
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
September 3, 1999, among Entertainment Boulevard, Inc., a Nevada corporation
(the "CORPORATION") (which was formerly known as Sedmet Exploration, Inc.),
and the purchasers whose names appear on the signature page hereof. Such
purchasers are each referred to herein individually as a "PURCHASER" and are
collectively referred to herein as the "PURCHASERS."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Corporation desires to issue and sell to the Purchasers, and
the Purchasers desire to acquire from the Corporation, an aggregate of 2,000
shares of 8.0% Mandatorily Convertible Series A Preferred Stock of the
Corporation, $1,000 stated value per share (the "INITIAL SECURITIES"),
convertible into shares of common stock, $0.001 par value per share, of the
Corporation (the "COMMON STOCK"), and an aggregate of not more than 2,000
additional shares (the "Additional Securities"). The Additional Securities,
together with the Initial Securities, are hereinafter referred to as the
"Securities."
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Corporation and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 PURCHASE AND SALE; PURCHASE PRICE. Subject to the terms and
conditions hereof and in reliance on the representations and warranties
contained herein, the Corporation shall issue and sell to the Purchasers, and
the Purchasers, severally and not jointly, shall purchase from the
Corporation an aggregate of 4,000 shares of Securities for a purchase price
of $1,000 per share (the "PURCHASE PRICE").
(a) The Securities shall have the respective rights,
preferences and privileges set forth in the Certificate of Designation of the
Corporation (the "CERTIFICATE OF DESIGNATION") the form of which is annexed
hereto as EXHIBIT A, which shall be approved by the Purchasers and the
Corporation's Board of Directors (the "BOARD OF DIRECTORS") and filed and
accepted for filing on or prior to the Initial Closing Date (as defined
below) by the Corporation with the Secretary of State of the State of Nevada.
For purposes of this Agreement, "TRADING DAY," "PER SHARE
MARKET VALUE," "CONVERSION DATE," and "ORIGINAL ISSUE DATE" shall have the
meanings set forth in the Certificate of Designation.
1.2 THE CLOSINGS.
(a) The closing of the purchase and sale of the Securities
shall take place in two or more parts: (i) an initial closing upon the purchase
and sale of 2,000 shares of the Initial Securities (the "INITIAL CLOSING") and
(ii) one or more subsequent closings upon the purchase and
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sale of up to an additional 2,000 shares (or an aggregate of 4,000 shares) of
the Additional Securities (the "FINAL CLOSING" and with the Initial Closing,
the "CLOSING") and shall take place at the offices of Stroock & Stroock &
Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, immediately
following the execution hereof or such later date or different location as
the parties shall agree in writing, but not prior to the date that the
conditions set forth in Section 4.1 have been satisfied or waived by the
appropriate party. The date of the Initial Closing shall be no later than
September 7, 1999, and is hereinafter referred to as the "INITIAL CLOSING
DATE." The date of the Final Closing shall be within 10 days of the date the
Registration Statement is declared effective and is hereinafter referred to
as the "CLOSING DATE." On the Initial Closing Date, the Corporation shall
sell and issue to the Purchasers, and the Purchasers shall, severally and not
jointly, purchase from the Corporation, an aggregate of 2,000 shares of
Initial Securities. On or before the Closing Date, the Corporation shall
sell and issue to the Purchasers, and the Purchasers shall, severally and not
jointly, purchase from the Corporation, an additional 2,000 shares of
Securities.
(b) At each Closing (i) the Corporation shall deliver to
each Purchaser (1) stock certificates representing the shares of the
Securities in the denominations specified on SCHEDULE 1 attached hereto, each
registered in the name of such Purchaser, (2) the Registration Rights
Agreement, dated the date hereof, by and among the Corporation and the
Purchasers, in the form of EXHIBIT B annexed hereto (the "REGISTRATION RIGHTS
AGREEMENT"), and (3) all other documents, instruments and writings required
to have been delivered at or prior to the Initial Closing Date by the
Corporation pursuant to this Agreement or the Registration Rights Agreement,
and (ii) each Purchaser shall deliver to the Corporation the portion of the
Purchase Price set forth next to its name on SCHEDULE 1, in United States
dollars in immediately available funds by wire transfer to an account
designated in writing by the Corporation for such purpose on or prior to each
Closing Date, and all documents, instruments and writings required to have
been delivered at or prior to each Closing Date by such Purchaser pursuant to
this Agreement and the Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE CORPORATION.
The Corporation hereby makes the following representations and warranties to
the Purchasers:
(a) ORGANIZATION AND QUALIFICATION; SUBSIDIARY. The
Corporation is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Nevada, with full corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Corporation has no subsidiaries other
than International Net Broadcasting, LLC, a wholly-owned subsidiary (the
"SUBSIDIARY"). The Subsidiary is a limited liability company, duly
organized, validly existing and in good standing under the laws of the State
of California, with full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Each of the Corporation and the Subsidiary is duly qualified to do business
and is in good standing as a foreign corporation or limited liability
company, as the case may be, in each jurisdiction in
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which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability of
the Securities or any of the other Transaction Documents (as defined below),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects (insofar as such prospects may reasonably be foreseen) or
financial condition of the Corporation and the Subsidiary, taken as a whole
or (z) adversely impair the Corporation's ability to perform fully on a
timely basis its obligations under any Transaction Document (as defined
below), including, without limitation, the Corporation's obligations under
Section 3.7 hereof (any of (x), (y) or (z), being a "MATERIAL ADVERSE
EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Corporation has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents and otherwise to carry out its obligations hereunder and
thereunder. This Agreement, the Registration Rights Agreement and the
Certificate of Designation are collectively referred to as the "TRANSACTION
DOCUMENTS." The execution and delivery of each of the Transaction Documents
by the Corporation and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Corporation and no further action is required by
the Corporation. Each of the Transaction Documents has been duly executed by
the Corporation and when delivered in accordance with the terms hereof will
constitute the legal, valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Corporation
nor the Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, bylaws or other organizational documents. Prior to
the Initial Closing Date, the Certificate of Designation has been filed with
the Secretary of State of the State of Nevada and will be in full force and
effect, enforceable against the Corporation in accordance with the provisions
thereof.
(c) CAPITALIZATION; RIGHTS TO ACQUIRE CAPITAL STOCK. On the
date hereof, the authorized capital of the Corporation consists of (i)
50,000,000 shares of Common Stock, $0.001 par value, and (ii) 1,000,000 shares
of preferred stock, $0.01 par value. SCHEDULE 2.1(c) hereto sets forth the
shares issued and outstanding of the Corporation as of the date hereof.
SCHEDULE 2.1(c)(i) hereto sets forth the options, warrants and convertible
securities of the Corporation (the "DERIVATIVE SECURITIES") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Corporation into which such
Derivative Securities are convertible as of the date hereof, (iv) the conversion
or exercise price or prices of such Derivative Securities as of the date hereof
and (v) the expiration date of any conversion or exercise rights held by the
owners of such Derivative Securities. All issued and outstanding shares of
capital stock of the Corporation and the Subsidiary have been duly authorized
and validly issued and are fully paid and non-assessable. No shares of the
capital stock of the Corporation are entitled to preemptive or similar rights,
nor is any holder of the capital stock of the Corporation entitled to preemptive
or similar rights arising out of any agreement or
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understanding with the Corporation by virtue of any of the Transaction
Documents. To the best knowledge of the Corporation except as disclosed on
SCHEDULE 2.1(c)(v), no Person or group of related Persons beneficially owns
(as determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) or has the right to
acquire by agreement with or by obligation binding upon the Corporation
beneficial ownership of in excess of 5% of the Common Stock. A "PERSON"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity of any kind. The Common Stock is quoted on the OTC Bulletin Board
("OTCBB").
(d) ISSUANCE OF THE SECURITIES. The shares of the
Securities are duly authorized, and when issued and paid for in accordance
with the terms hereof, shall be validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances, and rights of first refusal of any
kind (collectively, "LIENS"). The shares of the Securities upon issuance
will not subject the holders thereof to personal liability by reason of being
such holders. The Corporation has, and at each Closing Date will have, and
at all times while the shares of the Securities are outstanding will maintain
an adequate reserve of duly authorized shares of Common Stock as may be
necessary to enable it to perform its obligations under this Agreement and
the Certificate of Designation with respect to the number of shares and
warrants issued and outstanding at such Closing Date and in no circumstances
shall such reserved and available shares of Common Stock be less than 200% of
the maximum number of shares of Common Stock which would be issuable upon
conversion of the Securities pursuant to the terms hereof with respect to the
number of the Securities issued and outstanding at such Closing Date were
such conversion effected on such Closing Date. The shares of Common Stock
issuable upon conversion of, or in lieu of dividends on, the shares of the
Securities are referred to herein as the "UNDERLYING SHARES." When issued in
accordance with the Certificate of Designation, the Underlying Shares will be
duly authorized, validly issued, fully paid and nonassessable, free and clear
of all Liens. The Securities and the Underlying Shares are referred to
herein as the "STOCK."
(e) NO CONFLICTS. The execution, delivery and performance
of this Agreement and the other Transaction Documents by the Corporation and
the consummation by the Corporation of the transactions contemplated hereby
and thereby, do not and will not (i) conflict with or violate any provision
of its articles of incorporation, bylaws or other organizational documents
(each as amended through the date hereof) or (ii) subject to obtaining the
consents referred to in Section 2.1(f), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Corporation debt or otherwise) to which the Corporation is a
party or by which any property or asset of the Corporation is bound or
affected, (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Corporation is subject (including Federal
and state securities laws and regulations), or by which any material property
or asset of the Corporation is bound or affected, or (iv) result in the
creation of imposition of a Lien upon any of the Stock or any of the assets
of the Corporation, except in the case of each of clauses (ii) and (iii),
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have or result in a Material Adverse Effect. The
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business of the Corporation is not being conducted in violation of any law,
ordinance or regulation of any governmental authority except for any such
violation as would not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(f) CONSENTS AND APPROVALS. Except as specifically set
forth in SCHEDULE 2.1(f), neither the Corporation nor the Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Corporation of
the Transaction Documents, other than (i) the filing of the Registration
Statement with the Securities and Exchange Commission (the "SEC"), which
shall be filed in accordance with and in the time periods set forth in the
Registration Rights Agreement, (ii) the approval of the Board of Directors
and the filing of the Certificate of Designation with respect to the
Securities with the Secretary of State of the State of Nevada, which filing
and approvals with respect to the Securities shall be effected prior to the
Initial Closing Date, and (iii) any filings, notices or registrations under
applicable federal and state securities laws (together with the consents,
waivers, authorizations, orders, notices and filings referred to in SCHEDULE
2.1(f), the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically set
forth in SCHEDULE 2.1(g), there is no action, suit, notice of violation,
proceeding or investigation pending or, to the knowledge of the Corporation,
threatened against or affecting the Corporation or the Subsidiary or any of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county, local
or foreign) which (i) adversely affects or challenges the legality, validity
or enforceability of any of the Transaction Documents or the Stock or (ii)
could reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Except as set forth in SCHEDULE
2.1(h), neither the Corporation nor the Subsidiary (i) is in default under or
in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect, (ii) is in violation of any
order of any court, arbitrator or governmental body applicable to it, or
(iii) is in violation of any statute, rule or regulation of any governmental
authority to which it is subject, which violation could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
(i) SCHEDULES. The Schedules to this Agreement furnished by
or on behalf of the Corporation do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein not misleading.
(j) PRIVATE OFFERING. The Corporation and all Persons
acting on its behalf have not made, and will not make, offers or sales of the
Securities or any securities that might be integrated with offers and sales
of the Securities, except to "accredited investors" (as defined in Regulation
D ("REGULATION D") under the Securities Act of 1933, as amended (the
"SECURITIES ACT")) without any general solicitation or advertising and
otherwise in compliance with the conditions of Regulation D. The offer and
sale by the Corporation to the Purchasers of the
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Securities and the Underlying Shares into which the Securities are
convertible or exercisable, as the case may be, is exempt from the
registration requirements of the Securities Act.
(k) FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The
Corporation's audited financial statements for the fiscal year ended December
31, 1998 and its unaudited financial statements for the five months ended May
31, 1999 previously furnished to the Purchaser and attached hereto as
SCHEDULE 2.1(k), have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the financial position of the Corporation as of and for the dates thereof and
the results of operations and cash flows for the periods then ended. The
financial statements do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(l) SENIORITY. The Securities are senior in right of
payment, whether upon liquidation, dissolution or otherwise to all other
existing equity securities of the Corporation.
(m) INVESTMENT CORPORATION. The Corporation is not, and is
not controlled by or under common control with an affiliate of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) CERTAIN FEES. Other than those described in Section
5.1, no fees or commissions will be payable by the Corporation to any broker,
financial advisor, finder, investment banker, or bank with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(n) that may be due in connection with the transactions contemplated by
this Agreement. The Corporation shall indemnify and hold harmless each of
the Purchasers, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees.
(o) SOLICITATION MATERIALS. The Corporation has not
distributed any offering materials in connection with the offering and sale
of the Securities. The Corporation confirms that it has not provided the
Purchasers or their agents or counsel with any information that constitutes
or might constitute material non-public information. The Corporation
understands and confirms that the Purchasers shall be relying on the
foregoing representations in effecting transactions in securities of the
Corporation.
(p) EXCLUSIVITY. The Corporation shall not issue and sell
the Securities to any Person other than the Purchasers pursuant to this
Agreement other than with the prior written consent of each of the Purchasers.
(q) PATENTS AND TRADEMARKS. The Corporation has sufficient
title and ownership of all patents, patent applications, trademarks, trademark
applications, service marks,
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trade names, copyrights, licenses and rights that are necessary for use in
connection with its business, as currently conducted, and such business does
not and would not conflict with or constitute an infringement on such rights
of others.
(r) ACKNOWLEDGMENT OF DILUTION. The Corporation
acknowledges that the issuance of the Underlying Shares upon conversion of
the Securities in accordance with the Certificate of Designation may result
in dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Corporation further
acknowledges that its obligation to issue the Underlying Shares upon
conversion of the Securities in accordance with the Certificate of
Designation is unconditional and absolute regardless of the effect of any
such dilution.
(s) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
described on SCHEDULE 2.1(s) hereto, (i) the Corporation has not granted or
agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Corporation registered with the SEC or
any other governmental authority which has not been satisfied and (ii) no
Person, including, but not limited to, current or former shareholders of the
Corporation, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by this Agreement or any other Transaction
Document.
(t) TITLE. Except as disclosed in SCHEDULE 2.1(t), the
Corporation and the Subsidiary have good and marketable title in fee simple
to all real property and personal property owned by them which is material to
the business of the Corporation or the Subsidiary, in each case free and
clear of all liens, except for liens, claims or encumbrances that do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Corporation or the
Subsidiary. Any real property and facilities held under lease by the
Corporation or the Subsidiary are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Corporation or the Subsidiary.
(u) PERMITS. The Corporation and the Subsidiary possess all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct their respective businesses except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the
Corporation nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(v) EMPLOYMENT MATTERS. The Corporation and the Subsidiary
is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the Corporation
or the Subsidiary would have any liability; neither the Corporation nor the
Subsidiary has incurred and expects to incur liability under (i) Title IV of
ERISA with respect to termination of, or
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withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "CODE"); and each "pension plan"
for which the Corporation or the Subsidiary would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(w) INSURANCE. Except as disclosed in SCHEDULE 2.1(w), the
Corporation and the Subsidiary maintain property and casualty, general
liability, director and officer, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound
and reputable insurers that is adequate, consistent with industry standards.
Neither the Corporation nor the Subsidiary has received notice from, and has
any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Corporation or the Subsidiary) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
(x) TAXES. All applicable tax returns required to be filed
by the Corporation and the Subsidiary have been filed, or if not yet filed
have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Corporation, the Subsidiary, or upon any of their respective properties,
income or franchises, shown in such returns and on assessments received by
the Corporation or the Subsidiary to be due and payable have been paid, or
adequate reserves therefor have been set up if any of such taxes are being
contested in good faith; or if any of such tax returns have not been filed or
if any such taxes have not been paid or so reserved for, the failure to so
file or to pay would not in the aggregate or individually have a Material
Adverse Effect.
(y) NO INTEGRATED OFFERING. Neither the Corporation, nor
any Person acting on its or their behalf, has directly or indirectly made any
offers or sales in any security or solicited any offers to buy any securities
under circumstances that would cause the offering of the Stock pursuant to
this Agreement to be integrated with prior offerings by the Corporation for
purposes of the Securities Act or any applicable shareholder approval
provisions.
(z) YEAR 2000 COMPLIANCE. The Corporation has initiated a
review and assessment of all areas within its and the Subsidiary's business
and operations that could be adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by the Corporation or the
Subsidiary may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, except as set forth on SCHEDULE 2.1(z), the
Corporation believes that the computer applications that are currently
material to its or the Subsidiary's business and operations are reasonably
expected to be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000, except to the extent that a failure
to do so would not reasonably be expected to have a Material Adverse Effect.
For the avoidance of doubt, this Section 2.1(z) applies only to the
Corporation and the Subsidiary.
(aa) FULL DISCLOSURE. The representations and warranties of
the Corporation set forth in this Agreement do not contain any untrue
statement of a material fact or omit any
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material fact necessary to make the statements contained herein, in light of
the circumstances under which they were made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Corporation as follows:
(a) INVESTMENT INTENT. Such Purchaser is acquiring the
Stock for its own account for investment purposes only and not with a view to
or for distributing or reselling such Stock or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, at all times
to sell or otherwise dispose of all or any part of such Stock pursuant to an
effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration subject to the provisions of this Agreement and the Registration
Rights Agreement.
(b) PURCHASER STATUS. At the time such Purchaser was
offered the Stock, and at each Closing Date, (i) it was and will be, an
"accredited investor" (as defined in Regulation D), or (ii) such Purchaser
either alone or together with its representatives, had and will have such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective
investment in the Stock, and had and will have so evaluated the merits and
risks of such investment. Such Purchaser has the authority and is duly and
legally qualified to purchase and own the Stock.
(c) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Stock
and, at the present time, is able to afford a complete loss of such
investment.
(d) RELIANCE. Each Purchaser understands and acknowledges
that (i) the Stock is being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act under Section 4(2) of
the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and the Corporation will
rely upon the accuracy and truthfulness of, the foregoing representations and
such Purchaser hereby consents to such reliance.
(e) INDEPENDENT INVESTIGATION. Each Purchaser understands
and acknowledges that it has not received any offering materials in
connection with the offering and sale of the Securities, that it has had
adequate opportunity to ask questions of, and receive satisfactory answers
from, the Corporation and its officers and that it has conducted its own
investigation of the Corporation, with respect to its investment in the Stock.
The Corporation acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby or the other Transaction Documents other than those specifically set
forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS.
(a) If any Purchaser should decide to dispose of any of the
Securities (and upon conversion thereof any of the Underlying Shares) held by
it, each Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the
Corporation or pursuant to an available exemption from the registration
requirements of the Securities Act. In connection with any transfer of any
Stock other than pursuant to an effective registration statement or to the
Corporation, the Corporation may require the transferor thereof to provide to
the Corporation a written opinion of special counsel, the form and substance
of which opinion shall be reasonably satisfactory to the Corporation and its
outside general counsel, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Corporation hereby consents to and agrees
to register (i) any transfer of Stock by one Purchaser to another Purchaser,
and agrees that no documentation other than executed transfer documents shall
be required for any such transfer, and (ii) any transfer by any Purchaser to
an Affiliate of such Purchaser or to an Affiliate of another Purchaser, or
any transfer among any such Affiliates, provided that transferee certifies in
writing to the Corporation that it is an "accredited investor" (as defined in
Regulation D). Any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Stock:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
The Underlying Shares issuable upon conversion of the Securities shall
not contain the legend set forth above if such conversion or exercise occurs
at any time while the Registration Statement is effective under the
Securities Act and upon the sale of the Underlying Shares by the Purchasers
or in the event there is not an effective Registration Statement at such
time, if in the written opinion of counsel to the Corporation (such opinion
to be furnished at the sole expenses of the Corporation at the request of a
Purchaser) such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by the staff of the SEC). The Corporation agrees that it will provide each
Purchaser, upon
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request, with a certificate or certificates representing Underlying Shares,
free from such legend at such time as such legend is no longer required
hereunder.
3.2 STOP TRANSFER ORDERS; SUSPENSION OF QUALIFICATION. The
Corporation may not make any notation on its records or give instructions to
any transfer agent of the Corporation which enlarge the restrictions of
transfer set forth in Section 3.1. The Corporation will advise the
Purchasers, promptly after it receives notice of issuance by the SEC, any
state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending the use of any offering of any
securities of the Corporation, or of the suspension of the qualification of
the Common Stock for offering or sale in any jurisdiction, or the initiation
of any proceeding for any such purpose.
3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns Stock,
if the Corporation is not required to file reports pursuant to Section 13(a)
or 15(d) of the Exchange Act, it will promptly prepare and promptly furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. As long as any Purchaser owns Stock, the
Corporation covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Corporation pursuant to Section 13(a) or 15(d) of the Exchange Act
after the date it becomes subject to the reporting requirements of Section
13(a) or 15(d) of the Exchange Act. The Corporation further covenants that
it will promptly take such further action as any holder of Stock may
reasonably request, all to the extent required from time to time to enable
such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1. Upon the request of any such Person, the Corporation
shall deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with such requirements.
3.4 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, the Corporation shall qualify the Underlying Shares under the
securities or Blue Sky laws of such jurisdictions as the Purchasers may
request and shall continue such qualification at all times through the third
anniversary of the last Closing Date.
3.5 INTEGRATION. The Corporation shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Stock in a manner that would require the registration
under the Securities Act of the sale of any or all of such securities to any
Purchaser.
3.6 CERTAIN AGREEMENTS. As long as any Purchaser owns Securities,
the Corporation shall not and shall cause the Subsidiary not to, without the
consent of the holders of all of the Securities then outstanding, (i) amend
its articles of incorporation, bylaws or other organizational documents so as
to adversely affect any rights of any Purchaser; (ii) declare,
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authorize, set aside or pay any dividend or other distribution with respect
to the Common Stock except as permitted under the Certificate of Designation
and as would not adversely affect the rights of any Purchaser hereunder or
under the Certificate of Designation; (iii) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock in any
manner; (iv) issue any series of preferred stock or other securities with
rights senior (in respect of liquidations, dividends, preferences and similar
rights) to those of the Securities; or (v) enter into any agreement with
respect to any of the foregoing.
3.7 LISTING AND RESERVATION OF UNDERLYING SHARES; COMPLIANCE WITH
LAW.
(a) The Corporation shall (i) not later than the fifth
Business Day following the Initial Closing Date make all necessary notices
and filings with OTCBB (as well as any other national securities exchange or
market on which the Common Stock is then listed) with respect to a sufficient
number of shares of Common Stock to cover the maximum number of Underlying
Shares then issuable and (ii) provide to the Purchasers evidence of such
notices and filings, and the Corporation shall maintain the listing of its
Common Stock on such market. As used herein, "BUSINESS DAY" means any day
except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York generally are
authorized or required by law or other government actions to close.
(b) The Corporation shall at all times have authorized and
reserved for issuance upon conversion of the Securities a sufficient number
of shares of Common Stock to provide for the conversion of the Securities.
(c) The Corporation shall notify the SEC and NASD, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Stock to the Purchasers and promptly provide
copies thereof to the Purchasers.
(d) Until at least two (2) years after the last of the
Securities has been converted into Underlying Shares, (i) the Corporation
will cause its Common Stock to be registered under Sections 12(b) or 12(g) of
the Exchange Act, will comply in all respects with its reporting and filing
obligations under such Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement or the
Registration Rights Agreement and will not take any action or file any
document (whether or not permitted by the Securities Act or the Exchange Act
or the rules and regulations thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Securities Act and Exchange Act, except as permitted herein and
(ii) the Corporation will take all action within its power to continue the
trading of its Common Stock on OTCBB and will comply in all respects with the
Corporation's reporting, filing and other obligations under the bylaws or
rules of the NASD and OTCBB.
3.8 LISTING ON NASDAQ. The Corporation shall use its best efforts
to get approved for listing on The Nasdaq Small-Cap Market after the Initial
Closing Date.
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3.9 FILING THE FORM 10 OR FORM S-1 AND FORM 8-A. The Corporation
shall use its best efforts to file, and thereafter promptly have declared
effective, with the SEC either (1) a Registration Statement on Form 10 (the
"FORM 10") within sixty business days after the Initial Closing Date (or
earlier, if necessary, to comply with the new OTCBB Eligibility Rule) or (2)
a Registration Statement on Form S-1 as more fully described in the
Registration Rights Agreement and a Registration Statement on Form 8-A,
within sixty business days after the Initial Closing Date (or earlier, if
necessary, to comply with the new OTCBB Eligibility Rule) which shall comply
as to form and substance with all applicable rules and regulations. This
provision shall in no way be construed to limit the rights and obligations of
the parties under the Registration Rights Agreement.
3.10 NOTICE OF BREACHES.
(a) Each of the Corporation and each Purchaser shall give
prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement, the Certificate of
Designation, or the Registration Rights Agreement, as well as any events or
occurrences arising after the date hereof and prior to each Closing Date,
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained herein to be
incorrect or breached as of such Closing Date. However, no disclosure by any
party pursuant to this Section 3.10 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.10(a), the
Corporation shall promptly notify each Purchaser of any notice or claim
(written or oral) that it receives from any lender of the Corporation to the
effect that the consummation of the transactions contemplated by this
Agreement, by the Certificate of Designation, or by the Registration Rights
Agreement violates or would violate any written agreement or understanding
between such lender and the Corporation, and the Corporation shall promptly
furnish by facsimile to each Purchaser a copy of any written statement in
support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Corporation's obligations under the Transaction Documents to any
non-defaulting Purchaser with respect to any outstanding Securities or
Underlying Shares.
3.11 CONVERSION OBLIGATIONS OF THE CORPORATION. The Corporation
covenants to convert the Securities and to deliver the Underlying Shares in
accordance with the terms and conditions and within the time period set forth
in the Certificate of Designation.
3.12 USE OF PROCEEDS. The Corporation shall use all of the proceeds
from the sale of the Stock for working capital and general corporate purposes
and not for the satisfaction of any portion of Corporation borrowings outside
the normal course of business, including, without limitation, any obligation
or liability of any kind whatsoever owed to a shareholder, officer or
director of the Corporation, or to redeem Corporation equity or
equity-equivalent securities.
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Pending application of the proceeds of this placement in the manner permitted
hereby, the Corporation will invest such proceeds in interest bearing
accounts and/or short-term, investment grade interest bearing securities.
3.13 INDEMNIFICATION. The Corporation also will indemnify and hold
the Purchasers harmless against any and all losses, claims, damages or
liabilities to any such Person (including, without limitation, in connection
with any action, proceeding or investigation brought by or against any such
Person, including by shareholders of the Corporation) in connection with or
as a result of any matter referred to in the Transaction Documents,
including, without limitation, for any misrepresentation by the Corporation,
for breaches of representations and warranties contained in any of the
Transaction Documents, and for any breach, non-compliance or nonfulfillment
by the Corporation of any covenant, agreement or undertaking to be complied
with or performed by it contained in or pursuant to the Transaction
Documents. If for any reason the foregoing indemnification is unavailable to
such Purchaser or is insufficient to hold such Person harmless, then the
Corporation shall contribute to the amount paid or payable by such Purchaser
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Corporation and
its shareholders on the one hand and the Purchasers on the other hand in the
matters contemplated by the Transaction Documents as well as the relative
fault of the Corporation and the Purchasers with respect to such loss, claim,
damage or liability and any other relevant equitable considerations. The
reimbursement, indemnity and contribution obligations of the Corporation
under this paragraph shall be in addition to any liability which the
Corporation may otherwise have, shall extend upon the same terms and
conditions to any affiliate of the Purchasers and the partners, directors,
agents, employees and controlling persons (if any), as the case may be, of
the Purchasers and any such affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Corporation, the Purchasers, any such affiliate and any such Person. The
Corporation also agrees that neither the Purchasers nor any of such
Affiliates, partners, directors, agents, employees or controlling persons
shall have any liability to the Corporation or any Person asserting claims on
behalf of or in right of the Corporation in connection with or as a result of
any matter referred to in this Agreement except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Corporation
result from the gross negligence or bad faith of, or knowing breach of this
Agreement by, the Purchasers. Promptly after receipt by the Purchasersor any
affiliate, partners, directors, agents, employees and controlling persons, as
the case may be, of notice of any claim or other commencement of any action
in respect of which indemnity may be sought, such party will notify the
Corporation in writing of the receipt or commencement thereof and the
Corporation shall have the right to assume the defense of such claim or
action (including the employment of counsel reasonably satisfactory to the
indemnified parties and the payment of fees and expenses of such counsel).
The indemnified party shall cooperate with the Corporation and the
Corporation's counsel in the defense of such claim or action. The Purchasers
understand that the Corporation shall not in connection with any one such
claim or action or separate but substantially similar related claims or
actions in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys for all of the indemnified parties unless the
defense of one indemnified party is unique or separate from that of another
indemnified party or one or more legal defenses are available to an
indemnified party but not to other indemnified parties subject to the same
claim or action. In the event the
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Corporation does not promptly assume the defense of a claim or action, the
indemnified parties shall have the right to employ counsel reasonably
satisfactory to the Corporation, at the Corporation's expense, to defend such
claim or action. The indemnified party shall not admit any liability with
respect to the claim or action or settle, compromise, pay or discharge the
same without the prior written consent of the Corporation so long as the
Corporation is reasonably contesting or defending the same in good faith. The
Corporation shall not compromise, settle or discharge any claim or action
without the Purchasers' consent, as applicable, which consent will not be
unreasonably withheld, unless there is no finding or admission of any
vilation of any law against the indemnified party and the sole relief is
monetary damages paid in full by the Corporation. The provisions of this
Section 3.13 shall survive any termination or completion of the Transaction
Documents.
3.14 SALES OF THE SECURITIES . The Corporation shall not sell any
shares of preferred stock senior to the Securities other than the Securities.
3.15 SUBSEQUENT SALES AND REGISTRATIONS.
(a) Until 180 days after the date the Registration Statement
is declared effective as stated in an agreement between Robb Peck McCooey
Clearing Corporation ("ROBB PECK") and the Corporation (the "LOCK-UP
LETTER"), the Corporation shall not, directly or indirectly, without the
prior written consent of the Purchasers, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant of any
option to purchase or other disposition) any of its equity or
equity-equivalent securities or any instrument that permits the holder
thereof to acquire Common Stock at a price that is less than the market price
of the Common Stock at the time of issuance of such security or instrument
and, if such security or instrument contains a conversion feature, at a
conversion price that is less than the market price of the Common Stock at
the time of issuance of such security or instrument, except (i) the granting
of options or warrants to employees, officers, directors and consultants, and
the issuance of shares upon exercise of options granted, under any stock
option plan heretofore or hereinafter duly adopted by the Corporation
(including any stock options plans which are restated after the date hereof),
(ii) shares issued upon exercise of any currently outstanding warrants
disclosed in SCHEDULE 2.1(c)(i), and (iii) shares of Common Stock issued upon
conversion or redemption of the Securities.
(b) Other than Underlying Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, the
Corporation shall not, for a period of not less than 90 Trading Days (as
defined in the Certificate of Designation) after the dates that any
registration statement relating to the Stock is declared effective by the
SEC, without the prior written consent of the Purchasers, (i) file with the
SEC to register for resale any securities of the Corporation, except for any
shares owned by Robb Peck or its assigns and as set forth on SCHEDULE 2.1(s),
or (ii) issue or sell any of its equity or equity-equivalent securities
except for (A) securities issued upon the exercise, conversion or redemption
of the securities set forth on SCHEDULE 2.1(c)(i) or (B) securities sold
pursuant to the Corporation's employee benefit plans. Any day that any
Purchaser is unable to sell Underlying Shares under the Registration
Statement shall be added to such 90 Trading Day period for the purposes of
(i) and (ii) above.
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3.16 BOARD OF DIRECTORS. For a period of two years after the
Closing Date, the Purchasers shall have the right to approve the appointment
of any new or replacement member to the Board of Directors, such approval not
to be unreasonably withheld. The Corporation agrees to take all corporate
action necessary to effect the foregoing concurrent with the Closing,
including, without limitation, amending the Corporation's Bylaws, in
accordance with the corporate laws of the State of Nevada.
3.17 BOARD MEMBER. For a period of two years after the Closing
Date, Robb Peck, its assigns or designees shall have the right to appoint a
designee to serve on the Board of Directors. The Corporation agrees to take
all corporate action necessary to cause the foregoing designee to be elected
to the Board of Directors concurrent with the Closing, including, without
limitation, amending the Corporation's Bylaws and the election of the
foregoing designee, in accordance with the corporate laws of the State of
Nevada.
3.18 EMPLOYEE INVENTIONS AND CONFIDENTIALITY AGREEMENT. The
Corporation and its Subsidiary shall have each of its new employees, hired
after the Closing Date, execute an Employee Inventions and Confidentiality
Agreement in the form provided to outside general counsel of the Corporation,
a copy of which is attached hereto as EXHIBIT D.
3.19 YEAR 2000 PLAN. The Corporation shall adopt a Year 2000 Plan
to address the Year 2000 Problem, as described in Section 2.1(z), within 90
days of the Initial Closing Date.
3.20 INCORPORATION OF THE CERTIFICATE OF DESIGNATION BY REFERENCE.
The Certificate of Designation is hereby incorporated herein by reference and
made a part hereof.
ARTICLE IV
CONDITIONS
4.1 CONDITIONS PRECEDENT TO SALE OF THE SECURITIES.
(a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
CORPORATION TO SELL THE SECURITIES. The obligation of the Corporation to
sell the Stock hereunder is subject to the satisfaction or waiver by the
Corporation, at or before each Closing, of each of the following conditions:
(i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND
WARRANTIES. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made and
as of the Initial Closing Date and the Closing Date, as though made on
and as of such date;
(ii) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements
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and conditions required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to each Closing; and
(iii) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement.
(b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS
TO PURCHASE THE SECURITIES. The obligation of each Purchaser hereunder to
acquire and pay for the Stock is subject to the satisfaction or waiver by
such Purchaser, at or before each Closing, of each of the following
conditions:
(i) ACCURACY OF THE CORPORATION'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Corporation set
forth in this Agreement and in the Registration Rights Agreement shall be
true and correct in all material respects as of the date when made and as
of the Initial Closing Date and the Closing Date as though made on and as
of such date, except where the event causing such representation or
warranty to be untrue or incorrect would not result in a Material Adverse
Effect;
(ii) PERFORMANCE BY THE CORPORATION. The Corporation
shall have performed, satisfied and complied with in all material
respects all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Corporation
at or prior to each Closing;
(iii) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Certificate of
Designation or the Registration Rights Agreement relating to the
issuance, conversion or exercise of any of the Securities;
(iv) LITIGATION; PROCEEDINGS. No action, suit, notice of
violation, proceeding or investigation shall have been instituted or
threatened against the Corporation which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(v) ADVERSE CHANGES. Since the date of the financial
statements attached hereto as SCHEDULE 2.1(k), no event which had a
Material Adverse Effect and no material adverse change in the financial
condition of the Corporation shall have occurred (for purposes hereof
changes in the market price of the Common Stock may be considered as a
factor in determining whether there has occurred an event which has had a
Material Adverse Effect or whether a material adverse change has
occurred);
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<PAGE>
(vi) MANAGEMENT. In the reasonable judgment of each
Purchaser, there have been no unacceptable changes in the senior
management of the Corporation, except for changes which could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect;
(vii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The
trading in the Common Stock shall not have been suspended by the SEC or
OTCBB which suspension shall remain in effect;
(viii) LISTING OF COMMON STOCK. The Corporation shall have
no knowledge of any action or proceeding, pending or threatened, that may
result in the delisting of the Common Stock from OTCBB and the
Corporation shall have made all necessary notices and filings with OTCBB;
(ix) LEGAL OPINION. The Corporation shall have delivered
to the Purchasers the opinion of Richman, Lawrence, Mann, Chizever &
Phillips, counsel to the Corporation, in substantially the form annexed
hereto as EXHIBIT C.
(x) REQUIRED APPROVALS. All Required Approvals shall
have been obtained;
(xi) SHARES OF COMMON STOCK. On or prior to each Closing
Date, the Corporation shall have duly reserved the number of Underlying
Shares required by the Transaction Documents to be reserved for issuance
upon conversion of the Securities;
(xii) DELIVERY OF THE SECURITIES. The Corporation shall
have delivered to each Purchaser or such Purchaser's designee, the
Securities, registered in the name of such Purchaser, and in form
satisfactory to such Purchaser;
(xiii) REGISTRATION RIGHTS AGREEMENT. The Corporation
shall have executed and delivered the Registration Rights Agreement;
(xiv) CHANGE OF CONTROL. No Change of Control shall have
occurred between the date hereof and the Closing Date. "CHANGE OF
CONTROL" means the occurrence of any of (A) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d5(b)(1) promulgated under the Exchange Act) of in excess of 50% of the
voting securities of the Corporation, (B) a replacement of more than
one-half of the members of the Board of Directors which is not approved
by those individuals who are members of the Board of Directors on the
date hereof in one or a series of related transactions, (C) the merger of
the Corporation with or into another entity, consolidation or sale of all
or substantially all of the assets of the Corporation in one or a series
of related transactions or (D) the execution by the Corporation of an
agreement to which the Corporation is a party or by which it is bound,
providing for any of the events set forth above in (A), (B) or (C);
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(xv) TRANSFER AGENT INSTRUCTIONS. The Irrevocable
Transfer Agent Instructions, in the form of EXHIBIT E annexed hereto,
shall have been delivered to and acknowledged in writing by the
Corporation's transfer agent;
(xvi) OFFICER'S CERTIFICATE. On each Closing Date, the
Corporation shall deliver to the Purchasers an Officer's Certificate
dated the respective Closing Date and signed by an executive officer of
the Corporation confirming the accuracy of the Corporation's
representations, warranties and covenants as of such respective Closing
Date and confirming the compliance by the Corporation with the conditions
precedent set forth in this Section 4.1 as of the respective Closing
Date;
(xvii) INTERIM FINANCIAL STATEMENTS. On or prior to the
Initial Closing Date, the Corporation shall have delivered to the
Purchasers interim financial statements reflecting the financial
condition of the Corporation and the Subsidiary through May 31, 1999 and
on or prior to the Closing Date, the Corporation shall have delivered to
the Purchasers any subsequent interim financial statements as required to
be filed pursuant to the Exchange Act (such statements not to be outdated
by more than 60 days);
(xviii) DIRECTOR. On or prior to the Initial Closing Date,
the Corporation shall have agreed to appoint a designee of Robb Peck (or
a Robb Peck assign or designee) to the Board of Directors and to have
secured the necessary approvals for the election of the foregoing
designee, in accordance with the corporate laws of the State of Nevada;
(xix) D&O INSURANCE. On or prior to the Initial Closing
Date, the Corporation shall have delivered to Robb Peck a commitment
letter or binder in respect of the proposed insurance policy for its
directors and officers;
(xx) EFFECTIVENESS OF THE REGISTRATION STATEMENT. On or
prior to the Closing Date, the Corporation shall have had declared
effective by the SEC a Registration Statement which shall comply as to
form and substance with all applicable rules and regulations;
(xxi) WAIVER OF PIGGY-BACK REGISTRATION RIGHTS. On or
prior to the Initial Closing Date, Stephen Brown shall have executed, and
delivered to the Purchasers, a lock-up letter with respect to his
1,500,000 warrants for a period of 270 days, beginning on the Initial
Closing Date;
(xxii) LOCK-UP LETTER. On or prior to the Initial Closing
Date, the Corporation shall have delivered to each Purchaser or such
Purchaser's designee, a Lock-up Letter (as defined above), and in form
satisfactory to such Purchaser.
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<PAGE>
ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES.
(a) The Corporation shall pay the reasonable legal fees and
expenses of Stroock & Stroock & Lavan LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance
of this Agreement and the other Transaction Documents, which amount shall not
include any fees or costs incurred by Robb Peck. The Corporation shall pay
the reasonable fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by the Corporation
incident to the negotiation, preparation, execution, delivery and performance
of this Agreement and the other Transaction Documents. The fees and expenses
in this Section 5.1(a) for which the Corporation shall be responsible shall
be no more than $38,000. The Corporation shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Stock pursuant to
the Transaction Documents.
(b) The Corporation shall pay a fee to Robb Peck with
respect to the transactions contemplated by this Agreement, payable on the
Initial Closing Date.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Exhibits and Schedules hereto and the other Transaction Documents,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters.
5.3 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified for notice prior to 5:00 p.m., New
York City time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified for notice later than 5:00 p.m., New
York City time, on any date and earlier than 11:59 p.m., New York City time,
on such date, (iii) the Business Day following the date of mailing, if sent
by nationally recognized overnight courier service or (iv) actual receipt by
the party to whom such notice is required to be given. The addresses for
such communications shall be with respect to each Purchaser at its address
set forth under its name on SCHEDULE 1 attached hereto, or with respect to
the Corporation, addressed to:
Entertainment Boulevard, Inc.
4052 Del Rey Avenue, Suite 108
Marina Del Rey, California 90292
Attention: Stephen Brown
Telephone No.: (310) 578-5404
Facsimile No.: (310) 578-6304
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<PAGE>
or to such other address or addresses or facsimile number or numbers as any
such party may most recently have designated in writing to the other parties
hereto by such notice. Copies of notices to any Purchaser shall be sent to
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, Attention: Susan O. Posen, Esq., Facsimile No.: (212) 806-6006.
Copies of notices to the Corporation shall be sent to Richman, Lawrence,
Mann, Chizever & Phillips, 9601 Wilshire Boulevard, Penthouse Suite, Beverly
Hills, California 90210, Attention: Gerald M. Chizever, Esq., Facsimile No.:
(310) 274-8300.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Corporation and the Purchasers; or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter. Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the holders of
the Stock outstanding. The Corporation shall not offer or pay any
consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
5.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Corporation may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the
Purchasers. The Purchasers may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Corporation,
except that any assignee must make the representations and warranties set
forth in Section 2.2 and otherwise comply with the terms of this Agreement
otherwise applicable to its assignor. This provision shall not limit a
Purchaser's right to transfer securities or transfer or assign rights under
the Registration Rights Agreement.
5.7 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
5.8 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without regard to the principles of conflicts of law thereof.
5.9 SURVIVAL. The agreements, covenants, representations,
warranties and provisions contained in this Agreement shall survive the
delivery of the Stock pursuant to this Agreement and the Closing hereunder
and any conversion of the Securities.
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<PAGE>
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that all parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
5.11 PUBLICITY. The Corporation and each Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall
be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other Party with prior notice of such
public statement. The Corporation shall not publicly or otherwise disclose
the names of any of the Purchasers without the prior written consent of Robb
Peck (or its assign or designee) unless otherwise required by law, in which
case the Corporation shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.
5.12 CONSENT TO JURISDICTION; ATTORNEYS' FEES.
(a) The Corporation (including, but not limited to, its
subsidiaries, officers, directors and controlling persons) and each Purchaser
hereby (i) irrevocably submits to the exclusive jurisdiction of any New York
State court or Federal court sitting in the City of New York in any action
related to, connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Corporation subsequent to the purchase by such Purchaser or
Persons claimed to be affiliated with such Purchaser, (ii) agrees that all
claims in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum
and (iv) consents to the service of process by certified mail, return receipt
requested. Nothing herein shall affect the right of any party to serve legal
process in any manner permitted by law or affect its right to bring any
action in any other court.
(b) In connection with any dispute between the Corporation
and any Purchaser, related to, connected with or arising out of, in whole or
in part, the Transaction Documents, including, but not limited to,
transactions in the securities of the Corporation subsequent to the purchase,
by a Purchaser or Persons claimed to be affiliated to a Purchaser, the
prevailing party shall be awarded all reasonable attorneys' fees and expenses
incurred by it. In that connection fees and expenses actually paid by a
party in connection with the litigation of any dispute shall be deemed
presumably reasonable.
(c) In the event that any Purchaser or any Person claimed to
be affiliated or associated with such Purchaser becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
Person, including shareholders of the Corporation, in connection with or as a
result of any matter referred to in the Transaction Documents, the
Corporation will reimburse such Purchaser and/or those claimed to be
affiliated or associated
-25-
<PAGE>
with such Purchaser for its legal fees and expenses and other expenses
(including the cost of any investigation and preparation) incurred in
connection therewith, as those fees and expenses are incurred; PROVIDED,
HOWEVER, that if at the conclusion of such action, proceeding or
investigation it shall be finally judicially determined by a court of
competent jurisdiction that indemnity for such fees and expenses is contrary
to law, or that such Purchaser is not the prevailing party then in that
event, such Purchaser and/or any other Person having received such advances
of fees and expenses shall reimburse the Corporation in full for the sums
advanced.
(d) The provisions of this Section 5.12 shall survive any
termination or completion of the Transaction Documents.
5.13 WAIVER OF JURY TRIAL.
(a) The parties hereto each waive their respective rights to
a trial by jury of any claim or cause of action based upon or arising out of
or related to the Transaction Documents, or the transactions contemplated by
the Transaction Documents, in any action, proceeding or other litigation of
any type brought by any of the parties against any other party or parties,
whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be
tried by a court trial without a jury. Without limiting the foregoing, the
parties further agree that their respective right to a trial by jury is
waived by operation of this Section 5.13 as to any action, counterclaim or
other proceeding which seeks, in whole or in part, to challenge the validity
or enforceability of any of the Transaction Documents or any provision hereof
or thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any
termination or completion of the Transaction Documents.
5.14 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held to be invalid, illegal, void or unenforceable in
any respect, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Corporation under the Transaction Documents and injunctive relief. Each of
the Corporation and the Purchasers (severally and not jointly) agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence
and hereby agrees to waive in
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<PAGE>
any action for specific performance of any such obligation or injunctive
relief the defense that a remedy at law would be adequate.
5.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Purchaser shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons
as of the date first indicated above.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
-------------------------------------
Name: Stephen Brown
Title: Chief Executive Officer
PURCHASER: H.A.A. Inc.
------------------------------
By: /s/ [Illegible]
-------------------------------------
Name:
Title:
PURCHASER: Lowen Holdings, a
Gibraltar Corporation
------------------------------
By: /s/ [Illegible]
-------------------------------------
Name:
Title:
PURCHASER: Beestons Investments Ltd
------------------------------
By: /s/ [Illegible]
-------------------------------------
Name:
Title:
-28-
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Number of Shares of
the Securities Purchased
Name of Investor at Closing Purchase Price
---------------- ------------------------- --------------
<S> <C> <C>
H.A.A. Inc. 700 $700,000
1601-42nd Street
Brooklyn, New York 11204
Facsimile: 718-435-1313
Lowen Holdings, 300 $300,000
a Gibraltar Corporation
West Street 51
Zurich, Switzerland
Facsimile: 011-411-462-9086
Beestons Investments Ltd. 1,000 $1,000,000
Gretton House
Grand Turk
Turks & Caicos, BWI
Facsimile: 011-649-946-2933
</TABLE>
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<PAGE>
SCHEDULE 2.1(a)
Incorporated in the State of Nevada on December 23, 1997 as Sedmet
Exploration, Inc.
Changed name to Entertainment Boulevard, Inc. on February 2, 1999.
-30-
<PAGE>
SCHEDULE 2.1(c)
The following sets forth the capital structure of the Corporation on the Closing
Date.
[TO COME]
<TABLE>
<CAPTION>
Authorized Shares Shares Issued and Outstanding
----------------- -----------------------------
<S> <C> <C>
Common Stock 50,000,000 12,312,500 (1)
preferred stock 1,000,000 0
Total Shares issued and
outstanding
</TABLE>
- ---------------------
(1) Total includes 112,500 shares issued in connection with bridge loans made
to the Corporation by Steve McKeag and Beestons Investment Ltd. (see
Schedule 2.1(s)).
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<PAGE>
SCHEDULE 2.1(c)(i)
OPTIONS:
1999 Stock Option Plan, effective ________ (not yet approved).
<TABLE>
<CAPTION>
WARRANTS:
Holder # of warrants Issue Date Exercise price Expiration Registration
rights?
<S> <C> <C> <C> <C> <C>
Stephen 1,500,000 7/99 $1.00 8/1/04 Yes (1)
Brown
United 400,000 $1.00 8/1/04 Yes
Kingdom
Unit 2,925,000 1998 $1.00 Yes
Warrant
[EMI 366,000 (2)
Transaction]
</TABLE>
- ---------------------
(1) Prior to the Initial Closing Date, Stephen Brown shall have executed a
lock-up letter with respect to his 1,500,000 warrants for a period of 270 days,
beginning on the Initial Closing Date.
(2) Shares equal to 3% of the total outstanding shares (undiluted) of Common
Stock (not including bridge shares) of the Corporation. Transaction is
contemplated as of the Initial Closing Date.
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<PAGE>
SCHEDULE 2.1(c)(v)
<TABLE>
<CAPTION>
NAME OF STOCKHOLDERS Type of Security Shares issued and
- -------------------- ---------------- outstanding
-----------
<S> <C> <C>
Stephen Brown Common Stock 500,000
Raaheen Alikhan Common Stock 312,500
Rohail Alikhan Common Stock 625,000
Loretta Harty Common Stock 462,500
</TABLE>
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SCHEDULE 2.1(f)
None.
-34-
<PAGE>
SCHEDULE 2.1(g)
None.
-35-
<PAGE>
SCHEDULE 2.1(h)
None.
-36-
<PAGE>
SCHEDULE 2.1(k)
See attached audited consolidated financial statements for the year ended
December 31, 1998, and unaudited compiled financial statements as of May 31,
1999.
-37-
<PAGE>
SCHEDULE 2.1(s)
<TABLE>
<CAPTION>
Number of Shares granted
Name of holder Registration Rights
- -------------- -------------------
<S> <C>
Purchasers under this (1)
Agreement
Stephen Brown 1,500,000 warrants (2)
United Kingdom 400,000 warrants (2)
Unit Warrant 2,925,000 warrants (2)(3)
Steve McKeag 37,500 shares (4)
Beestons Investment Ltd. 75,000 shares (4)
Robb Peck McCooey Clearing shares underlying their warrants
Corporation issued for their services as
Placement Agent
</TABLE>
- -------------------
(1) Represents piggy-back registration rights on any registration statement
to be filed by the Corporation under the Securities Act following the
registration statement to be filed covering the Underlying Shares.
(2) The underlying shares to these warrants have registration rights. Prior
to the Initial Closing Date, Stephen Brown shall have executed a lock-up
letter with respect to his 1,500,000 warrants for a period of 270 days,
beginning on the Initial Closing Date.
(3) These warrants were issued by the Corporation in its 1998 private
placement.
(4) Shares issued in connection with bridge loans made by the respective
holders to the Corporation.
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<PAGE>
SCHEDULE 2.1(t)
The Corporation executed and delivered a Loan and Security Agreement, dated
August 6, 1999, whereby the Corporation pledged its assets as security for
the repayment of a $250,000 bridge loan, and filed the requisite accompanying
UCC-1 financing statement prior to the Initial Closing Date.
-39-
<PAGE>
SCHEDULE 2.1(w)
The Corporation shall adopt the requisite insurance within 30 days of the
Initial Closing Date.
The Corporation shall adopt adequate insurance for its directors and officers
within 60 days of the Initial Closing Date. The Corporation shall deliver to
Robb Peck on the Initial Closing Date a commitment letter or binder in
respect of the proposed insurance policy.
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<PAGE>
SCHEDULE 2.1(z)
The Corporation shall adopt a Year 2000 Plan to address the Year 2000 Problem
within 90 days of the Initial Closing Date.
-41-
<PAGE>
ENTERTAINMENT BOULEVARD INC.
Up to 4,000 Shares
8.0% Mandatorily Convertible Preferred Stock
PLACEMENT AGENCY AGREEMENT
September 3, 1999
Robb Peck McCooey Clearing Corporation
As Placement Agent
One Exchange Plaza
New York, NY 10006
Gentlemen:
This letter confirms our agreement (this "Agreement") to retain Robb
Peck McCooey Clearing Corporation, or its affiliates, assigns or designees,
as: (1) our exclusive agent (the "Placement Agent") to introduce
Entertainment Boulevard Inc. (the "Corporation") to certain investors
(collectively, the "Investors") as prospective purchasers of up to $2.0
million of its shares of its 8.0% Mandatorily Convertible Series A Preferred
Stock, stated value $1,000 per share (the "Initial Securities"), convertible
into shares of common stock, par value $0.001 per share (the "Common Stock"),
of the Corporation, and an aggregate of not more than $2.0 million of
additional shares (the "Additional Securities") in a private placement (the
"Placement") as will be more fully described herein and in the confidential
disclosure documents prepared by the Corporation and provided to the
Placement Agent for use in connection with the proposed Placement, including,
without limitation, the most recent Business Plan provided to the Placement
Agent (said disclosure documents as amended and supplemented from time to
time hereafter being hereinafter collectively referred to as the "Business
Plan" and incorporated herein by this reference) and (2) the Corporation's
financial advisor to provide the investment banking services described more
specifically in Section 11 herein. The Additional Securities, together with
the Initial Securities are hereinafter referred to as the "Securities." The
Placement Agent will have no obligation to purchase any of the Securities
offered by the Corporation in the Placement. The Placement Agent agrees that
the Initial Securities will be sold on or before September 7, 1999, and that
the $2.0 million of the Additional Securities will be sold within 10 days of
the date the Registration Statement has been declared effective.
1
<PAGE>
The Placement is intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) under the Securities Act and Regulation D
("Regulation D") of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") promulgated under the Securities Act (the "Rules and
Regulations").
The engagement described herein shall be in accordance with applicable
laws and pursuant to the following procedures and terms and conditions:
1. AGREEMENT TO ACT AS PLACEMENT AGENT. On the basis of the
representations, warranties and agreements of the Corporation herein
contained and subject to all the terms and conditions of this Agreement, the
Placement Agent agrees to act as the Corporation's exclusive placement agent.
Upon any sale of Securities, the Corporation shall (i) pay to the Placement
Agent 10% of the proceeds received by the Corporation from the sale of such
Securities, (ii) provide the Placement Agent a non-accountable expense
allowance equal to 2% of the proceeds received by the Corporation from the
sale of such Securities and (iii) issue to the Placement Agent or its assign
or designee pursuant to a Warrant Agreement dated the date hereof by and
between the Corporation and you (the "Placement Agent's Warrant Agreement") a
5-year warrant to purchase 250,000 shares of the Corporation's Common Stock
at a purchase price of $2.00 per share (the "Placement Agent Warrants").
Except as provided herein or unless otherwise mutually agreed by the parties
in writing, during the term of this Agreement, the Placement Agent shall
receive the fees described herein, regardless of whether the Investor was
introduced to the Corporation by the Placement Agent. The shares of Common
Stock issuable upon exercise of the Placement Agent Warrants are hereinafter
referred to as the "Warrant Shares" and the Placement Agent Warrants and
Warrant Shares are together referred to as the "Agent's Securities." The
Corporation agrees to register the Warrant Shares pursuant to the terms of
that certain Registration Rights Agreement dated the date hereof between the
Corporation and you (the "Registration Rights Agreement").
2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to, and agrees with, the Placement
Agent, as of the date hereof and as of the date of the consummation of the
sale of the Securities (the "Closing"), that:
(a) The Business Plan does not and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this subsection
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Corporation by or on
behalf of the Placement Agent expressly for use in the Business Plan or any
amendment or supplement thereto. The Corporation has not distributed any
offering material in connection with the offering or sale of the Securities
other than the Business Plan. The Corporation confirms that it has not
provided the Investors or their agents or counsel with any information that
constitutes or might constitute material non-public information.
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(b) There has been no notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or initiation or, to the knowledge of the Corporation, threat of
any proceeding for such purpose.
(c) The financial statements and the related notes included
in the Business Plan present fairly, in all material respects, the financial
condition of the Corporation as of the dates thereof and the results of its
operations and cash flows at the dates and for the periods covered thereby in
conformity with generally accepted accounting principles ("GAAP"). No other
financial statements or schedules of the Corporation or any other entity are
required by the Securities Act or the Rules and Regulations to be included in
the Business Plan. Singer Lewak Greenbaum & Goldstein, LLP (the
"Accountants"), who have reported on such financial statements and schedules,
are independent accountants with respect to the Corporation as required by
the Securities Act and the Rules and Regulations. The financial statements
of the Corporation and the related notes and schedules included in the
Business Plan have been prepared in conformity with the requirements of the
Securities Act and the Rules and Regulations and present fairly the
information shown therein.
(d) The Corporation maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(e) The Corporation is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Nevada,
with full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. The Corporation
has no subsidiaries other than International Net Broadcasting, LLC, a
wholly-owned subsidiary (the "SUBSIDIARY"). The Subsidiary is a limited
liability company, duly organized, validly existing and in good standing
under the laws of the State of California, with full corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Corporation and the Subsidiary
is duly qualified to do business and is in good standing as a foreign
corporation or limited liability company, as the case may be, in each
jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or
in the aggregate, (x) adversely affect the legality, validity or
enforceability of the Securities or any of the other Transaction Documents
(as defined below), (y) have or result in a material adverse effect on the
results of operations, assets, prospects (insofar as such prospects may
reasonably be foreseen) or financial condition of the Corporation and the
Subsidiary, taken as a whole or (z) adversely impair the Corporation's
ability to perform fully on a timely basis its obligations under any
Transaction Document, including, without limitation, the Corporation's
obligations under Section 3.7 of the Securities Purchase Agreement between
the Corporation and the purchasers of Securities (the "Securities Purchase
Agreement") (any of (x), (y) or (z), being a "MATERIAL ADVERSE EFFECT").
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(f) Since the date as of which information is given in the
Business Plan, except as otherwise stated therein, (i) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Corporation and the
Subsidiary, taken as a whole, whether or not arising in the ordinary course
of business, (ii) there have been no transactions entered into by the
Corporation or the Subsidiary, other than those in the ordinary course of
business, which are material with respect to the Corporation, and the
Subsidiary, taken as a whole, (iii) there has been no dividend or
distribution of any kind declared, paid or made either by the Corporation or
the Subsidiary on any class of its respective securities, and (iv) neither
the Corporation nor the Subsidiary has incurred any liabilities or
obligations, either direct or contingent, other than in the ordinary course
of business.
(g) The Corporation has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and the other Transaction Documents (as defined) and otherwise
to carry out its obligations hereunder and thereunder. This Agreement, the
Secured Bridge Note, the Loan and Security Agreement, the Securities Purchase
Agreement, the Certificate of Designation, the Registration Rights Agreements
and the Placement Agent's Warrant Agreement are collectively referred to as
the "TRANSACTION DOCUMENTS." The execution and delivery of each of the
Transaction Documents by the Corporation and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Corporation and no further action is
required by the Corporation. Each of the Transaction Documents has been duly
executed by the Corporation and when delivered in accordance with the terms
hereof will constitute the legal, valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
or by other equitable principles of general application. Neither the
Corporation nor the Subsidiary is in violation of any of the provisions of
its respective articles of incorporation, bylaws or other organizational
documents. Prior to the Closing the Certificate of Designation has been
filed with the Secretary of State of the State of Nevada and will be in full
force and effect, enforceable against the Corporation in accordance with the
provisions thereof.
(h) Each of the Corporation and the Subsidiary has filed all
federal, state, local and foreign tax returns that are required to be filed
or has requested extensions thereof and have paid all taxes and all
assessments to the extent that the same have become due. No tax assessment
or deficiency has been made or proposed against the Corporation or the
Subsidiary nor has the Corporation or the Subsidiary received any notice of
any proposed assessment or deficiency. The charges, accruals and reserves
shown as the financial statements included in the Business Plan, in respect
of taxes for all fiscal periods to date are adequate based on current law.
There is no material unpaid assessment or proposal by any taxing authority
for additional taxes for which the Corporation does not have adequate
reserves for any fiscal year.
(i) On the date hereof, the authorized capital of the
Corporation consists of (i) 50,000,000 shares of Common Stock, $0.001 par
value and (ii) 1,000,000 shares of preferred
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stock, $0.01 par value, 10,000 of which will be designated 8.0% Mandatorily
Convertible Series A Preferred Stock, $0.01 par value. SCHEDULE 2.1(c) of
the Securities Purchase Agreement sets forth the shares issued and
outstanding of the Corporation as of the date hereof. SCHEDULE 2.1(c)(i) of
the Securities Purchase Agreement sets forth the options, warrants and
convertible securities of the Corporation (the "DERIVATIVE SECURITIES") which
are outstanding on the date hereof, including in each case (i) the name and
class of such Derivative Securities, (ii) the issue date of such Derivative
Securities, (iii) the number of shares of Common Stock of the Corporation
into which such Derivative Securities are convertible as of the date hereof,
(iv) the conversion or exercise price or prices of such Derivative Securities
as of the date hereof and (v) the expiration date of any conversion or
exercise rights held by the owners of such Derivative Securities. All issued
and outstanding shares of capital stock of the Corporation and the Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable. No shares of the capital stock of the Corporation are
entitled to preemptive or similar rights, nor is any holder of the capital
stock of the Corporation entitled to preemptive or similar rights arising out
of any agreement or understanding with the Corporation by virtue of any of
the Transaction Documents. To the best knowledge of the Corporation except
as disclosed on SCHEDULE 2.1(c)(v) of the Securities Purchase Agreement, no
Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) or has the right to acquire by agreement with
or by obligation binding upon the Corporation beneficial ownership of in
excess of 5% of the Common Stock. A "PERSON" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind. The Common
Stock is quoted on the OTC Bulletin Board ("OTCBB"). The issuance and sale
of the Placement Agent Warrants have been duly authorized by the Corporation,
and the Placement Agent Warrants, when issued in accordance with the terms of
this Agreement and the Placement Agent's Warrant Agreement will (i) be duly
and validly issued, (ii) constitute valid and legally binding obligations of
the Corporation, enforceable against and in accordance with their terms and
entitled to the benefits of the Placement Agent's Warrant Agreement and (iii)
be exercisable for the Warrant Shares in accordance with their terms.
(j) The shares of Common Stock into which the Securities are
convertible have been duly authorized, and when issued and paid for in
accordance with the terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of first
refusal of any kind (collectively, "LIENS"). The Corporation has, and at the
Closing will have, and at all times while the Securities are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock as may
be necessary to enable it to perform its obligations under this Agreement,
the Placement Agent's Warrant Agreement and the Registration Rights
Agreement. The Warrant Shares have been duly authorized and reserved for
issuance upon exercise of the Placement Agent Warrants and, when issued and
paid for upon such exercise in accordance with the terms thereof, will be
duly and validly issued, fully paid and nonassessable and will not be subject
to preemptive or similar rights. The holders of the Placement Agent Warrants
will not be subject to personal liability by reason of being such holders.
(k) Except as set forth in the Business Plan or the
Securities Purchase
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Agreement, the execution, delivery and performance of this Agreement, the
Placement Agent's Warrant Agreement and the Registration Rights Agreement by
the Corporation and the Subsidiary and the consummation by the Corporation
and the Subsidiary of the transactions contemplated hereby and thereby, do
not and will not (i) conflict with or violate any provision of its articles
of incorporation, bylaws or other organizational documents (each as amended
through the date hereof) or (ii) subject to obtaining the consents referred
to in Section 2(u) of this Agreement, conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Corporation or Subsidiary debt or otherwise) to which the
Corporation or the Subsidiary is a party or by which any property or asset of
the Corporation or the Subsidiary is bound or affected, (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Corporation or the Subsidiary is subject (including Federal and state
securities laws and regulations), or by which any material property or asset
of the Corporation or the Subsidiary is bound or affected, or (iv) result in
the creation of imposition of a Lien upon any of the Securities or any of the
assets of the Corporation or the Subsidiary, except in the case of each of
clauses (ii) and (iii), such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in
the aggregate, have or result in a Material Adverse Effect. The business of
the Corporation and the Subsidiary is not being conducted in violation of any
law, ordinance or regulation of any governmental authority except for any
such violation as would not individually or in the aggregate, have or result
in a Material Adverse Effect.
(l) The Corporation is not, and is not controlled by or
under common control with an affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(m) Except as specifically set forth in SCHEDULE 2.1(g) of
the Securities Purchase Agreement, there is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation or the
Subsidiary or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect.
(n) Except as set forth in the Business Plan or the
Securities Purchase Agreement, there are no (i) hazardous substances,
hazardous materials, toxic substances or waste materials (collectively,
"Hazardous Materials"), the existence of which is in violation of any
environmental law or regulation, on any of the properties owned or leased by
the Corporation or the Subsidiary, or (ii) spills, releases, discharges or
disposal of Hazardous Materials that have occurred or are presently occurring
from such properties. Except as described in the Business Plan, each of the
Corporation and the Subsidiary is in compliance with all applicable local,
state and federal environmental laws, regulations, ordinances and
administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials, which alone is, or in the
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aggregate are, likely to have a Material Adverse Effect on the Corporation
and the Subsidiary, taken as a whole.
(o) Except as set forth in the Business Plan or the
Securities Purchase Agreement, the business, operations and facilities of the
Corporation and the Subsidiary have been and are being conducted in
compliance in all material respects with all applicable laws, ordinances,
rules, regulations, licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic substances, materials or
wastes into ambient air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
Hazardous Materials), of any governmental department, commission, board,
bureau, agency or instrumentality of the United States, any state or
political subdivision thereof, or any foreign jurisdiction, and all
applicable judicial or administrative agencies or regulatory decrees, awards,
judgments and orders relating thereto; and neither the Corporation nor the
Subsidiary has received any notice from any governmental instrumentality or
any third party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to natural
resources).
(p) The Corporation and the Subsidiary possess all
franchises, certificates, licenses, authorizations and permits or similar
authority necessary to conduct their respective businesses except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the
Corporation nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(q) Except as disclosed in SCHEDULE 2.1(t) of the Securities
Purchase Agreement, the Corporation and the Subsidiary have good and
marketable title in fee simple to all real property and personal property
owned by them which is material to the business of the Corporation or the
Subsidiary, in each case free and clear of all Liens, except for liens,
claims or encumbrances that do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Corporation or the Subsidiary. Any real property and
facilities held under lease by the Corporation or the Subsidiary are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Corporation or the Subsidiary or
third party.
(r) Except as disclosed in SCHEDULE 2.1(w) of the Securities
Purchase Agreement, the Corporation and the Subsidiary maintain property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound
and reputable insurers that is adequate, consistent with industry standards.
Neither the Corporation nor the Subsidiary has received notice from, and has
any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Corporation or the Subsidiary) that such insurer intends to
deny coverage under or cancel,
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discontinue or not renew any insurance policy presently in force.
(s) The Securities are senior in right of payment, whether
upon liquidation, dissolution or otherwise to all other existing equity
securities of the Corporation.
(t) Except as described on SCHEDULE 2.1(s) of the Securities
Purchase Agreement, (i) the Corporation has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have
any securities of the Corporation registered with the SEC or any other
governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former shareholders of the
Corporation, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by this Agreement, the Placement Agent's
Warrant Agreement and the Registration Rights Agreement.
(u) Except as specifically set forth in SCHEDULE 2.1(f) of
the Securities Purchase Agreement, neither the Corporation nor the Subsidiary
is required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Corporation of
the Transaction Documents, other than (i) the filing of the Registration
Statement with the SEC, which shall be filed in accordance with and in the
time periods set forth in the Registration Rights Agreement, (ii) the
approval of the Board of Directors and the filing of the Certificate of
Designation with respect to the Preferred Stock with the Secretary of State
of the State of Nevada, which filing and approvals with respect to the
Preferred Stock shall be effected prior to the Closing, and (iii) any
filings, notices or registrations under applicable federal and state
securities laws (together with the consents, waivers, authorizations, orders,
notices and filings referred to in SCHEDULE 2.1(f) of the Securities Purchase
Agreement, the "REQUIRED APPROVALS").
(v) Any certificate signed by any officer of the Corporation
and delivered to the Placement Agent, or to counsel for the Placement Agent,
shall be deemed a representation and warranty by the Corporation to the
Placement Agent as to the matters covered thereby.
(w) The Corporation and all Persons acting on its behalf
have not made, and will not make, offers or sales of the Securities or any
securities that might be integrated with offers and sales of the Securities,
except to "accredited investors" (as defined in Regulation D ("REGULATION D")
under the Securities Act without any general solicitation or advertising and
otherwise in compliance with the conditions of Regulation D.
(x) Neither the Corporation, nor any Person acting on its or
their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any securities under circumstances
that would cause the offering of the Securities pursuant to this Agreement to
be integrated with prior offerings by the Corporation for purposes of the
Securities Act or any applicable shareholder approval provisions.
(y) Neither the Corporation nor, to the Corporation's
knowledge, any employee or agent of the Corporation has made any payment of
funds of the Corporation or received or retained any funds in violation of
any law, rule or regulation of a character required
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to be disclosed in the Business Plan.
(z) The Common Stock is currently quoted on the OTCBB.
(aa) The Corporation is not involved in any material labor
dispute nor is any such dispute known by the Corporation to be threatened.
(bb) Except as disclosed in or specifically contemplated by
the Business Plan or the Securities Purchase Agreement, (i) neither the
Corporation nor the Subsidiary owns or has obtained valid and enforceable
licenses or options for the inventions, patent applications, patents,
trademarks (both registered and unregistered), tradenames, copyrights and
trade secrets necessary for the conduct of the Corporation's or the
Subsidiary's business as currently conducted and as the Business Plan
indicates the Corporation and the Subsidiary contemplate conducting
(collectively, the "Intellectual Property"); and (ii) to the Corporation's
knowledge (for each of the following subsections (a) through (e)): (a) there
are no third parties who have any ownership rights to any Intellectual
Property that is owned by, or has been licensed to, the Corporation or the
Subsidiary for the products and services described in the Business Plan that
would preclude the Corporation or the Subsidiary from conducting its
businesses as currently conducted and as the Business Plan indicates the
Corporation and the Subsidiary contemplate conducting, except for the
ownership rights of the owners of the Intellectual Property licensed or
optioned by the Corporation or the Subsidiary; (b) there are currently no
sales of any products that would constitute an infringement by third parties
of any Intellectual Property owned, licensed or optioned by the Corporation
or the Subsidiary; (c) there is no pending or threatened action, suit,
proceeding or claim by others challenging the rights of the Corporation or
the Subsidiary in or to any Intellectual Property owned, licensed or optioned
by the Corporation or the Subsidiary; (d) there is no pending or threatened
action, suit, proceeding or claim by others challenging the validity or scope
of any Intellectual Property owned, licensed or optioned by the Corporation
or the Subsidiary, other than non-material claims; and (e) there is no
pending or threatened action, suit, proceeding or claim by others that the
Corporation or the Subsidiary infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary right of others,
other than non-material claims.
(cc) The Corporation has initiated a review and assessment of
all areas within its and the Subsidiary's business and operations that could
be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Corporation or the Subsidiary may be unable
to recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999). Based on the
foregoing, except as set forth on SCHEDULE 2.1(z) of the Securities Purchase
Agreement, the Corporation believes that the computer applications that are
currently material to its or the Subsidiary's business and operations are
reasonably expected to be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000, except to the extent that a
failure to do so would not reasonably be expected to have a Material Adverse
Effect.
(dd) The Corporation has delivered to the Placement Agent an
agreement in the form of Attachment A hereto to the effect that it will not,
for 180 days after the date the Registration Statement has been declared
effective, without the prior written consent of the Placement Agent, offer to
sell, sell, contract to sell, grant any option to purchase or otherwise
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dispose (or announce any offer, sale, grant of any option to purchase or
other disposition) of, whether directly or indirectly or through any change
in allocation of economic risk relating to the shares, any shares of capital
stock of the Corporation or securities convertible into, or exchangeable or
exercisable for, shares of capital stock of the Corporation, except with
respect to the issuance of shares of Common Stock upon the exercise of stock
options and warrants outstanding as of the date hereof the and the issuance
of Common Stock or stock options under any benefit plan of the Corporation.
(ee) The Corporation and the Subsidiary is in compliance in
all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Corporation or the
Subsidiary would have any liability; neither the Corporation nor the
Subsidiary has incurred and expects to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan"
or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the "CODE"); and each "pension plan" for which the Corporation or the
Subsidiary would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(ff) The Corporation and its directors, officers or
controlling persons have not taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result, under
the Securities Act or otherwise, in, or which has constituted, stabilization
or manipulation of the price of any security of the Corporation to facilitate
the sale or resale of the Securities.
3. COVENANTS. The Corporation covenants and agrees with the
Placement Agent as follows:
(a) The Corporation shall (i) not later than the fifth
Business Day following the Closing make all necessary notices and filings
with the OTCBB (as well as any other national securities exchange or market
on which the Common Stock is then traded or listed) with respect to a
sufficient number of shares of Common Stock and Warrant Shares to cover the
maximum number of Securities and Warrant Shares then issuable and (ii)
provide to the Investors evidence of such notices and filings, and the
Corporation shall maintain the listing of its Common Stock on such market.
As used herein, "Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the State of New York generally are authorized or required by law or other
government actions to close.
(b) The Corporation shall at all times have taken the steps
necessary to authorize and reserve a sufficient number of shares of
authorized but unissued Common Stock and Warrant Shares as required to permit
the conversion of all of the Securities and exercise of the Placement Agent
Warrants. The Corporation will immediately take any such steps as may
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be necessary in the future to increase such number of authorized but unissued
shares of Common Stock and Warrant Shares in the event of a Conversion Price
adjustment (as defined in the Certificate of Designation), stock split, stock
dividend or any other event which increases the number of shares of Common
Stock for which the Securities may be converted or into which the Placement
Agent Warrants may be exercised. Any and all shares of Common Stock issued
upon conversion of the Securities, or Warrant Shares issued upon exercise of
the Placement Agent Warrants, shall be validly issued and outstanding, fully
paid and non-assessable.
(c) The Corporation will apply the net proceeds from the
sale of the Securities in accordance with the description set forth in
Section 3.12 of the Securities Purchase Agreement.
(d) The Corporation shall take all steps necessary to
fulfill all registration or qualification requirements of any state or
political subdivision of the United States in which the Securities are to be
offered, sold or converted into shares of Common Stock.
(e) If at any time following the date of the Business Plan,
any event occurs as a result of which the Business Plan, as then amended or
supplemented, would include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
or if for any other reason it is necessary at any time to amend or supplement
the Business Plan to comply with the Securities Act or the Rules and
Regulations, the Corporation will promptly notify the Placement Agent thereof
and will prepare and deliver to the registered holders of the Securities and
the Placement Agent, at the Corporation's expense, an amendment to the
Business Plan that corrects such statement or omission or effects such
compliance.
(f) While any of the Securities remain outstanding, the
Corporation shall not and shall cause the Subsidiary not to, without the
consent of the holders of all of the Securities then outstanding, issue any
series of preferred stock or other securities with rights senior (in respect
of liquidations, dividends, preferences and similar rights) to those of the
Securities.
(g) The Corporation will not at any time, without the
approval of a majority of the holders of the Initial Securities, issue any
equity or equity-linked securities, in violation of the terms of Attachment
A.
(h) The Corporation will not at any time, directly or
indirectly, take any action intended, or which might reasonably be expected,
to cause or result in, or which will constitute, stabilization of the price
of the Securities to facilitate the sale or resale of any of the Securities.
(i) The Corporation will furnish to the Placement Agent for
a period of five years, without charge, (i) copies of financial statements
and related notes and schedules, (ii) supplementary financial information and
interim financial statements, and (iii) other periodic and special reports as
are required to be filed by the Securities Act or Rules and Regulations.
(j) The Corporation shall use its best efforts to get
approved for listing on
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The Nasdaq Small-Cap Market after the Closing.
(k) The Corporation shall use its best efforts to file, and
thereafter promptly have declared effective, with the SEC either (1) a
Registration Statement on Form 10 (the "Form 10"), within sixty business days
after the Closing (or earlier, if necessary, to comply with the new OTCBB
Eligibility Rule) or (2) a Registration Statement on Form S-1 (or other
applicable form) as more fully described in the Registration Rights Agreement
and a Registration Statement on Form 8-A, within sixty business days after
the Closing (or earlier, if necessary, to comply with the new OTCBB
Eligibility Rule) which shall comply as to form and substance with all
applicable rules and regulations. This provision shall in no way be
construed to limit the rights and obligations of the parties under the
Registration Rights Agreement.
(l) For a period of two years after the Closing, the
Investors shall have the right to approve the appointment of any new or
replacement member to the Board of Directors, such approval not to be
unreasonably withheld. The Corporation agrees to take all corporate action
necessary to effect the foregoing concurrent with the Closing, including,
without limitation, amending the Corporation's Bylaws, in accordance with the
corporate laws of the State of Nevada.
(m) For a period of two years after the Closing, Robb Peck
McCooey Clearing Corporation, its assigns or designees shall have the right
to appoint a designee to serve on the Board of Directors. The Corporation
agrees to take all corporate action necessary to cause the foregoing designee
to be elected to the Board of Directors concurrent with the Closing,
including, without limitation, amending the Corporation's Bylaws and the
election of the foregoing designee, in accordance with the corporate laws of
the State of Nevada.
(n) The Corporation and the Subsidiary shall have each of
its new employees, hired after the Closing, execute an Employee Inventions
and Confidentiality Agreement in the form provided to outside general counsel
of the Corporation, a copy of which is attached as EXHIBIT D to the
Securities Purchase Agreement.
(o) The Corporation shall adopt a Year 2000 Plan to address
the Year 2000 Problem, as described in Section 2.1(z) of the Securities
Purchase Agreement, within 90 days of the Closing.
(p) The Corporation shall adopt an adequate insurance policy
for its directors and officers within 60 days of the Closing.
(q) The Corporation shall deliver to the Placement Agent at
Closing a commitment letter or binder in respect of the proposed insurance
policy.
4. REGISTRATION RIGHTS.
(a) The Corporation shall file and use its best efforts to
cause to be declared effective by the SEC not later than 120 days from the
Closing (the "Required Registration Date"), a registration statement on Form
S-1 (or other applicable form) under the Securities
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<PAGE>
Act, or any successor or alternate form thereto (the "Registration
Statement") to register under the Securities Act the shares of Common Stock
of the Corporation into which the Securities are convertible and the
Placement Agent Warrants (the "Shelf Registration"). The Corporation shall
take all other actions necessary to keep such Shelf Registration continuously
effective such date as is the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold or (y) the
date on which the Registrable Securities may be sold without any restriction
pursuant to Rule 144(k) as determined by the counsel to the Corporation
pursuant to a written opinion letter, addressed to the Corporation's transfer
agent to such effect. If an additional Registration Statement is required to
be filed because the actual number of shares of Common Stock into which the
Securities are convertible exceeds the number of shares of Common Stock
initially registered in respect of the Underlying Shares (as defined in the
Securities Purchase Agreement) based upon the computation on the Closing, the
Corporation shall have fifteen (15) Business Days to file such additional
Registration Statement, and the Corporation shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
SEC as soon as possible, but in no event later than 120 days after Closing.
The Corporation shall bear all costs and expenses of such Shelf Registration.
The Corporation shall notify the Placement Agent promptly of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof. If at any time the SEC shall issue any order suspending the
effectiveness of the Registration Statement, the Corporation will make every
effort to obtain the withdrawal of such order at the earliest possible
moment.
(b) If at any time following the effective date of the
Registration Statement, any event occurs as a result of which the
Registration Statement, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Registration
Statement to comply with the Securities Act or the Rules and Regulations, the
Corporation will promptly notify the Placement Agent thereof and will prepare
and file with the SEC, at the Corporation's expense, an amendment to the
Registration Statement that corrects such statement or omission or effects
such compliance.
(c) The Corporation shall furnish the Placement Agent copies
of all filings and correspondence with the SEC concerning the Shelf
Registration.
(d) In the event the Registration Statement has not been
declared effective by the Required Registration Date, the Corporation shall
promptly remit in cash to each of the purchasers of the Securities an amount
equal to 2% per month or part thereof of the amount paid by each of such
purchasers for the first thirty days following the Required Registration Date
and thereafter an amount equal to 3% per month or part thereof until such
time as the Registration Statement is declared effective.
5. COVENANTS OF THE PLACEMENT AGENT. The Placement Agent
covenants and agrees that it will take no action, nor fail to take any
action, if such action or failure to take such action would have the effect
that the offer or sale of the Securities would not be exempt from the
registration requirements of the Securities Act, pursuant to Regulation D, or
the registration or
13
<PAGE>
qualification requirements of any state or political subdivision of the
United States in which the Securities are to be offered or sold pursuant to
Regulation D.
6. CLOSING. The payment of the purchase for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Stroock & Stroock & Lavan LLP, or at such other place as shall be agreed upon
by you and the Corporation, on the third business day following satisfaction
of the closing conditions described herein, unless earlier agreed to (such
date, the "Closing Date"). The payment for, and delivery of certificates for,
any Additional Securities shall be made at the offices of Stroock & Stroock &
Lavan LLP, or at such other place as shall be agreed upon by you and the
Corporation on or before the 10th day following effectiveness of the
Registration Statement. The obligation of the Investors to purchase such
Additional Securities shall be conditioned, among other things, upon the
satisfaction of the closing conditions set forth herein and the accuracy of
the representations and warranties of the Corporation contained herein. For
purposes of this Agreement, "Closing Date" shall refer to the Closing Date
for the Initial Securities and any subsequent closing date for the Additional
Securities.
7. CONDITIONS TO CLOSING. The Corporation and the Placement Agent
agree that the issuance and sale of the Securities (whether Initial
Securities or Additional Securities) and all obligations of the Placement
Agent provided herein shall be subject to the truthfulness and accuracy of
the representations and warranties contained herein as of the date hereof and
as at the Closing Date, to the truthfulness and accuracy of the statements of
officers and directors of the Corporation made pursuant to the provisions
hereof, to the performance by the Corporation of its obligations hereunder to
be performed at or prior to the Closing and to the following further
conditions:
(a) The Placement Agent shall have received from Richman,
Lawrence, Mann, Chizever & Phillips, counsel to the Corporation, a legal
opinion addressed to the Placement Agent, which will be in form and substance
reasonably satisfactory to the Placement Agent and its counsel.
(b) The Placement Agent and its counsel shall have been
furnished such other documents and opinions as they reasonably may require
for the purpose of enabling them to assess the accuracy, completeness or
satisfaction of the representations, warranties or conditions herein
contained.
(c) As of the Closing: (i) in the sole opinion of the
Placement Agent, there shall have been no material adverse change in the
affairs of the Corporation and the Subsidiary, taken as a whole, financial or
otherwise, from and as of the latest dates as of which such condition is set
forth in the Business Plan, except as referred to therein; (ii) there shall
have been no material transaction entered into by the Corporation or the
Subsidiary from the latest date as of which the financial condition of the
Corporation and the Subsidiary is set forth in the Business Plan other than
transactions referred to or contemplated therein and transactions in the
ordinary course of business; (iii) except as set forth in the Business Plan,
the Corporation and
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<PAGE>
the Subsidiary shall not have been in material default (nor shall an event
have occurred which, with notice or lapse of time or both, would constitute a
material default) under any provision of any material agreement or instrument
to which either the Corporation or the Subsidiary is a party or by which its
properties are subject or bound; and (iv) except as set forth in the Business
Plan, no action, suit or proceeding at law or in equity or before or by any
federal or state commission, board or other administrative agency, shall be
pending, threatened or, to the best knowledge of the Corporation,
contemplated against the Corporation and the Subsidiary or affecting its
properties wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, operations, financial condition
or income of the Corporation and the Subsidiary.
(d) The Placement Agent shall have received a certificate of
the Chief Executive Officer of the Corporation, dated as of each Closing, to
the effect that (i) there has been no material adverse change in the
condition, financial or otherwise, or affairs of the Corporation from the
latest date such condition is set forth in the Business Plan except as
referred to therein, and (ii) each of the conditions set forth in this
Section 7 has been satisfied.
(e) On or prior to the Closing Date, the Placement Agent
shall have furnished to the Corporation a certificate to the effect that the
offer and sale of the Securities shall be in compliance with Regulation D
under the Securities Act.
(f) The representations and warranties of the Corporation
contained herein shall be true and correct in all material respects at the
Closing Date, as if made on such date, and all covenants and agreements
herein contained to be performed on the part of the Corporation and the
Placement Agent and all conditions herein contained to be fulfilled or
complied with by the Corporation at or prior to the Closing Date shall have
been duly performed, fulfilled or complied with.
(g) The Corporation shall have furnished to the Placement
Agent such certificates, in addition to those specifically mentioned herein,
as the Placement Agent may have reasonably requested as to the accuracy and
completeness at the Closing of any statement in the Business Plan as to the
accuracy at the Closing Date of the representations and warranties of the
Corporation as to the performance by the Corporation of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and
precedent to the obligations hereunder of the Placement Agent.
(h) On or prior to the Closing Date, the Corporation shall
have duly reserved the number of shares of Common Stock and Warrant Shares
required by this Agreement, the Placement Agent's Warrant Agreement and the
Registration Rights Agreement to be reserved for issuance upon conversion of
the Securities and upon exercise of the Placement Agent Warrants.
(i) The trading in the Common Stock shall not have been
suspended by the SEC or the OTCBB which suspension shall remain in effect.
15
<PAGE>
(j) The Corporation shall have no knowledge of any action or
proceeding, pending or threatened, that may result in the delisting of the
Common Stock from the OTCBB and the Corporation shall have made all necessary
notices and filings with the OTCBB.
(k) The Corporation shall have duly executed and delivered
to the Placement Agent, the Placement Agent's Warrant Agreement and the
Registration Rights Agreement.
(l) On or prior to the Closing, the Corporation shall have
delivered to the Investors interim financial statements reflecting the
financial condition of the Corporation and the Subsidiary at May 31, 1999.
(m) On or prior to the Closing, the Corporation shall have
delivered to the Investors the results of UCC searches conducted in Nevada
and California for the Corporation and the Subsidiary.
(n) On or prior to the Closing, the Corporation shall have
agreed to appoint a designee of Robb Peck McCooey Clearing Corporation (or a
Robb Peck assign or designee) to the Board of Directors and to have secured
the necessary approvals for the election of the foregoing designee, in
accordance with the corporate laws of the State of Nevada.
All such opinions, certificates, letters and documents shall be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Placement Agent and counsel for the
Placement Agent. Any certificates signed by an officer of the Corporation
and delivered to the Placement Agent or to counsel for the Placement Agent
shall be deemed a representation and warranty by the Corporation to the
Placement Agent as to the statements made therein. If any condition to the
Placement Agent's obligations hereunder to be fulfilled prior to or at the
Closing is not so fulfilled, the Placement Agent may terminate this Agreement
or, if the Placement Agent so elects, may waive any such conditions which
have not been fulfilled or may extend the time of their fulfillment.
8. INDEMNIFICATION. The Corporation hereby agrees as follows:
(a) The Corporation will indemnify and hold harmless the
Placement Agent and each of its partners, directors, officers, associates,
affiliates, subsidiaries, employees, consultants, attorneys and agents, and
each person, if any, controlling either the Placement Agent or any of its
affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities, costs or expenses (and any legal or other expenses
incurred by the Placement Agent in investigating or defending the same or in
giving testimony or furnishing documents in response to a request of any
government agency or to a subpoena) in any way relating to or in any way
arising out of the activities of the Placement Agent contemplated by this
letter, or in connection with the offering or sale of the Securities to be
sold by the Corporation as contemplated hereunder. Such indemnity agreement
shall not, however, cover any such loss, claim, damage, liability, cost or
expense which is held in a final judgment of a court (not subject to further
appeal) to have arisen out of either (i) the gross negligence or willful
misconduct of the Placement Agent or (ii) a breach of Section 5 hereof by the
Placement
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<PAGE>
Agent.
(b) The Placement Agent will indemnify and hold harmless the
Corporation, each person, if any, who controls the Corporation within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and each director of the Corporation to the same extent as the foregoing
indemnity from the Corporation to the Placement Agent, but only insofar as
losses, claims, liabilities, expenses or damages arise out of either (i) the
gross negligence or willful misconduct of the Placement Agent or (ii) a
breach of Section 5 hereof by the Placement Agent.
(c) If any action, proceeding or investigation is commenced
by a third party as to which the indemnified party hereunder proposes to
demand indemnification under this Agreement, it will notify the indemnifying
party with reasonable promptness. The indemnified party shall have the right
to retain counsel of its own choice (which choice shall be reasonably
satisfactory to the indemnifying party) to represent it and such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the indemnifying party and any counsel designated by the
indemnifying party. The indemnifying party will not be liable under this
Agreement for any settlement of any claim against the indemnifying party made
without the indemnifying party's written consent, which shall not be
unreasonably withheld.
(d) In order to provide for just and equitable contribution,
if a claim for indemnification pursuant to this Section 8 is made but it is
found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provided for indemnification
in such case, then the Corporation, on the one hand, and the Placement Agent,
on the other hand, shall contribute to the losses, claims, damages,
liabilities or costs to which the indemnified persons may be subject in
accordance with the relative benefits received from the offering and sale of
the Securities by the Corporation, on the one hand, and the Placement Agent,
on the other hand, and also the relative fault of the Corporation, on the one
hand, and the Placement Agent, on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims, damages,
liabilities or costs, and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any person who is not also found liable for
such fraudulent misrepresentation. Notwithstanding the foregoing, the
Placement Agent shall not be obligated to contribute any amount hereunder
that exceeds the proceeds received by the Placement Agent from the offering
and sale of the Securities.
9. SURVIVAL. The respective indemnities of the Corporation and
the Placement Agent and the representations and warranties of the Corporation
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any termination or cancellation of this Agreement or
any investigation made by or on behalf of the Placement Agent, the
Corporation or any person referred to in Section 8 hereof, and shall survive
any termination of this Agreement and/or issuance of the Securities, and any
successor or assign of the Placement Agent and/or its designee(s), the
Corporation, or any such person or any legal representative of such person
shall be entitled to the benefit of the respective indemnities, agreements,
warranties and representations.
17
<PAGE>
10. TERMINATION. The Corporation has the right to terminate this
Agreement, prior to the Closing, by written notice to the Placement Agent 10
days prior to such termination and payment of the Placement Agent's
nonaccountable expense reimbursement on an assumed successful Placement of
$4,000,000 of gross proceeds from the sale of the Securities less such
amounts that have been previously paid or advanced by the Corporation with
respect to such nonaccountable expense reimbursement. The Placement Agent
shall have the right to terminate this Agreement at any time prior to the
Closing, by written notice to the Corporation, if any domestic or
international event or act or occurrence has materially disrupted, or in the
Placement Agent's sole opinion will in the immediate future materially
disrupt, securities markets; or if the United States shall have become
involved in a war or major hostilities; or if a banking moratorium has been
declared by any governmental authority; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared;
or if the Corporation shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which is not covered by insurance and in the Placement Agent's
sole opinion, will make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been such material adverse change in the
condition or prospects of the Corporation or the market for its securities as
in the Placement Agent's sole judgment would make it inadvisable to proceed
with the offering, sale and delivery of the Securities.
Anything herein to the contrary notwithstanding, the liability of the
Corporation to the Placement Agent will be as set forth in Sections 1, 8, 9
and 10 hereof, and upon demand the Corporation will pay the Placement Agent
the full amount so owing.
11. INVESTMENT BANKING SERVICES.
(a) The Corporation is engaging you as its financial advisor
to provide investment banking services for a period of 24 months from the
date hereof for purposes of advising the Corporation in connection with
raising additional financing through private or public financings, assisting
the Corporation in its discussions and negotiations of strategic alliances,
joint ventures or similar transactions or evaluating offers received in
respect of any such transactions, acting as lead manager for any underwritten
public offering, acting as exclusive placement agent or advisor in connection
with any private offering of securities of the Corporation and acting as
financial advisor in connection with any sale or other transfer by the
Corporation, directly or indirectly, of a majority or controlling portion of
its capital stock or assets to another entity, any purchase or other transfer
by another entity, directly or indirectly, of a majority or controlling
portion of the capital stock or assets of the Corporation, and any merger or
consolidation of the Corporation with another entity. The Corporation
agrees, in respect of its engagement of you described in the prior sentence,
that you shall be the Corporation's exclusive agent, advisor or sole
underwriter in connection with any offering of convertible preferred
securities and that in connection with any other offering of equity
securities, the Corporation hereby grants you a right of first refusal to
serve as its exclusive advisor, agent or underwriter, which right must be
expressly waived by you in writing within 15 days of receipt of the
Corporation's written offer to you. Both the Placement Agent and the
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<PAGE>
Corporation agree that if a nationally-recognized financial advisor (as so
determined in the Placement Agent's reasonable judgment) is successfully
retained by the Corporation for an acquisition or merger as described herein,
the Placement Agent will waive its rights under this Section 11.
(b) If during the term of this engagement securities are
sold by the Corporation using an agent, advisor or underwriter other than the
Placement Agent (subject to the terms of Section 11(a) herein), then the
Corporation shall pay the Placement Agent, at the time of each such sale, an
amount equal to $100,000 and 100,000 shares of the Corporation's common
stock, plus expenses.
(c) If during the term of this engagement one or more
acquisitions occur, in which the party or parties to an acquisition were
identified by the Placement Agent or where the Placement Agent rendered
advice concerning the acquisition, then the Corporation shall pay the
Placement Agent, for its services hereunder, a cash fee at the closing of
each such acquisition equal to the percentages set forth below of the
Aggregate Consideration (as defined below) payable in connection with each
such acquisition:
<TABLE>
<CAPTION>
Aggregate Consideration Percentages
----------------------- -----------
<S> <C>
On the first $1,000,000 5.0%
Plus on the next $1,000,000 4.0%
Plus on the next $1,000,000 3.0%
Plus on the next $1,000,000 2.0%
Plus on the amount over $4,000,000 1.0%
</TABLE>
(d) For purposes of this engagement, the term "Aggregate
Consideration" with respect to a particular acquisition means the aggregate
gross value of all cash, securities or other property paid directly or
indirectly to the Corporation (including all amounts paid or distributed by
the Corporation to the holders of capital stock of the Corporation and all
amounts paid, distributed or issued to the holders of options, warrants,
stock appreciation rights or similar rights or securities in the Corporation
in connection with the acquisition).
12. GENERAL PROVISIONS.
(a) PARTIES. This Agreement shall inure solely to the
benefit of, and shall be binding upon, the Placement Agent, the Corporation,
the controlling and other persons referred to in Section 9 hereof, and their
respective successors, legal representatives, heirs, designees and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement
or any provision herein contained.
(b) AMENDMENT. No amendment or modification hereto, or
waiver of the terms hereof, shall be valid unless in a writing executed by
each of the parties hereto or by the party or parties to be bound.
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(c) NOTICES. All notices, requests and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered 48 hours after having been mailed in a general or branch post
office and enclosed in a registered or certified postpaid envelope; 24 hours
after having been sent by overnight courier; when delivered to a telegraph
company or when scanned graphically or otherwise by telegraphic
communications equipment of the sending party and accompanied by a
substantially contemporaneous telephone call; and, in each case, addressed to
the respective parties at the addresses stated below or to such other changed
addresses as the parties may have fixed by notice; provided, however, that
any notice of change of address shall be effective only upon receipt.
<TABLE>
<CAPTION>
<S> <C>
To the Placement
Agent: Robb Peck McCooey Clearing Corporation
One Exchange Plaza
New York, New York 10006
Attention: Richard Rosenblum
Telephone: (212) 482-3740
Facsimile: (212) 425-7149
with a copy to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Susan O. Posen, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
To the Corporation: Entertainment Boulevard Inc.
4052 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
Attention: Stephen Brown
Telephone: (310) 578-5404
Facsimile: (310) 578-6304
with a copy to: Richman, Lawrence, Mann, Chizever & Phillips
9601 Wilshire Boulevard, Penthouse Suite
Beverly Hills, California 90210
Attention: Gerald M. Chizever, Esq.
Telephone: (310) 274-8300
Facsimile: (310) 205-5348
</TABLE>
(d) SEVERABILITY. If any provision herein, or the
application thereof to any circumstance, is found to be unenforceable,
invalid or illegal, such provision shall be deemed deleted from this
Agreement or not applicable to such circumstance, as the case may be, and the
remainder of this Agreement shall not be affected or impaired thereby.
20
<PAGE>
(e) ATTORNEYS' FEES. If any action, including, without
limitation, arbitration, should arise among the parties hereto to enforce or
interpret the provisions of this Agreement, the prevailing party in such
action shall be reimbursed for all reasonable expenses incurred in connection
with such action, including reasonable attorneys' fees.
(f) INTEGRATION. This Agreement expresses the entire
agreement and understanding of the parties hereto with respect to the matters
set forth herein and supersedes all prior agreements, arrangements and
understandings among the parties hereto with respect to the matters set forth
herein.
(g) GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York without regard
to the principles of conflicts of laws.
(h) CAPTIONS. The section headings contained herein are
inserted only for convenience and shall not affect the construction or
meaning of any of the terms hereof.
(i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
(j) WAIVERS. No waiver of any term, provision or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a further waiver of any such term, provision or condition or as
a waiver of any other term, provision or condition.
(k) PRONOUNS AND NUMBER. When the context so requires, the
masculine shall include the feminine and neuter, the singular shall include
the plural and conversely.
(l) CERTAIN TERMS. As used herein, the term "person" means
any individual or natural person, or any corporation, trust, business trust,
governmental agency or body or any other legal entity, whether acting for
himself, herself or itself or in a fiduciary or other capacity; the terms
"hereof," "herein," "hereby" and "hereunder" refer to this Agreement in its
entirety (and not solely to the particular provisions in which they may
appear) and to the documents incorporated herein by reference.
(m) SURVIVAL OF REPRESENTATIONS. All representations and
warranties set forth in this Agreement shall survive the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
(n) FURTHER ASSURANCES. The parties hereto agree to execute
any and all such further agreements, instruments or documents, and to take
any and all such further action, as may be necessary or desirable to carry
into effect the purpose and intent of this Agreement.
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<PAGE>
If the foregoing correctly sets forth the understandings among the
Placement Agent and the Corporation, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
ENTERTAINMENT BOULEVARD INC.
By: /s/ Stephen Brown
---------------------------
Name: Stephen Brown
Title: President
READ, ACCEPTED AND AGREED TO AS
OF THE DATE FIRST WRITTEN ABOVE:
ROBB PECK MCCOOEY CLEARING CORPORATION
By: /s/ Richard Rosenblum
--------------------------
Name: Richard Rosenblum
Title:
22
<PAGE>
ATTACHMENT A
LOCK UP LETTER
Robb Peck McCooey Clearing Corporation
As Placement Agent
One Exchange Plaza
New York, NY 10006
Ladies and Gentlemen:
Reference is made to a Placement Agency Agreement (the "Placement
Agency Agreement"), which will be executed between Entertainment Boulevard
Inc., a Nevada corporation (the "Corporation"), and Robb Peck McCooey
Clearing Corporation (the "Placement Agent").
In consideration of the Placement Agency Agreement, the Corporation
hereby agrees not to, without the prior written consent of the Placement
Agent, offer, sell or otherwise dispose of any shares, directly or
indirectly, or transfer any of the economic risk of ownership, of its common
stock, par value $0.001 per share (the "Common Stock"), owned by the
undersigned until such time as the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective, except with respect to
the issuance of shares of Common Stock upon the exercise of stock options and
warrants outstanding as of the date hereof and the issuance of Common Stock
or stock options under any benefit plan of the Corporation.
It is understood that, if the Corporation notifies you that it does
not intend to proceed with the issuance and sale of Securities (as defined in
the Placement Agency Agreement) pursuant to the Placement Agency Agreement,
if the Placement Agency Agreement does not become effective, or if the
Placement Agency Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and
delivery of the Securities, the undersigned will be released from his
obligations under this letter agreement.
Dated: September , 1999
Very truly yours,
ENTERTAINMENT BOULEVARD INC.
23
<PAGE>
-----------------------------
Name:
Title:
24
<PAGE>
Exhibit 10.34
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of September 3, 1999, among Entertainment Boulevard, Inc., a
Nevada corporation (the "CORPORATION"), and Robb Peck McCooey Clearing
Corporation (the "PLACEMENT AGENT").
This Agreement is being entered into in connection with that certain
Warrant issued to the Placement Agent to purchase 250,000 shares of the
Corporation's common stock, dated as of the date hereof (the "WARRANTS"). The
Warrants have been issued by the Corporation to the Placement Agent in exchange
for the Placement Agent's services rendered to the Corporation pursuant to the
terms of that certain Placement Agency Agreement between the Corporation and the
Placement Agent dated September 3, 1999.
The Corporation and the Placement Agent hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Warrant. As used in this Agreement, the
following terms shall have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"BOARD" shall have meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Corporation's common stock, $0.001 par value
per share.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the 120th day following the Closing Date.
<PAGE>
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2.
"EVENT" shall have the meaning set forth in Section 7(e).
"EVENT DATE" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the 60th business day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock issuable
upon exercise of the Warrants.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
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"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Corporation pursuant to Section 4.
2. SHELF REGISTRATION.
On or prior to the Filing Date the Corporation shall prepare and file
with the Commission a "shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-1 (or other applicable
form), which may be converted to a Registration Statement on Form S-3 upon the
Corporation's meeting the eligibility requirements for Form S-3. The
Corporation shall (i) not permit any securities other than the Registrable
Securities (and those listed in SCHEDULE 2.1(s) of the Purchase Agreement) to be
included in the Registration Statement and (ii) use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x) the
date when all Registrable Securities covered by such Registration Statement have
been sold or (y) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144(k) as determined by the counsel to
the Corporation pursuant to a written opinion letter, addressed to the
Corporation's transfer agent to such effect (the "EFFECTIVENESS PERIOD").
3. REGISTRATION PROCEDURES.
In connection with the Corporation's registration obligations
hereunder, the Corporation shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-1 (or other applicable form) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than ten (10) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto
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(including any document that would be incorporated therein by reference), the
Corporation shall (i) furnish to the Holders and any Special Counsel, copies
of all such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Holders and
such Special Counsel within five (5) days of receipt, and (ii) cause its
officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion
of respective counsel to such Holders, to conduct a reasonable investigation
within the meaning of the Securities Act. The Corporation shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel, shall reasonably object in writing within
seven (7) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1)
Business Day following the day (i)(A) when a Prospectus or any prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the Commission notifies the Corporation
whether there will be a "review" of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement and (C)
with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) if at any time any of the representations and warranties
of the Corporation contained in any agreement contemplated hereby ceases to
be true and correct in all material respects; (v) of the receipt by the
Corporation of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or
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the initiation or threatening of any Proceeding for such purpose; and (vi) of
the occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Corporation reasonably agrees should be included therein and (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Corporation has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
(f) Furnish to each Holder and any Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Corporation hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto provided such
use is in compliance with applicable federal and state securities laws.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, and
any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; PROVIDED, HOWEVER,
that the Corporation shall not be required to qualify generally to do business
in any jurisdiction where it is not then so qualified or to take any action that
would subject it to general
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<PAGE>
service of process in any such jurisdiction where it is not then so subject
or subject the Corporation to any material tax in any such jurisdiction where
it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holders may request at least
two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on The OTC Bulletin Board and any
other securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Corporation are then
listed as and when required pursuant to the Placement Agency Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Corporation after the effective date of the Registration Statement, which
statement shall conform to the requirements of Rule 158.
(m) The Corporation may require each selling Holder to furnish to the
Corporation within ten (10) days of receipt of request information regarding
such Holder and the distribution of such Registrable Securities as is required
by law to be disclosed in the Registration Statement, and the Corporation may
exclude from such registration the Registrable Securities of any such Holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Corporation, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
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<PAGE>
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Corporation that such Registration Statement
and any post-effective amendments thereto have become effective as contemplated
by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Corporation of the occurrence of any
event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "ADVICE")
by the Corporation that the use of the applicable Prospectus may be resumed,
and, in either case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding the
Corporation which the Corporation's Board of Directors (the "BOARD") reasonably
determines not to be in the Corporation's best interest to disclose and which
the Corporation is not otherwise required to disclose, or (ii) there is a
significant business opportunity (including, but not limited to, the acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Corporation which the Board reasonably determines not to be in the
Corporation's best interest to disclose, then the Corporation may postpone or
suspend use of the Registration Statement for a period not to exceed 20
consecutive days, provided that the Corporation may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12-month period; PROVIDED, HOWEVER, that no such postponement or suspension
shall be permitted for consecutive 20 day periods, arising out of the same set
of facts, circumstances or transactions.
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Corporation shall be borne by the Corporation whether
or not the Registration Statement is filed or becomes effective and whether or
not any Registrable Securities are sold pursuant to the Registration Statement.
The fees and expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with The OTC Market and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the National Association of Securities Dealers,
Inc. and the NASD Regulation, Inc. and (C) in compliance with state securities
or Blue Sky laws (including, without limitation, fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as Holders of a
majority of Registrable Securities may designate)), (ii) printing
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expenses (including, without limitation, expenses of printing certificates
for Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the Holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the Corporation and Special Counsel for the Holders, in the case of the
Special Counsel, to a maximum amount of $5,000, (v) Securities Act liability
insurance, if the Corporation so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Corporation in connection with
the consummation of the transactions contemplated by this Agreement,
including, without limitation, the Corporation's independent public
accountants (incuding the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Corporation shall be responsible for all
of its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE CORPORATION. The Corporation shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result of
a pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Corporation by such Holder expressly
for use therein, which information was reasonably relied on by the
Corporation for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. The Corporation
shall notify the Holders promptly of the institution, threat or assertion of
any Proceeding of which the Corporation is aware in connection with the
transactions contemplated by this Agreement.
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(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Corporation, the directors, officers,
agents and employees, each Person who controls the Corporation (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Corporation specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Corporation for use in the Registration Statement, such Prospectus
or such form of prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the reasonable
fees and expenses of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay
such fees and expenses; or (2) the Indemnifying Party shall have failed promptly
to assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
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without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. RULE 144.
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As long as any Holder owns Warrants or Underlying Shares, if the
Corporation is not required to file reports pursuant to Section 13(a) or 15(d)
of the Exchange Act, it will promptly prepare and promptly furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. As
long as any Holder owns Warrants or Underlying Shares, the Corporation covenants
to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Corporation
pursuant to Section 13(a) or 15(d) of the Exchange Act after the date it becomes
subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange
Act. The Corporation further covenants that it will promptly take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Underlying Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions referred to in the Placement Agency Agreement. Upon the
request of any Holder, the Corporation shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Corporation or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Corporation, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Corporation and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Corporation nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Corporation or any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in SCHEDULE
2.1(s) of the Purchase Agreement, neither the Corporation nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Corporation shall not grant to any Person the right to request
the Corporation to register any securities of the Corporation under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict with the provisions of this Agreement.
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(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Corporation nor any
of its security holders (other than the Holders in such capacity pursuant hereto
or as disclosed in SCHEDULE 2.1(s) of the Purchase Agreement and Robb Peck
McCooey Clearing Corporation) may include securities of the Corporation in the
Registration Statement, and the Corporation shall not after the date hereof
enter into any agreement providing such right to any of its security holders,
unless the right so granted is subject in all respects to the prior rights in
full of the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering Underlying Shares, the Corporation
shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Corporation
shall send to each Holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such Holder shall so request in writing, (which request shall specify the
Registrable Securities intended to be disposed of by the Placement Agent), the
Corporation will cause the registration under the Securities Act of all
Registrable Securities which the Corporation has been so requested to register
by the Holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Corporation shall determine for any reason not to register or
to delay registration of such securities, the Corporation may, at its election,
give written notice of such determination to such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Corporation shall include in such registration statement all or
any part of such Registrable Securities such Holder requests to be registered;
PROVIDED, HOWEVER, that the Corporation shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then if
the Corporation after consultation with the managing underwriter(s) should
reasonably determine that the inclusion of such Registrable Securities, would
materially adversely affect the offering contemplated in such registration
statement, and based on such determination recommends inclusion in such
registration statement of fewer or none of the Registrable Securities of the
Holders, then (x) the number of Registrable Securities of the Holders included
in such registration statement shall be reduced pro-rata among such Holders
(based upon the number of Registrable Securities requested to be included in the
registration), if the Corporation after consultation with the managing
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holders shall be
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included in such registration statement, if the Corporation after
consultation with the managing underwriter(s) recommends the inclusion of
none of such Registrable Securities; PROVIDED, HOWEVER, that if securities
are being offered for the account of other persons or entities as well as the
Corporation, such reduction shall not represent a greater fraction of the
number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Corporation).
(e) FAILURE TO FILE REGISTRATION STATEMENT. The Corporation and
the Placement Agent agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date
and maintained in the manner contemplated herein during the Effectiveness
Time or if certain other events occur. The Corporation and the Holders
further agree that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration Statement is not
filed on or prior to the Filing Date, or is not declared effective by the
Commission on or prior to the Effectiveness Date, or (B) the Corporation
fails to file with the Commission a request for acceleration in accordance
with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business
Days of the date that the Corporation is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will
not be "reviewed," or not subject to further review, or (C) the Registration
Statement is filed with and declared effective by the Commission but
thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with and
declared effective by the Commission, or (D) trading in the Common Stock
shall be suspended or if the Common Stock is delisted from The OTC Market for
any reason for more than three (3) Business Days in the aggregate, or (E) the
Corporation breaches in a material respect any covenant or other material
term or condition to this Agreement or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated hereby and thereby, and such breach continues for a period of
thirty (30) days after written notice thereof to the Corporation, or (F) the
Corporation has breached Section 3(n) (any such failure or breach being
referred to as an "EVENT," and for purposes of clause (A) the date on which
such Event occurs, or for purposes of clause (B) the date on which such five
day period is exceeded, or for purposes of clause (C) after more than fifteen
(15) Business Days, or for purposes of clause (D) the date on which such
three Business Day period is exceeded, or for clause (E) the date on which
such thirty day period is exceeded, being referred to as "EVENT DATE"), the
Corporation shall pay in cash as liquidated damages to each Holder an amount
equal to (i) 2.0% of the stated value of the outstanding Shares held by such
Holder plus the stated value of any Shares that have been converted to the
extent any of the Underlying Shares issued upon such conversion have not been
sold, for the 30-day period, or portion thereof, commencing on the Event
Date; and (ii) 3.0% of the stated value of the outstanding Shares held by
such Holder plus the stated value of any Shares that have been converted to
the extent any of the Underlying Shares issued upon such conversion have not
been sold, for each subsequent 30-day period, or portion thereof, commencing
on the 31st day after the Event Date until the applicable Event is cured, but
not to exceed a total of 30%. Payments to be made pursuant to this Section
7(e) shall be due and payable immediately upon demand in immediately
available funds.
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(f) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the
Corporation and each of the Holders. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least 66-2/3% of the Registrable Securities to which such waiver or consent
relates; PROVIDED, HOWEVER, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(g) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., New York
City time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., New York
City time, on any date and earlier than 11:59 p.m., New York City time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on SCHEDULE 1 attached hereto, or with respect to the
Corporation, addressed to:
Entertainment Boulevard
4052 Del Rey Avenue, Suite 108
Marina Del Rey, California 90292
Attention: Stephen Brown
Telephone No.: (310) 578-5404
Facsimile No.: (310) 578-6304
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
Susan O. Posen, Esq., Facsimile No.: (212) 806-6006. Copies of notices to the
Corporation shall be sent to Richman, Lawrence, Mann, Chizever & Phillips, 9601
Wilshire Boulevard, Penthouse Suite, Beverly Hills, California 90210, Attention:
Gerald M. Chizever, Esq., Facsimile No.: (310) 205-5348.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Corporation may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. The
Placement Agent may assign its rights hereunder in the manner and to the Persons
as permitted under the Warrant.
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(i) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Corporation register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder and up to four other assignees of
all or a portion of the Shares of the Common Stock or the Registrable Securities
if: (i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Corporation within
a reasonable time after such assignment, (ii) the Corporation is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the further disposition
of such securities by the transferee or assignees is restricted under the
Securities Act and applicable state securities laws, (iv) at or before the time
the Corporation receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Corporation to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(k) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law thereof.
(l) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(m) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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(o) SHARES HELD BY THE CORPORATION AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Corporation
or its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
-----------------------------------
Name: Stephen Brown
Title: Chief Executive Officer
Agreed to:
ROBB PECK MCCOOEY CLEARING CORPORATION
By: /s/ David Stefansky
-----------------------------
Name: David Stefansky
Title:
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SCHEDULE 1
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Exhibit 10.35
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of September 3, 1999, among Entertainment Boulevard, Inc., a
Nevada corporation (the "CORPORATION"), and the purchasers whose names appear
on the signature page hereof. Such purchasers are each referred to herein
individually as a "PURCHASER" and are collectively referred to herein as the
"PURCHASERS."
This Agreement is being entered into pursuant to the Securities
Purchase Agreement, dated as of the date hereof among the Corporation and the
Purchasers (the "PURCHASE AGREEMENT").
The Corporation and the Purchasers hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"BOARD" shall have meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Corporation's Common Stock, $0.001 par
value per share.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the 120th day following the Closing Date.
<PAGE>
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2.
"EVENT" shall have the meaning set forth in Section 7(e).
"EVENT DATE" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 60th business day following the Closing
Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock issuable
upon conversion of the Securities; PROVIDED, HOWEVER, that Registrable
Securities shall include (but not be limited to) a number of shares of Common
Stock equal to no less than 200% of the maximum number of shares of Common
Stock which would be issuable upon conversion of the Securities, assuming
such conversion occurred either (i) on the Closing Date or (ii) the Filing
Date, whichever date would produce a greater number of Registrable
Securities. Such registered shares of Common Stock shall be allocated among
the Holders pro rata based on the total number of Registrable Securities
issued or issuable as of each date that a Registration Statement, as amended,
relating to the resale of the Registrable Securities is declared effective by
the
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Commission. Notwithstanding anything herein contained to the contrary, if the
actual number of shares of Common Stock issuable upon conversion of the
Securities exceeds 200% of the number of shares of Common Stock issuable upon
conversion of the Securities based upon a computation as at the Closing Date
or the Filing Date, the term "Registrable Securities" shall be deemed to
include such additional shares of Common Stock.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES" means the 8% Mandatorily Convertible Series A
Preferred Stock, stated value $1,000 per share, and the Additional Securities
of the Corporation issued to the Purchasers pursuant to the Purchase
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Corporation pursuant to Section 4.
2. SHELF REGISTRATION.
On or prior to the Filing Date the Corporation shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-1 (or
other applicable form), which may be converted to a Registration Statement on
Form S-3 upon the Corporation's meeting the eligibility requirements for Form
S-3. The Corporation shall (i) not permit any securities other than the
Registrable Securities (and those listed in SCHEDULE 2.1(s) of the Purchase
Agreement) to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as possible after the filing thereof, but in
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until such date as
is the earlier of (x) the date when all Registrable Securities
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<PAGE>
covered by such Registration Statement have been sold or (y) the date on
which the Registrable Securities may be sold without any restriction pursuant
to Rule 144(k) as determined by the counsel to the Corporation pursuant to a
written opinion letter, addressed to the Corporation's transfer agent to such
effect (the "EFFECTIVENESS PERIOD"). If an additional Registration Statement
is required to be filed because the actual number of shares of Common Stock
into which the Securities are convertible exceeds the number of shares of
Common Stock initially registered in respect of the Underlying Shares based
upon the computation on the Closing Date, the Corporation shall have fifteen
(15) Business Days to file such additional Registration Statement, and the
Corporation shall use its best efforts to cause such additional Registration
Statement to be declared effective by the Commission as soon as possible, but
in no event later than sixty (60) days after filing.
3. REGISTRATION PROCEDURES.
In connection with the Corporation's registration obligations
hereunder, the Corporation shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-1 (or other applicable form)
in accordance with the method or methods of distribution thereof as specified
by the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than ten (10) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Corporation shall (i) furnish to the
Holders and any Special Counsel, copies of all such documents proposed to be
filed, which documents (other than those incorporated by reference) will be
subject to the review of such Holders and such Special Counsel within five
(5) days of receipt, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Corporation shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities or any Special Counsel,
shall reasonably object in writing within seven (7) Business Days of their
receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare
and file with the Commission such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as possible
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to
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the Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1)
Business Day following the day (i)(A) when a Prospectus or any prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the Commission notifies the Corporation
whether there will be a "review" of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement and (C)
with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) if at any time any of the representations and warranties
of the Corporation contained in any agreement contemplated hereby ceases to
be true and correct in all material respects; (v) of the receipt by the
Corporation of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (vi) of the occurrence of any event that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Corporation reasonably agrees should be included therein and (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Corporation has received
notification of the matters to be incorporated in such prospectus supplement
or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including
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financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with
the Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and the Corporation hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto provided such use is in compliance with applicable federal
and state securities laws.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement; PROVIDED, HOWEVER, that the Corporation shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject
the Corporation to any material tax in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to be sold pursuant to a Registration Statement, which certificates shall be
free of all restrictive legends, and to enable such Registrable Securities to
be in such denominations and registered in such names as any Holders may
request at least two (2) Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on The OTC Bulletin
Board and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued
by the Corporation are then listed as and when required pursuant to the
Purchase Agreement.
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(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its
security holders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 not later than 45 days after the end
of any 12-month period (or 90 days after the end of any 12-month period if
such period is a fiscal year) commencing on the first day of the first fiscal
quarter of the Corporation after the effective date of the Registration
Statement, which statement shall conform to the requirements of Rule 158.
(m) The Corporation may require each selling Holder to furnish
to the Corporation within ten (10) days of receipt of request information
regarding such Holder and the distribution of such Registrable Securities as
is required by law to be disclosed in the Registration Statement, and the
Corporation may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Corporation, then such
Holder shall have the right to require (if such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar
federal statute then in force) the deletion of the reference to such Holder
in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Corporation that such Registration Statement
and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) it and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Corporation of the
occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus
and/or amended Registration Statement contemplated by Section 3(j), or until
it is advised in writing (the "ADVICE") by the Corporation that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration
Statement.
(n) If (i) there is material non-public information regarding
the Corporation which the Corporation's Board of Directors (the "BOARD")
reasonably determines not to be in the Corporation's best interest to
disclose and which the Corporation is not otherwise required to disclose, or
(ii) there is a significant business opportunity (including, but not limited
to, the acquisition or disposition of assets (other than in the ordinary
course of business) or any merger,
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consolidation, tender offer or other similar transaction) available to the
Corporation which the Board reasonably determines not to be in the
Corporation's best interest to disclose, then the Corporation may postpone or
suspend use of the Registration Statement for a period not to exceed 20
consecutive days, provided that the Corporation may not postpone or suspend
its obligation under this Section 3(n) for more than 45 days in the aggregate
during any 12-month period; PROVIDED, HOWEVER, that no such postponement or
suspension shall be permitted for consecutive 20 day periods, arising out of
the same set of facts, circumstances or transactions.
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Corporation shall be borne by the Corporation
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with The OTC Market and each other securities
exchange or market on which Registrable Securities are required hereunder to
be listed, (B) with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and the NASD Regulation, Inc. and (C)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection
with Blue Sky qualifications of the Registrable Securities and determination
of the eligibility of the Registrable Securities for investment under the
laws of such jurisdictions as Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the Holders of a
majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Corporation and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000,
(v) Securities Act liability insurance, if the Corporation so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Corporation in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the
Corporation's independent public accountants (incuding the expenses of any
comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters). In addition, the
Corporation shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.
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5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE CORPORATION. The Corporation shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result of
a pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Corporation by such Holder expressly
for use therein, which information was reasonably relied on by the
Corporation for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. The Corporation
shall notify the Holders promptly of the institution, threat or assertion of
any Proceeding of which the Corporation is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Corporation, the directors,
officers, agents and employees, each Person who controls the Corporation
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses, as incurred, arising solely out of or based solely
upon any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out
of or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Corporation
specifically for inclusion in the Registration Statement or such Prospectus
and that such information was reasonably relied upon by the Corporation for
use in the Registration Statement, such Prospectus or such form of prospectus
or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus or such form of Prospectus.
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(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the reasonable fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall
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contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. RULE 144.
As long as any Holder owns Securities or Underlying Shares, if the
Corporation is not required to file reports pursuant to Section 13(a) or
15(d) of the Exchange Act, it will promptly prepare and promptly furnish to
the Holders and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. As long as any Holder owns Securities or
Underlying Shares, the Corporation covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all reports required to be filed by the Corporation pursuant to Section 13(a)
or 15(d) of the Exchange Act after the date it becomes subject to the
reporting requirements of Section 13(a) or 15(d) of the Exchange Act. The
Corporation further covenants that it will promptly take such further action
as any Holder may reasonably request, all to the extent required from time to
time to enable such Person to sell Underlying Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including providing any legal
opinions referred to in the Purchase Agreement. Upon the request of any
Holder, the Corporation shall deliver to such
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Holder a written certification of a duly authorized officer as to whether it
has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Corporation or by
a Holder, of any of their obligations under this Agreement, each Holder or
the Corporation, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Corporation and each Holder agree that monetary
damages would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Corporation nor any
of its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Corporation or any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as
disclosed in SCHEDULE 2.1(s) of the Purchase Agreement, neither the
Corporation nor any of its subsidiaries has previously entered into any
agreement currently in effect granting any registration rights with respect
to any of its securities to any Person. Without limiting the generality of
the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Corporation shall not grant
to any Person the right to request the Corporation to register any securities
of the Corporation under the Securities Act unless the rights so granted are
subject in all respects to the prior rights in full of the Holders set forth
herein, and are not otherwise in conflict with the provisions of this
Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Corporation nor
any of its security holders (other than the Holders in such capacity pursuant
hereto or as disclosed in SCHEDULE 2.1(s) of the Purchase Agreement and Robb
Peck McCooey Clearing Corporation) may include securities of the Corporation
in the Registration Statement, and the Corporation shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein, and is not otherwise in
conflict with the provisions of this Agreement.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not
an effective Registration Statement covering Underlying Shares, the
Corporation shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Corporation shall send to each Holder of Registrable Securities
written notice of such determination and, if within thirty (30) days after
receipt of such notice, any such Holder shall so
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request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Purchasers), the Corporation will cause the
registration under the Securities Act of all Registrable Securities which the
Corporation has been so requested to register by the Holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Corporation shall determine for any reason not to register or to delay
registration of such securities, the Corporation may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities being registered pursuant to this Section 7(d) for the same period
as the delay in registering such other securities. The Corporation shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; PROVIDED, HOWEVER, that the
Corporation shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule
144(k) of the Securities Act. In the case of an underwritten public offering,
if the managing underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the
Corporation after consultation with the managing underwriter(s) should
reasonably determine that the inclusion of such Registrable Securities, would
materially adversely affect the offering contemplated in such registration
statement, and based on such determination recommends inclusion in such
registration statement of fewer or none of the Registrable Securities of the
Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Corporation after consultation with the
managing underwriter(s) recommends the inclusion of fewer Registrable
Securities, or (y) none of the Registrable Securities of the Holders shall be
included in such registration statement, if the Corporation after
consultation with the managing underwriter(s) recommends the inclusion of
none of such Registrable Securities; PROVIDED, HOWEVER, that if securities
are being offered for the account of other persons or entities as well as the
Corporation, such reduction shall not represent a greater fraction of the
number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Corporation).
(e) FAILURE TO FILE REGISTRATION STATEMENT. The Corporation and
the Purchasers agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date and not declared
effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or
if certain other events occur. The Corporation and the Holders further agree
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if (A) the Registration Statement is not filed on or
prior to the Filing Date, or is not declared effective by the Commission on
or prior to the Effectiveness Date (or in the event an additional
Registration Statement is filed because the actual number of shares of Common
Stock into which the Securities are convertible exceeds the number of shares
of Common Stock initially registered is not filed and declared effective with
the time periods set forth in Section 2), or (B) the
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Corporation fails to file with the Commission a request for acceleration in
accordance with Rule 12dl-2 promulgated under the Exchange Act within five
(5) Business Days of the date that the Corporation is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not subject to further review, or (C)
the Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities at any time prior to the expiration of the Effectiveness Period,
without being succeeded immediately by a subsequent Registration Statement
filed with and declared effective by the Commission, or (D) trading in the
Common Stock shall be suspended or if the Common Stock is delisted from The
OTC Market for any reason for more than three (3) Business Days in the
aggregate, or (E) the conversion rights of the Holders are suspended for any
reason under the Certificate of Designation, or (F) the Corporation breaches
in a material respect any covenant or other material term or condition to
this Agreement, the Certificate of Designation or the Purchase Agreement
(other than a representation or warranty contained therein) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby, and such breach
continues for a period of thirty (30) days after written notice thereof to
the Corporation, or (G) the Corporation has breached Section 3(n) (any such
failure or breach being referred to as an "EVENT," and for purposes of
clauses (A) and (E) the date on which such Event occurs, or for purposes of
clause (B) the date on which such five day period is exceeded, or for
purposes of clause (C) after more than fifteen (15) Business Days, or for
purposes of clause (D) the date on which such three Business Day period is
exceeded, or for clause (F) the date on which such thirty day period is
exceeded, being referred to as "EVENT DATE"), the Corporation shall pay in
cash as liquidated damages to each Holder an amount equal to (i) 2.0% of the
stated value of the outstanding Shares held by such Holder plus the stated
value of any Shares that have been converted to the extent any of the
Underlying Shares issued upon such conversion have not been sold, for the
30-day period, or portion thereof, commencing on the Event Date; and (ii)
3.0% of the stated value of the outstanding Shares held by such Holder plus
the stated value of any Shares that have been converted to the extent any of
the Underlying Shares issued upon such conversion have not been sold, for
each subsequent 30-day period, or portion thereof, commencing on the 31st day
after the Event Date until the applicable Event is cured, but not to exceed a
total of 30%. Payments to be made pursuant to this Section 7(e) shall be due
and payable immediately upon demand in immediately available funds.
(f) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Corporation and each of the Holders. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least 66-2/3% of the Registrable Securities to which such
waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(g) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and
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effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., New York City time, on a Business
Day, (ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., New York City time, on any date
and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall
be with respect to each Holder at its address set forth under its name on
SCHEDULE 1 attached hereto, or with respect to the Corporation, addressed to:
Entertainment Boulevard
4052 Del Rey Avenue, Suite 108
Marina Del Rey, California 90292
Attention: Stephen Brown
Telephone No.: (310) 578-5404
Facsimile No.: (310) 578-6304
or to such other address or addresses or facsimile number or numbers as any
such party may most recently have designated in writing to the other parties
hereto by such notice. Copies of notices to any Holder shall be sent to
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, Attention: Susan O. Posen, Esq., Facsimile No.: (212) 806-6006.
Copies of notices to the Corporation shall be sent to Richman, Lawrence,
Mann, Chizever & Phillips, 9601 Wilshire Boulevard, Penthouse Suite, Beverly
Hills, California 90210, Attention: Gerald M. Chizever, Esq., Facsimile No.:
(310) 205-5348.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Corporation may not assign this Agreement or any of its rights
or obligations hereunder without the prior written consent of each Holder.
Each Purchaser may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(i) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Corporation register for resale
Registrable Securities in accordance with the terms of this Agreement, shall
be automatically assignable by each Holder to any Affiliate of such Holder,
any other Holder or Affiliate of any other Holder and up to four other
assignees of all or a portion of the Shares of the Securities or the
Registrable Securities if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Corporation within a reasonable time after such assignment,
(ii) the Corporation is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Corporation receives
the written notice contemplated by clause (ii) of this
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<PAGE>
Section, the transferee or assignee agrees in writing with the Corporation to
be bound by all of the provisions of this Agreement, and (v) such transfer
shall have been made in accordance with the applicable requirements of the
Purchase Agreement. The rights to assignment shall apply to the Holders (and
to subsequent) successors and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(k) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law thereof.
(l) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(n) HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(o) SHARES HELD BY THE CORPORATION AND ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Corporation or its Affiliates (other than any Holder or transferees or
successors or assigns thereof if such Holder is deemed to be an Affiliate
solely by reason of its holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons
as of the date first indicated above.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
-------------------------------
Name: Stephen Brown
Title: Chief Executive Officer
PURCHASER: H.A.A. Inc.
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
PURCHASER: Beeston Investments Ltd.
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
PURCHASER: Lowen Holdings, a
Gibraltar Company
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
-17-
<PAGE>
SCHEDULE 1
18
<PAGE>
SETTLEMENT AGREEMENT
This Settlement Agreement is made by, between and among Plaintiffs
Arthur Brown and Rizwan Alikhan (hereinafter collectively referred to as
"Plaintiffs") and Defendant Entertainment Boulevard, Inc. (hereinafter
referred to as "Defendant") concerning that certain action filed in the Los
Angeles Superior Court, bearing Case No. SC058891 (hereinafter referred to as
the "Action"), involving claims brought by the Plaintiffs for damages related
to non-payment of loans to Defendant.
FOR AND IN CONSIDERATION of cash, collateral and promises to pay
(described in detail below) to the Plaintiffs from the Defendant, Plaintiffs
hereby agrees to dismiss the Action against the Defendant after a stipulation
for the entry of Judgment is signed and the repayment of the loans occur
according to the terms set forth herein; and the Defendant hereby waives any
and all rights of appeal, presentment, notice of default, right for
reconsideration of this matter and any other rights which would change or
negate in any way the terms of the negotiated terms of this Settlement
Agreement.
Consideration:
(1) Payment of Three Hundred and Ten Thousand Dollars ($310,000.00)
cash. The Plaintiffs and Defendant agree to enter into a written stipulation
to be submitted to the court whereby the amount of $300,000.00 for payment
against the outstanding loan amounts owned plus $10,000.00 to be paid for
attorney's fees and cost (not interest) of bringing the Action will be
immediately released to the Plaintiffs by wiring the funds
1
<PAGE>
directly to Plaintiffs Counsel's Client trust account immediately upon
receipt of the funds back to the bank from the attachment. The remainder of
the funds that were attached will be immediately released back to Defendant.
(2) The remaining amounts owed to Plaintiffs from Defendants after
payment of $310,000.00 are as follows:
(a) The remaining principle amount of $256,793.12.
(b) Interest that has accrued from September 24, 1999 to October
13, 1999 at the rate of $122.04 per day in the amount of $2,318.76.
(c) Interest will continue to accrue on the remaining amounts owed
at ten percent (10%) interest until the remaining amounts are
repaid in full with all interest that has accrued.
(d) It is understood and agreed that the remaining amounts owed to
Plaintiffs will be paid back to Plaintiffs from Defendant out of
fifty percent (50%) of any future sums received by Defendants from
gross revenues generated or income from any other source.
(3) In order to secure repayment of the outstanding amounts owed,
Defendant agrees to the following:
(a) Mr. Stephen Brown will no longer will be a signatory on any
of the Defendant's current bank account(s) or any future bank account
that may be opened on behalf of, or for the benefit of, Defendant
unless and until
2
<PAGE>
there is full repayment of the above debt and also the remaining
$400,000.00 promissory note and accrued interest. The signatory
powers on all Defendant's bank accounts will be Mr. Steve McKeag.
Mr. Steve McKeag will immediately notify Plaintiff's in writing via
fax of any and all amounts of revenue received by Defendant as the
amounts are received by Defendants from any source. Mr. McKeag will
also immediately make arrangements for immediate payment to
Plaintiffs of fifty percent (50%) of any amounts received by
Defendants to repay the principle and interest owed to Plaintiffs,
and full repayment will occur on or before Jan. 31, 2000. Arthur
Brown will be appraised of all contracts and commitments to be
entered into by Entertainment Boulevard, Inc. until Mr. Arthur
Brown is no longer an acting director, pursuant to such
notification requirements to all acting directors as is dictated
according to the corporate bylaws and the California Corporations
Codes.
(b) Defendant agrees that a stipulated judgment will be signed
by the Defendant to be entered against the Defendant in the event
of default on this Settlement Agreement and attached Promissory
Note. The Judgment will reflect that as of October 13, 1999 the
remaining amount of $259,111.88 as of October 13, 1999. Any
available means to secure the amounts owed that are available from
obtaining a judgment may be utilized by Plaintiffs upon
3
<PAGE>
default, but Plaintiffs agree not to enter the Judgment against
Defendant unless and until Defendants fails to make payments to
Plaintiffs according to the plan of repayment as stated in this
"Settlement Agreement." If any of the security devices utilized by
Plaintiff encumber property of Defendant and Defendant requires a
written release from Plaintiffs to sell such property, Plaintiffs
agree to execute such documentation to effectuate the sale of such
property but reserves the right to demand and secure payment of at
least fifty percent (50%) of such proceeds from any such sale. Upon
default of the terms of this Settlement Agreement, Plaintiffs may
immediately enter the Judgment without giving notice to Defendant.
Defendant hereby waives any and all rights to notice, presentment
or any or defenses or notices necessary to entry and enforcement of
the Stipulated Judgment.
(c) In addition to the above, the Chief Executive Officer of
Defendant, Stephen Brown, agrees to personally guarantee the
repayment of the remaining amounts owed and to provide collateral
for the remaining principle and interest owed to Plaintiffs. The
collateral provided by Stephen Brown will be all of Stephen Brown's
Entertainment Boulevard, Inc. stock.
Stephen Brown agrees to execute all necessary documents to ensure
that
4
<PAGE>
Plaintiffs' are given a perfected lien against the stock. Failure
to immediately sign and return any documentation to ensure
perfecting of such liens will be considered a breach of this
settlement agreement whereby Plaintiffs would be automatically
authorized to Levy against the Defendant's assets or any of Steven
Brown's property that a lien has been perfected against.
(d) Attached hereto as Exhibit A is the proposed Stipulation
for entry of Judgment against Defendant pursuant to the above terms.
(e) Attached hereto as Exhibit B is the Promissory Note
entered into by Defendant for the remaining amounts owed.
(f) Attached hereto as Exhibit C is the Personal Guarantee by
Stephen Brown for the payment of the remaining amounts owed.
(g) Attached hereto as Exhibit D is the Agreement by Stephen
Brown to provide the above collateral for security of repayment of
the remaining amounts owed.
(h) Attached hereto as Exhibit E is the Corporate Resolution
signed by a majority of disinterested directors approving the terms
of this Settlement Agreement.
Upon execution of this Settlement Agreement and the Attachments,
Plaintiff will prepare the Stipulation to file with the court to obtain the
court order to effectuate all of the above terms, and Defendant agrees to
sign any further documents to effectuate this
5
<PAGE>
agreement.
6
<PAGE>
DISMISSAL: The undersigned Plaintiffs hereby authorize and direct their
attorney of record to dismiss WITHOUT PREJUDICE their Complaint, bearing Case
No. SC058891 pursuant to the above terms upon repayment of the debt owed and
will agree to not file the Stipulated Judgment unless and until there is a
breach of this Settlement Agreement.
ENTIRE AGREEMENT: This Settlement Agreement contains the ENTIRE
AGREEMENT and understanding among the parties concerning the subject matter
hereof, and supersedes and replaces all prior negotiations and proposed
agreements, written and oral. Each of the parties hereto acknowledges that no
other party, and no agent or attorney of any other party, has made any
promise, representation or warranty whatsoever, express or implied, not
contained herein concerning the subject matter hereof, to induce any party to
execute this settlement agreement or release, and acknowledges that no party
hereto has executed this settlement agreement or release in reliance upon any
such promise, representation or warranty not contained herein.
COUNTERPARTS: This Settlement Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to have the same force and effect as if
executed in one complete document and as the one and only original. Fax
signatures are acceptable and binding.
7
<PAGE>
ATTORNEYS FEES AND COSTS: In the event any litigation, arbitration, or
any action necessary is brought for the interpretation or enforcement of this
Settlement Agreement, or because of any alleged dispute, default,
misinterpretation of this Settlement Agreement, the successful or prevailing
party or parties shall be entitled to recover actual attorneys' fees, costs,
and expense actually incurred in connection therewith, in addition to any
other relief to which it or they may be entitled.
BINDING AFFECT OF AGREEMENT: The provisions of this Settlement Agreement
shall be binding upon and inure to the benefit of the respective parties and
their respective heirs, executors, administrators, agents and representatives.
SETTLEMENT AGREEMENT DRAFTED EQUALLY BY ALL PARTIES: For the purposes of
construing or interpreting this Settlement Agreement, this Settlement
Agreement shall be deemed to have been drafted equally by all parties hereto.
AUTHORITY TO EXECUTE AGREEMENT: Each individual signing this Settlement
Agreement, whether signed individually or on behalf of any person or entity,
warrants and represents that he or she has full authority to so execute the
Settlement Agreement on behalf of the parties on whose behalf he or she so
signs. Each separately acknowledges and represents that these representations
and warranties are essential and material provisions of this Settlement
Agreement and shall survive execution of this Settlement Agreement. The
parties hereto each respectively represents that the attorneys and
representatives signing this Settlement Agreement on their respective behalf
have
8
<PAGE>
been duly authorized and empowered to do so.
GOVERNING LAW: This Settlement Agreement shall be interpreted under and
governed by the laws of the State of California.
LEGAL COUNSEL PROVIDED: The undersigned hereby declare and represent
that they are effecting this Settlement Agreement and executing this Release
after having received from legal counsel full legal advice as to their rights
and or have had the opportunity to seek the advice of counsel and have waived
their right to do so.
ACTING UNDER FREE WILL: The undersigned further state that they have
carefully read the foregoing Settlement Agreement and release and know and
understand the contents thereof, and sign the same as their own free act.
Dated: -----------------, 1999. ----------------------------------
Arthur Brown
Dated: -----------------, 1999. ----------------------------------
Rizwan Alikhan
/s/ Stephen, Brown
Dated: -----------------, 1999. ----------------------------------
Stephen Brown, individually
/s/ Stephen Brown
Dated: -----------------, 1999. ----------------------------------
Authorized Agent for Entertainment
Boulevard, Inc.
Approved as to form and content this ___ day of ________________, 1999.
LAW OFFICES OF BRYAN R. FARRAR
By:
-----------------------------------------
Bryan R. Farrar, Attorneys for Plaintiffs
9
<PAGE>
PROMISSORY NOTE
$259,111.88 DATE: October 13, 1999
---------- ----------------
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged by the
maker, the undersigned, jointly and severally, promises to PAY TO THE ORDER OF
Riz Alikhan and/or Arthur Brown the principle sum of Two Hundred and Fifty Nine
Thousand One Hundred and Eleven dollars and Eighty Eight cents ($259,111.88)
together with the interest thereon from October 13, 1999 at the statutory
legal rate in California of ten percent (10%) per annum until repaid in full,
all payable in lawful money of the United States of America, as follows:
All sums are due as of October 13, 1999 and will accrue interest from such
date as stated above. Repayment is to occur as Entertainment Boulevard, Inc.
(hereinafter "EBI") receives gross revenues from its operation or from any
other source. EBI hereby agrees to make payment on this Promissory Note from
50% of each receipt of gross revenues or any income received by EBI until
repayment of this note is made in full including all accrued interest, and
final payment will occur on or before, Jan. 31, 2000.
All payments shall apply first to accrued interest, and the remainder, if
any, to reduction of principle. Upon default in the performance of any of the
covenants or agreements of this note, or of any instrument now or hereafter
evidencing or securing this note or the obligation represented hereby, the
whole indebtedness (including principal and interest) remaining unpaid,
shall, at the option of the holder, become immediately due, payable and
collectible, and while in default, this note and deferred interest shall
continue to accrue interest at the legal rate of 10% per annum. Each maker
and endorser severally waives demand, protest and notice of non-payment, or
notice of default and all requirements necessary to hold each of them liable
as makers and endorsers. Each maker an endorser further agrees, jointly and
severally, to pay all costs of collection, including reasonable attorney fees
in case the principle of this note or any payment on the principal or any
interest hereon is not paid at the respective maturity thereof, or in case it
becomes necessary to protect the security hereof whether suit be brought or
not.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-------------------------------------------------
Authorized Agent for Entertainment Boulevard, Inc.
Print Name of the above Signatory: Stephen Brown
----------------------------------
<PAGE>
Law Offices of Bryan R. Farrar
BRYAN R. FARRAR, Bar #156112
22942 El Toro Road
Lake Forest, California 92630
Telephone: (949)770-9030
Attorney for Plaintiff,
Arthur Brown and Rizwan Alikhan
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES, WEST DISTRICT - SANTA MONICA
ARTHUR BROWN AND RIZWAN ALIKHAN ) CASE NO. SC058891
)
) STIPULATION FOR MONEY
Plaintiffs. ) JUDGMENT TO BE ENTERED IN THE
) EVENT OF BREACH OF
vs. ) SETTLEMENT AGREEMENT
)
ENTERTAINMENT BOULEVARD, INC., )
and DOES 1 through 20, Inclusive, )
) Date: October 12, 1999
)
Defendants. )
_______________________________________)
THE PARTIES STIPULATE (AGREE) AS FOLLOWS:
1. In the event of breach of the Settlement Agreement the attached JUDGMENT
shall be entered in favor of Plaintiffs as named in the Complaint and
against the named Defendant, ENTERTAINMENT BOULEVARD, INC.
2. Judgment shall be entered for the sum of $259,111.88 plus any accrued
interest from October 13, 1999 at the rate of 10% per annum less any
amount of payments received.
3. Defendant agrees to pay the money judgment and accrued interest as
provided above pursuant to the Settlement agreement and Promissory note
executed concurrently. In the event of default in payment, the Judgment
may be filed and entered forthwith and a writ of execution may be
immediately issued by clerk or court without further notice of hearing.
<PAGE>
4. WAIVER OF RIGHTS: We the undersigned defendant, understand that we have
the following rights: (a) to be represented by an attorney of our own
choice, at our own expense; and (b) to notice and an opportunity to be
heard on the issue of any default in payment of installments, or on any
other alleged violation of conditions staying or delaying the
enforcement of the judgment. We give up these rights and freely agree
that judgment may be entered against us in accordance with this
stipulation.
By: /s/ Stephen Brown
-------------------------------
Dated: /s/ Stephen Brown
------------------- --------------------------------------------------
Authorized Agent for Entertainment Boulevard, Inc.
Print Name of Authorized Agent: Stephen Brown
---------------------------------
2
<PAGE>
Law Offices of Bryan R. Farrar
BRYAN R. FARRAR, Bar #156112
22942 El Toro Road
Lake Forest, California 92630
Telephone: (949)770-9030
Attorney for Plaintiff,
Arthur Brown and Rizwan Alikhan
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES, WEST DISTRICT - SANTA MONICA
ARTHUR BROWN AND RIZWAN ) CASE NO. SC058891
ALIKAN )
) JUDGMENT
Plaintiffs, )
)
)
vs. )
ENTERTAINMENT BOULEVARD, INC., )
and DOES 1 throught 20, Inclusive, )
)
)
Defendants, )
______________________________________)
THE PARTIES STIPULATE (AGREE) AS FOLLOWS:
1. JUDGMENT shall be entered in favor of Plaintiff as named in the Complaint
and against the named Defendant, ENTERTAINMENT BOULEVARD, INC.
2. Judgment shall be entered for the sum of $_________________ which
includes the principle amount of $259,111.88 plus any accrued interest
from October 13, 1999 at the rate of 10% per annum less any amount of
payments received since that time.
3. The Judgment may be filed and entered forthwith and a writ of execution
may be immediately issued by clerk or court without further notice of
hearing to Defendant.
<PAGE>
4. WAIVER OF RIGHTS: We the undersigned defendant, understand that we have
the following rights: (a) to be represented by an attorney of our own
choice, at our own expense; and (b) to notice and an opportunity to be
heard on the issue of any default in payment of installments, or on any
other alleged violation of conditions staying or delaying the enforcement
of the judgment. We give up these rights and freely agree that judgment
may be entered against us in accordance with this stipulation.
Dated: /s/ Stephen Brown
------------ --------------------------------------------------
Authorized Agent for Entertainment Boulevard, Inc.
Print Name of Authorized Agent: Stephen Brown
------------------------------------------
JUDGMENT IS HEREBY ORDERED ENTERED:
DATED
------------ --------------------------------------------------
Judge of the Superior Court
2
<PAGE>
PLEDGE OF COLLATERAL FOR PROMISSORY NOTE AND STIPULATION FOR MONEY
JUDGMENT
NOW, THEREFORE, in consideration of the execution of the signing of the
Settlement Agreement by Arthur Brown and Rizwan Alikhan ("Plaintiffs"), the
undersigned hereby pledges as collateral for the guarantee of repayment of
the Promissory Note and the Stipulation for Money Judgment to be performed
by Entertainment Boulevard, Inc. ("EBI") and pursuant to the terms, covenants
and conditions of such Settlement Agreement the following:
1. All of the ownership interest in all Entertainment Boulevard, Inc. stock
that is either held in the name of, or for the benefit of, Stephen
Brown. All of Stephen Brown's stock is intended to be collateral herein,
however such stock is held, whether in various forms of Stephen Brown's
name or for his benefit in trust or other beneficiary interest.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Stephen Brown hereby authorized and agrees to sign all necessary documents to
secure payment of the Promissory Note and the Stipulation for Money Judgment
using as collateral the above mentioned items. This includes, but is not
limited to, an agreement to sign a UCC-1 that may be filed against real or
personal property listed above, as allowed by law.
Dated:___________________ /s/ Stephen Brown
---------------------------------------
Stephen Brown
<PAGE>
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement made this 12 day of November, 1999, by and
between Entertainment Boulevard Inc., a Nevada corporation (the "Company"),
Beestons Investment Ltd., a foreign corporation (the "Investor") and H.A.A.
Inc., a foreign corporation (each an "Investor" and collectively, the
"Investors").
W I T N E S S E T H :
WHEREAS, the Company desires to borrow certain amounts from the
Investors and the Investors desire to make a loan (the "Loan") to the
Company;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties contained herein, the parties hereby agree as follows:
1. LOAN. The Investors hereby lend to the Company the aggregate
principal amount of $500,000. The Loan shall be evidenced by two secured
notes, one to Beestons Investment Ltd. and the other to H.A.A. Inc. (the
"Notes") in the forms attached hereto as Exhibits A and B, shall bear
interest at the rate of 10% per annum and shall be due and payable on or
before February 15, 2000, or earlier as provided in the Notes. Each Note may
be converted at any time by its respective Investor prior to repayment
thereof into shares of Common Stock of the Company at $2.00 per share and
will be entitled to resale registration rights (subject to the registration
rights previously granted to security holders of the Company). In
consideration for such Loan, the Company will grant each Investor and/or its
designee a
<PAGE>
70,000 shares, or an aggregate of 140,000 shares (the "Payment Shares"), of
the Company's Common Stock to be registered in the name of the Investors or
its designees.
2. CONDITIONS TO LOAN. The obligation of the Investors to make the
Loan is subject to the conditions that the following shall have occurred
prior to or concurrently with the Loan:
(a) The Company shall have granted to the Investors a valid pari
passu security interest in all its assets pursuant to this agreement dated
the date hereof.
(b) The Company agrees that various UCC statements will have to be
filed after the date hereof to perfect the Investors' PARI PASSU security
interest in the Company's assets as set forth in subsection (a). As such,
the Company grants Stroock & Stroock & Lavan LLP ("SSL") power of attorney to
sign as debtor on its behalf on the requisite UCC filings. The Company also
agrees it will prepare such filings as needed (such decision to be at the
sole discretion of SSL).
(c) The Company agrees to enter into a Registration Rights
Agreement (containing substantially the same terms as the registration rights
previously granted to security holders of the Company but being subject to
such previously granted rights) regarding the Payment Shares and the shares
underlying the Notes (upon conversion), which shall be reasonably acceptable
to the Investors.
3. Common Stock. In consideration of the Investors making the Loan,
the Company hereby issues to the Investors the Payment Shares to be
registered in a registration statement as defined in the Registration Rights
Agreement.
4. GRANT OF PARI PASSU SECURITY INTEREST. The Company hereby grants
to the Investors all of the right, title, and interest in and to the
Company's assets, whether now existing or hereafter from time to time
acquired, including: (i) each and every Receivable; (ii) all Contracts,
together with all Contract Rights arising thereunder; (iii) all Inventory;
(iv) all Equipment; (v) all Marks, together with the registrations
2
<PAGE>
and right to all renewals thereof, and the goodwill of the business of the
Company symbolized by the Marks; (vi) all Patents and Copyrights; (vii) all
computer programs of the Company and all intellectual property rights therein
and all other proprietary information of the Company, including, but not
limited to, trade secrets; (viii) all Stock; (ix) the Cash Collateral Account
and all monies, securities, and instruments deposited or required to be
deposited in the Cash Collateral Account; (x) all other Goods, General
Intangibles, Chattel Paper, Documents, and Instruments; and (xi) all Proceeds
and products of any and all of the foregoing. Until such time as there is an
Event of Default, the Investors will not collect any revenues from the
collateral described in this Section 4.
5. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants to the Investors as follows:
5.1. The issuance of the Notes and the Payment Shares pursuant to
the provisions of this Agreement have been duly and validly authorized. No
approval or authorization of the shareholders or the directors of the Company
or of any governmental authority or agency which has not been obtained will
be required by the Company for the issuance and sale of the Notes or the
Payment Shares, as contemplated by this Agreement. When issued and sold to
the Investors, the Payment Shares will be duly and validly issued, fully paid
and non-assessable, and will be free and clear of any liens or encumbrances
created by the Company.
5.2 The Company has the full corporate power and authority to
enter into this Agreement and to perform all of its obligations hereunder.
The execution, delivery and performance of this Agreement and the Notes by
the Company have been duly authorized by all necessary corporate action.
This Agreement and the Notes constitute legal, valid and binding obligations
of the Company enforceable in accordance with their respective terms.
3
<PAGE>
5.3 Neither the sale of the Notes, the Payment Shares, the
execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice
of lapse of time or each, would be a breach of or default under or violation
of the Certificate of Incorporation or By-Laws of the Company or would be a
breach of or default under or violation of any agreement, document, lease or
other instrument or undertaking by which the Company is bound or to which any
of its properties are subject, would be a violation of any law,
administrative regulation, judgment, order or decree applicable to the
Company, or (ii) subject to the listing approval requirements of the OTC
Stock Market, require the consent which has not been obtained of any other
person or entity under any agreement, lease, document or other instrument or
undertaking by which the Company is bound or to which any of its properties
are subject.
5.4 Subject to the filing of UCC-1 Financing Statements in
appropriate jurisdictions, the PARI PASSU security interest in all of the
assets of the Company (the "Assets") granted pursuant to Section 4 hereto
constitutes a valid PARI PASSU security interest in the Assets.
6. REPRESENTATIONS OF THE INVESTORS. The Investors understand that
the Payment Shares have not been registered under the Securities Act of 1933
(the "Securities Act"). The Investors are accredited investors within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
The Investors are acquiring the Payment Shares for their own accounts and
not with a present view to, or for sale in connection with, any distribution
in violation of the Securities Act. The Investors acknowledge that a
restrictive legend will be placed on the Payment Shares.
4
<PAGE>
7. COVENANTS OF THE COMPANY. The Company covenants with the Investors
as follows:
(a) The proceeds of the Loan will be used for working capital and
general corporate purposes.
(b) At all times while the Notes are outstanding, the Company
will reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
Notes, the full number of shares of Common Stock deliverable upon conversion
of the Notes.
8. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document, exhibit, schedule
or certificate delivered in connection herewith shall survive the execution
and delivery of this Agreement and the closing of the Loan and any
investigation at any time made by the Investors or on their behalf.
9. MISCELLANEOUS PROVISIONS.
9.1. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of New York
without giving any effect to principles of conflicts of laws.
9.2. All notices hereunder shall be in writing and shall be deemed
to have been given at the time when mailed by certified mail, addressed to
the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company:
Entertainment Boulevard, Inc.
4502 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
Attn: Stephen Brown
5
<PAGE>
To the Investors:
Beestons Investment Ltd.
P.O. Box 65
Duke Street
Gretton House
Grand Turks, Caicos
H.A.A. Inc.
1601-42nd Street
Brooklyn, New York 11204
provided, however, that any notice of change of address shall be effective
only upon receipt.
9.3. This Agreement shall be binding upon and inure to the benefit
of the Company, the Investor Investors and the successors and assigns of the
Investor Investors. The Company may not assign this Agreement without the
prior written consent of the Investor Investors. The Investor Investors may
assign all or any part of his rights and obligations hereunder to any
affiliate of the Investor, Investors without the consent of the Company.
9.4. This Agreement and all exhibits and schedules hereto set forth
the entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended, the Company or either
Investor may take any action herein prohibited or omit to take action herein
required to be performed by it or him, and any breach of or compliance with
any covenant, agreement, warranty or representation may be waived, only if
the Company or the Investor has obtained the written consent of the other
parties to this Agreement.
9.5. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
9.6. The headings in this Agreement are for reference purposes only
and shall not constitute a part hereof.
6
<PAGE>
9.7 On or prior to December 31, 1999, the Company will reimburse
the Investors for the reasonable attorneys fees and expenses, incurred by the
Investors in connection with the preparation, execution and delivery of this
Agreement, the Notes and the Registration Rights Agreement. Such fees shall
not exceed $[ ] without the consent of the Company.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
/s/ Stephen Brown
-----------------------------
By: Stephen Brown
Title: Chairman of the Board
BEESTONS INVESTMENT LTD.
/s/ [illegible Signature]
-----------------------------
By:
Title:
H.A.A. INC.
/s/ [illegible Signature]
-----------------------------
By:
Title:
8
<PAGE>
EXHIBIT A
SECURED NOTE
$250,000 November , 1999
---
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of Beestons Investments Ltd. (the "Payee"), at
P.O. Box 65, Duke Street Gretton House, Grand Turks, Caicos, or at such other
place as the Payee may designate in writing, in lawful money of the United
States of America, the principal sum of two hundred fifty thousand dollars
($250,000) together with interest from the date hereof at the rate of 10% per
annum, computed on the basis of a 360-day year of twelve 30-day months. The
principal of this Note shall be payable in full on or before February 15,
2000. Interest shall accrue from the date hereof and shall be paid when the
principal amount of this Note has been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any
representation or warranty of the Maker contained in the Loan and Security
Agreement dated as of the date hereof between the Maker and the Payee shall
not be true and correct in all material respects and the same shall not be
cured within 30 days after written notice thereof by the Payee to the Maker or
the Maker shall have breached any covenant contained in the Loan and Security
Agreement and such breach shall not be cured within 30 days; (iii) a
proceeding being filed or commenced against the Maker for bankruptcy,
dissolution or liquidation which shall not be dismissed within 60 days, or
the Maker voluntarily or involuntarily terminating or dissolving or being
terminated or dissolved; (iv) the Maker filing a petition
<PAGE>
under bankruptcy, insolvency or debtor's relief law or making an assignment
for the benefit of creditors; or (v) the appointment of a custodian, trustee,
liquidator or receiver for any of the property of the Maker, which shall not
be dismissed, released or vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note
shall immediately become due and payable without notice or demand. If an
Event of Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, in whole or in
part or in any respect, or in the event that any one or more of the
provisions of this Note operate to invalidate this Note, then and in either
of those events, such provision or provisions only shall be deemed null and
void and shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
2
<PAGE>
The principal and accrued interest on this Note may be converted into
shares of Common Shares (the "Common Shares") of the Maker at the option of
the Payee at $2.00 per share and the Maker agrees to cause such Common Shares
to be registered for resale (subject to the registration rights previously
granted to security holders of the Maker) under the Securities Act of 1933,
as amended.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
_____________________________
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
EXHIBIT B
SECURED NOTE
$250,000 November , 1999
---
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of H.A.A. Inc. (the "Payee"), at 1601-42nd
Street, Brooklyn, New York, or at such other place as the Payee may designate
in writing, in lawful money of the United States of America, the principal
sum of two hundred fifty thousand dollars ($250,000) together with interest
from the date hereof at the rate of 10% per annum, computed on the basis of a
360-day year of twelve 30-day months. The principal of this Note shall be
payable in full on or before February 15, 2000. Interest shall accrue from
the date hereof and shall be paid when the principal amount of this Note has
been paid in full.
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Note: (i) the failure to pay
principal of or interest on this Note as and when due; (ii) any
representation or warranty of the Maker contained in the Loan and Security
Agreement dated as of the date hereof between the Maker and the Payee shall
not be true and correct in all material respects and the same shall not be
cured within 30 days after written notice thereof by the Payee to the Maker or
the Maker shall have breached any covenant contained in the Loan and Security
Agreement and such breach shall not be cured within 30 days; (iii) a
proceeding being filed or commenced against the Maker for bankruptcy,
dissolution or liquidation which shall not be dismissed within 60 days, or
the Maker voluntarily or involuntarily terminating or dissolving or being
terminated or dissolved; (iv) the Maker filing a petition
<PAGE>
under bankruptcy, insolvency or debtor's relief law or making an assignment
for the benefit of creditors; or (v) the appointment of a custodian, trustee,
liquidator or receiver for any of the property of the Maker, which shall not
be dismissed, released or vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all
or any part of the unpaid principal balance of and interest on this Note
shall immediately become due and payable without notice or demand. If an
Event of Default occurs, the Maker agrees to pay to the holder all reasonable
expenses incurred by the holder, including reasonable attorneys' fees, in
enforcing and collecting this Note.
Failure of the Payee hereof to assert any right contained herein will
not be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part
or in any respect, or in the event that any one or more of the provisions of
this Note operate to invalidate this Note, then and in either of those
events, such provision or provisions only shall be deemed null and void and
shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect
and shall in no way be affected, prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time
to time without premium. This Note shall be paid without deduction by reason
of any set-off, defense or counterclaim of the Maker.
2
<PAGE>
The principal and accrued interest on this Note may be converted into
shares of Common Shares (the "Common Shares") of the Maker at the option of
the Payee at $2.00 per share and the Maker agrees to cause such Common Shares
to be registered for resale (subject to the registration rights previously
granted to security holders of the Maker) under the Securities Act of 1933,
as amended.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the
successors and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
-----------------------------
By: Stephen Brown
Title: Chairman of the Board
3
<PAGE>
EXHIBIT 10.38
ICTV - WEB SITE LINK AGREEMENT
(for US-based companies)
This Agreement (the "AGREEMENT") is between ICTV, Inc., a Delaware
corporation located at 14600 Winchester Blvd, Los Gatos, CA 95030 ("ICTV") and
Entertainment Boulevard Inc., a Nevada corporation located at 4052 Del Rey Ave.,
Suite 108, Marina Del Rey, CA 90404 ("Company") and is effective as of
April 14, 1999 (the "EFFECTIVE DATE").
RECITALS
A. Company owns or has licensed the rights of all creative
content and resource library resident on its website at
WWW.VIDNETUSA.COM.
B. ICTV is in the business of developing and providing products
and services to enable cable television subscribers to access
certain computer-based technology through the incorporation of
PCs and related technology in the headends of cable television
systems ("ICTV SYSTEMS"), as described in EXHIBIT A.
C. Company wishes ICTV to link to Company's site through such
systems ("ICTV LINK") pursuant to the terms and conditions of
this Agreement.
TERMS AND CONDITIONS
The parties agree as follows:
1. DEFINITIONS.
"WEBSITE" means Company's web site at www.vidnetusa.com and
any service or product available via this site.
"AUTHORIZED VIEWER" means a person who accesses any aspect of
the Website through an ICTV System.
"CABLE OPERATOR" means any and all of ICTV's direct or
indirect customers that make the ICTV System available to
Authorized Viewers or to such customers.
"ROYALTY" means the revenue share amount which Company will
pay ICTV per this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means patent rights, copyright
rights (including, but not limited to, rights in audiovisual
works and moral
-1-
<PAGE>
rights), trade secret rights, trademark rights, and any other
intellectual property rights recognized by the law of each
applicable jurisdiction.
"COMPANY'S MARKS" means the trademarks and/or service marks of
Company that are displayed to an Authorized Viewer in
connection with the ICTV Link.
"TERRITORY" means worldwide.
2. DELIVERY, MAINTENANCE, SUPPORT AND TRADEMARK LICENSES
(a) ICTV will implement the ICTV Link in accordance with
this Agreement no earlier than JUNE 01, 1999. ICTV
will have no other promotional or marketing
obligations under this Agreement.
(b) Company will notify ICTV prior to making any updates,
new feature additions, or other changes to the
Website that may affect the ICTV Link so that ICTV
has a reasonable opportunity to review, and prepare
for, such changes in advance.
(c) Company will maintain and handle all support issues
associated with the Website. Company will support its
customers in their use of the services and/or
products made available via the Website.
(d) The Authorized Viewer is identified currently by the
ICTV browser ID, where the browser ID includes the
string "ICTV". ICTV will promptly notify Company of
any change to such identification method that may
affect Company.
(e) Exhibit B specifies Company's services and products
on the Website as of the Effective Date. Should there
be other services or products initiated for the
Website where Company would generate revenue, ICTV
will be informed of such plans and will share in such
revenues in accordance with the provisions of this
Agreement.
(f) Subject to the terms and conditions of this
Agreement, each party to this Agreement grants to the
other party a non-exclusive, non-transferable license
for the term of this Agreement to use its trademarks
and service marks solely as specified in this
paragraph, provided that such use has been reviewed
and approved by the other party. Nothing in this
Agreement grants ownership or any rights in or to use
such trademarks and service marks, except in
accordance with this license. The rights in this
license will terminate upon any termination or
expiration of this Agreement.
-2-
<PAGE>
Neither party will seek to register any interest in
the trademarks and/or service marks of the other
party, or confusingly similar marks, at any time.
ICTV may display Company's Marks to Authorized
Viewers in connection with the ICTV Link. Company
may use ICTV's "ICTV" mark as specified in
paragraph (f) above.
(g) Company will receive no less representation and
presence than similar providers within the ICTV
system.
(h) Company will create in collaboration with and for
ICTV a Jukebox page from which videos will be
selected and displayed.
3. FINANCIAL OBLIGATIONS AND ACCOUNTING
(a) PAYMENT OF ROYALTIES. Company agrees to pay ICTV: (i)
a Royalty equal to 50% of the total revenue received
from Banner Ads served in the Music Video Jukebox
area.
(ii) 10% of sales received from every Authorized
Viewer that purchases CDs via link to online
Entertainment Boulevard's CD store. 15% of sales
received will be rewarded for sales over 7500 units
per month.
(b) TIMING AND REPORTS. Company will pay Royalties due to
ICTV within forty-five (45) days following the end of
the calendar quarter during which the Royalty
accrues. Company will pay and agrees to pay all sums
due in United State Dollars. Such payments will be
accompanied by reports showing in summary form the
appropriate calculations relating to the computation
of the Royalties. All payments and reports hereunder
will be deemed rendered when deposited, postage
prepaid, in the United States Mail, addressed to ICTV
at ICTV's address set forth on the first page hereof.
(b) AUDIT. An independent certified public accountant
selected by ICTV and reasonably acceptable to Company
may, upon reasonable notice and during normal
business hours, inspect the records in Company's
possession on which the Royalty reports are based.
If, upon performing such audit, it is determined that
Company has underpaid ICTV by an amount greater than
ten percent (10%) of the payments due in the
corresponding calendar year, Company will reimburse
ICTV for all reasonable expenses
-3-
<PAGE>
and costs of such audit in addition to its
obligation to make full payments under subsection
(a).
(c) INTEREST. If ICTV does not receive the applicable
Royalty payment on or before the due date of such
payment, Company will pay interest on Royalties owed
to ICTV from such date at a rate equal to the lesser
of: (i) 1.5% per month; or (ii) the highest rate
permitted by applicable law.
(d) TAXES. Company will be responsible for the payment of
any taxes arising from the payments made under this
Agreement, except for taxes on ICTV's net income.
4. WARRANTIES
(a) Each party warrants that it has full legal rights to
enter into this Agreement and to perform its
obligations hereunder.
(b) Company warrants that the Website will perform in
accordance with its documentation in all material
respects.
(c) THE WARRANTIES IN THIS SECTION ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5. INDEMNITIES.
(a) INDEMNITY BY COMPANY. Company will indemnify ICTV and
each Cable Operator (collectively, "INDEMNIFIED
PARTIES") against and hold them harmless from, and
will defend or settle at Company's own expense, any
action or other proceeding brought against an
Indemnified Party to the extent that it is based on a
claim (i) that Company's Marks infringe any
Intellectual Property Rights of a third party; or
(ii) relating to the Website. Company will pay any
and all costs, damages and expenses (including but
not limited to reasonable attorneys' fees) awarded
against an Indemnified Party in any such action or
proceeding attributable to any such claim.
(b) Company will have no obligation under this section as
to any action, proceeding or claim unless: (i)
Company is notified of it promptly; (ii) Company has
sole control of its defense and settlement; and (iii)
the Indemnified Party provides Company with
reasonable assistance in its defense and settlement.
-4-
<PAGE>
6. CONFIDENTIALITY
(a) Each party: (i) will not disclose to any third party
or use any technical product, business, or
customer-related information disclosed to it by the
other party (collectively "CONFIDENTIAL INFORMATION")
except as expressly permitted in this Agreement; and
(ii) will take all reasonable measures to maintain
the confidentiality of all Confidential Information
of the other party in its possession or control,
which will in no event be less than the measures it
uses to maintain the confidentiality of its own
information of similar importance.
(b) "Confidential Information" will not include
information that: (i) is in or enters the public
domain without breach of this Agreement; (ii) the
receiving party lawfully receives from a third party,
or already has in its possession, without restriction
on disclosure and without breach of a nondisclosure
obligation; or (iii) the receiving party develops
independently.
(c) Each party acknowledges that the Confidential
Information of the other party contains trade
secrets, the disclosure of which would cause
substantial harm to such other party that could not
be remedied by the payment of damages alone.
Accordingly, such other party will be entitled to
seek preliminary and permanent injunctive relief and
other equitable relief for any breach of this
section.
(d) Notwithstanding the terms or conditions of any
agreement between the parties, neither party will be
obligated to disclose or use any customer-related
information in violation of applicable law.
7. LIMITATIONS OF LIABILITY
(a) EXCEPT FOR LIABILITY UNDER SECTION 5, IN NO EVENT
WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND
WHETHER OR NOT IT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGE, AND EVEN IF SUCH DAMAGES ARE
FORESEEABLE.
(b) ICTV'S TOTAL LIABILITY TO COMPANY UNDER THIS
AGREEMENT WILL BE LIMITED TO THE PAYMENTS
-5-
<PAGE>
MADE UNDER THIS AGREEMENT BY COMPANY TO ICTV DURING
THE PRIOR 12 MONTHS.
8. TERM AND TERMINATION
(a) The term of this Agreement will be for one (1) year
beginning on the Effective Date. This Agreement will
automatically renew for additional one-year periods,
unless either party notifies the other in writing of
its intent not to renew at least sixty (60) days
prior to the expiration.
(b) Either party will have the right to terminate this
Agreement if:
(i) the other party breaches any material term
or condition of this Agreement and fails to
cure such breach within thirty (30) days
after written notice;
(ii) the other party becomes the subject of a
voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency,
receivership, liquidation, or composition
for the benefit of creditors; or
(iii) the other party becomes the subject of an
involuntary petition in bankruptcy or any
involuntary proceeding relating to
insolvency, receivership, liquidation or
composition for the benefit of creditors, if
such petition is not dismissed within sixty
(60) days of filing.
(c) Within thirty (30) days of the termination of this
Agreement, each party will return to the other party
or (at such other party's request) destroy all copies
of the Confidential Information of such other party
in its possession or control.
(d) The following Sections will survive the expiration or
earlier termination of this Agreements: 5, 6, 7,
8(c).
9. COMPLIANCE WITH APPLICABLE LAWS.
In performing under this Agreement, each party agrees to
comply with all applicable laws, regulations, ordinances and
statutes, including but not limited to, the export laws and
regulations of the United States and its governmental and
regulatory agencies.
-6-
<PAGE>
10. EXCUSED PERFORMANCE.
Neither party will be deemed to be in default of any provision
of this Agreement nor be liable for any delay, failure in
performance or interruption of service, resulting directly or
indirectly from acts of God, civil, or military authority,
civil disturbance, military action, war, strikes, other
catastrophes or any other similar cause beyond its reasonable
control. Written notice to the non-affected party of any such
condition will be given by the affected party within ten (10)
days of the event.
11. DELIVERY OF NOTICES AND DELIVERY OF PAYMENTS.
Unless otherwise directed in writing by the parties, all
notices given hereunder and all payments made hereunder will
be sent to the addresses set forth on the first page hereof.
All notices, requests, consents and other communications under
this Agreement will be in writing and will be deemed to have
been delivered on the date personally delivered or on the date
deposited in the United States Postal Service, postage prepaid
by certified mail, return receipt requested, or delivered by
electronic facsimile and confirmed.
12. GENERAL
(a) This Agreement and the rights and obligations
hereunder may not be assigned in whole or in part by
Company without the prior written consent of ICTV,
which will not be unreasonably withheld.
(b) The parties are independent contractors. Nothing in
this Agreement is intended or shall be construed to
constitute either party the partner, employee or
agent of the other.
(c) Any waiver by a party under this Agreement will not
constitute a continuing waiver by such party.
(d) This Agreement will be governed by the substantive
laws of the State of California. The prevailing party
in any dispute will be entitled to receive its
reasonable fees and costs (including, without
limitation, attorneys' fees) in connection therewith.
(e) This Agreement sets forth the entire agreement
between the parties with respect to the subject
matter hereof, superseding all prior or
contemporaneous representations, understandings and
agreements between the parties with respect to the
subject matter hereof. This Agreement or any
provision hereof may be modified or waived only by a
statement in writing signed by the party against whom
enforcement of same is sought.
-7-
<PAGE>
IN WITNESS WHEREOF, authorized representatives of the parties have executed this
Agreement as of the Effective Date
ICTV, INC. ENTERTAINMENT BOULEVARD, INC.
BY: /s/ Sheldon Safir BY: /s/ Stephen Brown
---------------------------------- ---------------------------------
NAME: Sheldon Safir NAME: Stephen Brown
-------------------------------- -------------------------------
TITLE: VP-Content and Bus. Dev. TITLE: CEO
------------------------------- ------------------------------
DATE: 4/21/99 DATE: 4/19/99
-------------------------------- -------------------------------
-8-
<PAGE>
EXHIBIT A
DESCRIPTION OF ICTV SYSTEM AND SERVICES
ICTV has developed a system for delivering interactive multimedia
content including Internet access, to residences over cable television networks
without the need for a personal computer in the home. The platform for the
system consists of hardware and software that is placed at the headend of the
cable operation and a small box placed at the user's home. This platform
provides video switching among the various applications available to the user.
The user accesses the system via cable or telephone lines connected to the small
box and can direct an on-screen pointer with a compact remote control device or
wireless keyboard.
-9-
<PAGE>
EXHIBIT B
DESCRIPTION OF COMPANY'S SERVICES AND PRODUCTS
Entertainment Boulevard is in the business of creating entertainment websites
geared toward the presentation of streaming media content. Currently, their
sites include Vidnet, ScreenClips, Pro Sports Net, ComedyNet, and Netfomercial.
Entertainment Boulevard's flagship site is Vidnet, an interactive music channel.
Vidnet's music video selection is updated daily and features a wide variety of
musical formats, including Rock/Metal, Pop/Dance, Urban, Country, Reggae,
Christian, Jazz/Swing and Latin. The music videos are available through
RealPlayer G2. The videos are encoded so that they can not be copied off the
on-line presentation for any other use, thus protecting the videos against any
piracy. Vidnet is in compliance with all of BMI's and ASCAP's rules and
regulations.
Vidnet links will appear in appropriate places throughout the ICTV environment.
When the subscriber clicks on the link, a co-branded ICTV/Vidnet jukebox or
player will open and play music videos. Within the player, the subscriber will
have the ability to navigate through the weekly top 20 and other available
videos, which will be seen at 300kbps. Within this player and in other
appropriate sections of the ICTV environment, users will view banner ads and
have the opportunity to purchase CD's through the Entertainment Blvd. store.
-10-
<PAGE>
ICTV - WEB SITE LINK AGREEMENT
(for US-based companies)
This Agreement (the "AGREEMENT") is between ICTV, Inc., a Delaware
corporation located at 14600 Winchester Blvd, Los Gatos, CA 95030 ("ICTV") and
Entertainment Boulevard Inc., a Nevada corporation located at 4052 Del Rey Ave.,
Suite 108, Marina Del Rey, CA 90404 ("Company") and is effective as of April 14,
1999 (the "EFFECTIVE DATE").
RECITALS
A. Company owns or has licensed the rights of all creative
content and resource library resident on its website at
WWW.NETFOMERCIAL.COM.
B. ICTV is in the business of developing and providing products
and services to enable cable television subscribers to access
certain computer-based technology through the incorporation of
PCs and related technology in the headends of cable television
systems ("ICTV SYSTEMS"), as described in EXHIBIT A.
C. Company wishes ICTV to link to Company's site through such
systems ("ICTV LINK") pursuant to the terms and conditions of
this Agreement.
TERMS AND CONDITIONS
The parties agree as follows:
1. DEFINITIONS.
"WEBSITE" means Company's web site at www.vidnetusa.com and
any service or product available via this site.
"AUTHORIZED VIEWER" means a person who accesses any aspect of
the Website through an ICTV System.
"CABLE OPERATOR" means any and all of ICTV's direct or
indirect customers that make the ICTV System available to
Authorized Viewers or to such customers.
"ROYALTY" means the revenue share amount which Company will
pay ICTV per this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means patent rights, copyright
rights (including, but not limited to, rights in audiovisual
works and moral
-1-
<PAGE>
rights), trade secret rights, trademark rights, and any other
intellectual property rights recognized by the law of each
applicable jurisdiction.
"COMPANY'S MARKS" means the trademarks and/or service marks of
Company that are displayed to an Authorized Viewer in
connection with the ICTV Link.
"TERRITORY" means worldwide.
2. DELIVERY, MAINTENANCE, SUPPORT AND TRADEMARK LICENSES
(a) ICTV will implement the ICTV Link in accordance with
this Agreement no earlier than JUNE 01, 1999. ICTV
will have no other promotional or marketing
obligations under this Agreement.
(b) Company will notify ICTV prior to making any updates,
new feature additions, or other changes to the
Website that may affect the ICTV Link so that ICTV
has a reasonable opportunity to review, and prepare
for, such changes in advance.
(c) Company will maintain and handle all support issues
associated with the Website. Company will support its
customers in their use of the services and/or
products made available via the Website.
(d) The Authorized Viewer is identified currently by the
ICTV browser ID, where the browser ID includes the
string "ICTV". ICTV will promptly notify Company of
any change to such identification method that may
affect Company.
(e) Exhibit B specifies Company's services and products
on the Website as of the Effective Date. Should there
be other services or products initiated for the
Website where Company would generate revenue, ICTV
will be informed of such plans and will share in such
revenues in accordance with the provisions of this
Agreement.
(f) Subject to the terms and conditions of this
Agreement, each party to this Agreement grants to the
other party a non-exclusive, non-transferable license
for the term of this Agreement to use its trademarks
and service marks solely as specified in this
paragraph, provided that such use has been reviewed
and approved by the other party. Nothing in this
Agreement grants ownership or any rights in or to use
such trademarks and service marks, except in
accordance with this license. The rights in this
license will terminate upon any termination or
expiration of this Agreement.
-2-
<PAGE>
Neither party will seek to register any interest in
the trademarks and/or service marks of the other
party, or confusingly similar marks, at any time.
ICTV may display Company's Marks to Authorized
Viewers in connection with the ICTV Link. Company
may use ICTV's "ICTV" mark as specified in
paragraph (f) above.
(g) Company will receive no less representation and
presence than similar providers within the ICTV
system.
3. FINANCIAL OBLIGATIONS AND ACCOUNTING
(a) PAYMENT OF ROYALTIES. Company agrees to pay ICTV:
(i) a Royalty equal to 50% of the total revenue
received from Banner Ads served in the Netfomercial
area .
(ii) a Royalty equal to 50% of revenues received by
Company from the infomercial companies who have
infomercials on Netfomercial for sales generated by
every Authorized Viewer that purchases merchandise
via online link to Entertainment Boulevard's
Netfomercial site.
(b) TIMING AND REPORTS. Company will pay Royalties due to
ICTV within forty-five (45) days following the end of
the calendar quarter during which the Royalty
accrues. Company will pay and agrees to pay all sums
due in United State Dollars. Such payments will be
accompanied by reports showing in summary form the
appropriate calculations relating to the computation
of the Royalties. All payments and reports hereunder
will be deemed rendered when deposited, postage
prepaid, in the United States Mail, addressed to ICTV
at ICTV's address set forth on the first page hereof.
(c) Audit. An independent certified public accountant
selected by ICTV and reasonably acceptable to Company
may, after at least thirty (30) days notice and
during normal business hours, inspect only the
records in Company's possession on which the Royalty
reports are based. All information derived by
Licensor during such audit shall be kept
confidential. Licensor may only conduct an audit once
in any calendar year and only once per statement. If,
upon performing such audit, it is determined that
Company has underpaid ICTV by an amount greater than
ten percent (10%) of the payments due in the
corresponding calendar year, Company
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<PAGE>
will reimburse ICTV for all reasonable expenses and
costs of such audit in addition to its obligation to
make full payments under subsection (a).
(d) Interest. If ICTV does not receive the applicable
Royalty payment on or before the due date of such
payment, Company will pay interest on Royalties owed
to ICTV from such date at a rate equal to the lesser
of: (i) 1.5% per month; or (ii) the highest rate
permitted by applicable law.
(e) Taxes. Company will be responsible for the payment of
any taxes arising from the payments made under this
Agreement, except for taxes on ICTV's net income.
4. WARRANTIES
(a) Each party warrants that it has full legal rights to
enter into this Agreement and to perform its
obligations hereunder.
(b) Company warrants that the Website will perform in
accordance with its documentation in all material
respects.
(c) THE WARRANTIES IN THIS SECTION ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5. INDEMNITIES.
(a) INDEMNITY BY COMPANY. Company will indemnify ICTV and
each Cable Operator (collectively, "INDEMNIFIED
PARTIES") against and hold them harmless from, and
will defend or settle at Company's own expense, any
action or other proceeding brought against an
Indemnified Party to the extent that it is based on a
claim (i) that Company's Marks infringe any
Intellectual Property Rights of a third party; or
(ii) relating to the Website. Company will pay any
and all costs, damages and expenses (including but
not limited to reasonable attorneys' fees) awarded
against an Indemnified Party in any such action or
proceeding attributable to any such claim.
(b) INDEMNITY BY ICTV. ICTV will indemnify Company
against and hold them harmless from, and will defend
or settle at ICTV's sole expense any action or other
proceeding brought against Company to the extent that
it is based on a claim relating to the ICTV Systems.
ICTV will pay any and all costs, damages and expenses
-4-
<PAGE>
(including but not limited to reasonable attorneys'
fees) awarded against Company in any such action or
proceeding attributable to any such claim.
(c) Company will have no obligation under this section as
to any action, proceeding or claim unless: (i)
Company is notified of it promptly; (ii) Company has
sole control of its defense and settlement; and (iii)
the Indemnified Party provides Company with
reasonable assistance in its defense and settlement.
6. CONFIDENTIALITY
(a) Each party: (i) will not disclose to any third party
or use any technical product, business, or
customer-related information disclosed to it by the
other party (collectively "CONFIDENTIAL INFORMATION")
except as expressly permitted in this Agreement; and
(ii) will take all reasonable measures to maintain
the confidentiality of all Confidential Information
of the other party in its possession or control,
which will in no event be less than the measures it
uses to maintain the confidentiality of its own
information of similar importance.
(b) "Confidential Information" will not include
information that: (i) is in or enters the public
domain without breach of this Agreement; (ii) the
receiving party lawfully receives from a third party,
or already has in its possession, without restriction
on disclosure and without breach of a nondisclosure
obligation; or (iii) the receiving party develops
independently.
(c) Each party acknowledges that the Confidential
Information of the other party contains trade
secrets, the disclosure of which would cause
substantial harm to such other party that could not
be remedied by the payment of damages alone.
Accordingly, such other party will be entitled to
seek preliminary and permanent injunctive relief and
other equitable relief for any breach of this
section.
(d) Notwithstanding the terms or conditions of any
agreement between the parties, neither party will be
obligated to disclose or use any customer-related
information in violation of applicable law.
-5-
<PAGE>
7. LIMITATIONS OF LIABILITY
(a) EXCEPT FOR LIABILITY UNDER SECTION 5, IN NO EVENT
WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND
WHETHER OR NOT IT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGE, AND EVEN IF SUCH DAMAGES ARE
FORESEEABLE.
(b) ICTV'S TOTAL LIABILITY TO COMPANY UNDER THIS
AGREEMENT WILL BE LIMITED TO THE PAYMENTS MADE UNDER
THIS AGREEMENT BY COMPANY TO ICTV DURING THE PRIOR 12
MONTHS.
8. TERM AND TERMINATION
(a) The term of this Agreement will be for one (1) year
beginning on the Effective Date. This Agreement will
automatically renew for additional one-year periods,
unless either party notifies the other in writing of
its intent not to renew at least sixty (60) days
prior to the expiration.
(b) Either party will have the right to terminate this
Agreement if:
(i) the other party breaches any material term
or condition of this Agreement and fails to
cure such breach within thirty (30) days
after written notice;
(ii) the other party becomes the subject of a
voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency,
receivership, liquidation, or composition
for the benefit of creditors; or
(iii) the other party becomes the subject of an
involuntary petition in bankruptcy or any
involuntary proceeding relating to
insolvency, receivership, liquidation or
composition for the benefit of creditors, if
such petition is not dismissed within sixty
(60) days of filing.
(c) Within thirty (30) days of the termination of this
Agreement, each party will return to the other party
or (at such other party's request) destroy all copies
of the Confidential Information of such other party
in its possession or control.
-6-
<PAGE>
(d) The following Sections will survive the expiration or
earlier termination of this Agreements: 5, 6, 7,
8(c).
9. COMPLIANCE WITH APPLICABLE LAWS.
In performing under this Agreement, each party agrees to
comply with all applicable laws, regulations, ordinances and
statutes, including but not limited to, the export laws and
regulations of the United States and its governmental and
regulatory agencies.
10. EXCUSED PERFORMANCE.
Neither party will be deemed to be in default of any provision
of this Agreement nor be liable for any delay, failure in
performance or interruption of service, resulting directly or
indirectly from acts of God, civil, or military authority,
civil disturbance, military action, war, strikes, other
catastrophes or any other similar cause beyond its reasonable
control. Written notice to the non-affected party of any such
condition will be given by the affected party within ten (10)
days of the event.
11. DELIVERY OF NOTICES AND DELIVERY OF PAYMENTS.
Unless otherwise directed in writing by the parties, all
notices given hereunder and all payments made hereunder will
be sent to the addresses set forth on the first page hereof.
All notices, requests, consents and other communications under
this Agreement will be in writing and will be deemed to have
been delivered on the date personally delivered or on the date
deposited in the United States Postal Service, postage prepaid
by certified mail, return receipt requested, or delivered by
electronic facsimile and confirmed.
12. GENERAL
(a) This Agreement and the rights and obligations
hereunder may not be assigned in whole or in part by
Company without the prior written consent of ICTV,
which will not be unreasonably withheld.
(b) The parties are independent contractors. Nothing in
this Agreement is intended or shall be construed to
constitute either party the partner, employee or
agent of the other.
(c) Any waiver by a party under this Agreement will not
constitute a continuing waiver by such party.
-7-
<PAGE>
(d) This Agreement will be governed by the substantive
laws of the State of California. The prevailing party
in any dispute will be entitled to receive its
reasonable fees and costs (including, without
limitation, attorneys' fees) in connection therewith.
(e) This Agreement sets forth the entire agreement
between the parties with respect to the subject
matter hereof, superseding all prior or
contemporaneous representations, understandings and
agreements between the parties with respect to the
subject matter hereof. This Agreement or any
provision hereof may be modified or waived only by a
statement in writing signed by the party against whom
enforcement of same is sought.
IN WITNESS WHEREOF, authorized representatives of the parties have executed this
Agreement as of the Effective Date
ICTV, INC. ENTERTAINMENT BOULEVARD, INC.
BY: /s/ Sheldon Safir BY: /s/ Stephen Brown
------------------------------- ---------------------------
NAME: Sheldon Safir NAME: Stephen Brown
----------------------------- -------------------------
TITLE: VP-Content and Bus. Dev. TITLE: CEO
---------------------------- ------------------------
DATE: 4/21/99 DATE: 4/19/99
----------------------------- -------------------------
-8-
<PAGE>
EXHIBIT A
DESCRIPTION OF ICTV SYSTEM AND SERVICES
ICTV has developed a system for delivering interactive multimedia
content including Internet access, to residences over cable television networks
without the need for a personal computer in the home. The platform for the
system consists of hardware and software that is placed at the headend of the
cable operation and a small box placed at the user's home. This platform
provides video switching among the various applications available to the user.
The user accesses the system via cable or telephone lines connected to the small
box and can direct an on-screen pointer with a compact remote control device or
wireless keyboard.
-9-
<PAGE>
EXHIBIT B
DESCRIPTION OF COMPANY'S SERVICES AND PRODUCTS
Entertainment Boulevard is in the business of creating entertainment websites
geared toward the presentation of streaming media content. Currently, their
sites include Vidnet, ScreenClips, Pro Sports Net, and Netfomercial.
Entertainment Boulevard's NetFomercial offers online shopping featuring
streaming video infomercials which present products ranging from fitness to auto
to home. When the subscriber clicks on the link, the subscriber will have the
ability to select a product of interest and click on the associated video.
Within this same area, banner ads will be displayed and users will have the
opportunity to purchase Infomercial merchandise online. The videos are available
through RealPlayer G2 and will be seen at 300kps.
The NetFomercial link will appear in ICTV's shopping area and within the area
described as Infomercials.
-10-
<PAGE>
ADDENDUM
To the Agreement between ICTV and Entertainment Boulevard
dated April 14, 1999
The purpose of this Addendum is to change the "Effective Date," as defined in
the Agreement. The parties agree that the Effective Date shall be changed to
December 1, 1999.
All other provisions of the Agreement remain as written.
IN WITNESS WHEREOF, authorized representatives of the parties have executed
this Agreement as of the Effective Date
ICTV, INC. ENTERTAINMENT BOULEVARD, INC.
BY: /s/ Sheldon Safir BY: /s/ Stephen Brown
------------------------------- ---------------------------
NAME: Sheldon Safir NAME: Stephen Brown
----------------------------- -------------------------
TITLE: VP-Content and Bus. Dev. TITLE: CEO
---------------------------- ------------------------
DATE: 11/23/99 DATE: 11/23/99
----------------------------- -------------------------
<PAGE>
EXHIBIT 10.39
WEBCAST DISTRIBUTION AGREEMENT
NO.___________________
This Webcast Distribution Agreement ("Agreement") is made on August 3, 1999
("Service Start Date"), by and between iBEAM Broadcasting Corporation-TM-, a
Delaware corporation ("iBEAM"), with offices at 645 Almanor Avenue, Suite 100,
Sunnyvale, CA 94086, and Entertainment Boulevard, Inc., a Nevada corporation
("Content Provider"), with offices at 4052 Del Rey Avenue, Suite 108, Marina Del
Rey, CA 90292.
WHEREAS, Content Provider desires to have iBEAM-TM- distribute, and iBEAM
desires to distribute, certain portions of Content Provider's content and
Internet websites to providers of Internet access services.
NOW, THEREFORE, the parties hereto, for the below mentioned consideration and
other good and valuable consideration recognized by the parties, hereby agree as
follows:
1. DEFINITIONS.
(a) WEBCAST DISTRIBUTION SERVICE: a service incorporating the Edge
Distribution Service and Ancillary Service.
(b) EDGE DISTRIBUTION SERVICE: The service provided by iBEAM,
whereby iBEAM distributes Content through a system of satellite communications
and/or terrestrial communications equipment, one or more computer servers, and
appropriate software to iBEAM defined entities which may include entities which
provide access to the Internet to consumers, commercial entities, users of
private intranets, and other third parties, both domestic and international,
regardless of the means of access to the Internet offered thereby.
(c) CENTRALIZED DISTRIBUTION SERVICE: The service will generally
conform to a service which allows users of the Internet to connect to an iBEAM
operated server/servers which contains the Content. Such access by Internet
users will be effectuated through the use of an iBEAM specified metafile.
Amounts of streams to be served, amounts to be kept as static, on demand or
HTTP, and bit-rate at which such streams will be served will be as mutually
agreed between the Parties and as are reasonable.
(d) ANCILLARY SERVICE: Any service provided by iBEAM beyond that
covered in the Edge Distribution Service and Centralized Distribution Service.
(e) CONTENT: The Content Provider's Internet Web site (s) or other
media as agreed upon mutually by the parties and provided by Content Provider to
iBEAM. iBEAM will accept the Content in Windows Media Player format and Real
format on the Centralized Distribution Service and, as it becomes available on
the Edge Distribution Service, including streaming MPEG for the Real G2 player.
Bit rates for the aforementioned formats will be as mutually agreed between the
Parties.
(f) TELECOMMUNICATIONS PROVIDER: Any entity with which iBEAM
contracts for telecommunications services for the purpose of providing the
Webcast Distribution Service.
2. CONTENT PREPARATION, DISTRIBUTION, SERVICE, LICENSE AND OWNERSHIP.
(a) CONTENT PREPARATION: iBEAM shall prepare the Content for such
services as Content provider has elected to have iBEAM provide. Content Provider
shall provide iBEAM with the access, to Content Provider facilities and/or the
Content, needed for iBEAM to prepare said Content and provide services that
Content Provider has elected to use. Content Provider understands that certain
equipment may need to be installed at Content Provider facilities and that such
equipment is wholly owned by iBEAM or its assigns. Content Provider understands
that iBEAM's performance and completion of the foregoing activities is dependent
in part on Content Provider's assistance and actions. Accordingly, Content
Provider will use reasonable efforts to timely provide iBEAM with the items,
access and assistance required to complete such activities, and any dates or
time periods relevant to performance by a Party shall be appropriately and
equitably extended to account for any delays due to the other Party.
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
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<PAGE>
(b) WEBCAST DISTRIBUTION SERVICE: Subject to availability and the
terms and conditions hereto, iBEAM undertakes to provide such Services as are
elected by the Content Provider for the term of this Agreement and specified
below. However, in the event that Content Provider materially breaches any
provision of this Agreement, iBEAM shall not be under any obligation to provide
any service.
(i) Edge Distribution Service: iBEAM shall provide the
Edge Distribution Service subject to the terms herein
for payment as specified in Articles 5(a). Included
in the Edge Distribution Service is basic Content
acquisition, as defined by iBEAM, which shall not
exceed terrestrial connectivity to Content Provider
location and retrieval of pre-encoded streaming media
in a form and format mutually agreed by the Parties.
Content Provider and iBEAM will work in good faith to
agree on reasonable time limits for on demand file
storage at MaxCasters.
(ii) Centralized Distribution Service: iBEAM shall provide
the Centralized Distribution Service subject to the
terms herein for payment as specified in Articles
5(b). Included in the Centralized Distribution
Service is live Content acquisition in a reasonable
and mutually agreeable manner, acquisition of Static,
on-demand or HTTP Content in a mutually agreeable
size and time of transfer over the Internet or by
physical transfer in an iBEAM specified format.
(iii) Ancillary Service: Subject to availability, iBEAM
shall provide such services as are mutually agreed by
the Parties at the then current negotiated price for
payment in a form and manner as set forth in Article
5(b).
(c) LICENSE: Content Provider hereby grants to iBEAM, solely for
distribution through iBEAM services that allow viewers to select the Content
from Content Provider web site and are redirected to iBEAM equipment, and iBEAM
accepts, a worldwide, non-exclusive, license to use, reproduce, market, promote,
host, distribute, display, perform, cache, and transmit Content in connection
with the Webcast Distribution Service for the purposes of this Agreement. This
license includes the right to allow Telecommunications Providers to perform the
same functions as iBEAM as part of the Webcast Distribution Service. iBEAM will
take reasonable precautions to prevent the unauthorized reception and use of the
Content, while being transported in the iBEAM network, and will take reasonable
security measures to prevent such unauthorized and unlawful use or copying by
third parties not intended under this Agreement to receive said Content.
(d) OWNERSHIP: Content Provider or its licensors retains all
right, title and interest to the Content. iBEAM or its assigns retains all
right, title and interest to all software, products, equipment, works, and other
intellectual property created, used or provided by iBEAM in connection with the
Webcast Distribution Service, and other activities performed by iBEAM pursuant
to this Agreement.
3. PROMOTION. Each Party shall have the right to make public announcements
and/or press releases using the other Party's name provided they have obtained
prior written approval, which shall not be unreasonably withheld.
4. TERM AND TERMINATION. This Agreement shall continue with full force and
effect for twelve (12) months from the Service Start Date (the "Initial Term")
and shall thereafter renew for successive one (1) year terms (each, a "Renewal
Term") unless terminated by either Party for any reason upon thirty (30) days
notice prior to the end of the Initial Term or any Renewal Term, as the case may
be, to the other party (the "Term"). In the event iBEAM changes its pricing or
services as set forth in Exhibit A, Content Provider may, prior to the effective
date of the new pricing, terminate, with thirty (30) days notice, during which
current pricing would apply, otherwise the Agreement will continue to the next
Renewal Term unless terminated pursuant to another provision of this Agreement.
Either Party may terminate this Agreement at any time, effective immediately,
upon written notice to the other Party, if such other Party: (i) breaches any of
its material obligations hereunder and fails to cure such breach (or to provide
evidence, to the other Party's reasonable satisfaction, that it is working
diligently towards curing and will have cured within an agreed-upon timeframe)
within sixty (60) days of receipt of written notice from the other party; (ii)
files a petition in bankruptcy; and/or (iv) makes an assignment for the benefit
of its creditors. Any such termination shall be without any liability to or
obligation of the terminating Party, other than with respect to any breach of
obligations under this Agreement prior to termination. In the event of
termination of this Agreement for any reason the following shall remain in full
force and effect: Article 2(d), and Articles 6, 7, and 8.
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
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<PAGE>
5. PAYMENT
a) iBEAM will provide the Edge Distribution Service at pricing
set forth within Schedule A. Payments shall be made in a manner consistent with
Articles 5(c), 5(d) and 5(e).
b) Any Centralized Distribution Service or Ancillary Service
elected by Content Provider and provided by iBEAM hereunder shall be at iBEAM's
then current negotiated rate for each service elected. Payments shall be made in
a manner consistent with Articles 5(c), 5(d) and 5(e).
c) Invoicing shall be on a monthly basis and all payments shall
be made net 30 days upon receipt of invoice to the address specified on each
invoice.
d) All prices set forth herein are exclusive of taxes with
regards to the Webcast Distribution Service. Content Provider is responsible for
any taxes associated with the Webcast Distribution Services.
e) Notwithstanding the above any Content Provider located outside
the United States must make payments via wire transfer to the account specified
within each invoice in US dollars.
6. WARRANTIES AND INDEMNIFICATION.
(a) Content Provider warrants and represents that: (i) it owns or
has properly licensed all rights in the Content necessary to grant the rights
and licensed granted hereunder; (ii) the Content is not obscene, infringing,
misappropriated, defamatory, or violates the privacy of a third party; and (iii)
all Content complies with all applicable federal, state and local laws and
regulations.
(b) iBEAM warrants and represents that: (i) it owns or has
properly licensed all rights in all technology used to implement the Webcast
Distribution Service necessary to grant the rights and licensed granted
hereunder; (ii) none of the technology used to implement the Webcast
Distribution Service infringes or misappropriates any intellectual property
right of a third party; and (iii) operation of the Webcast Distribution Service
complies with all applicable federal, state and local laws and regulations.
(c) Each party ("Indemnifying party") shall indemnify and hold
harmless the other party ("Indemnified party") for any breach or claim arising
out of or related to the Indemnifying party's warranties, including payment of
all damages, losses, expenses, costs and attorney's fees; provided that: (i) the
Indemnified party promptly gives the Indemnifying party notice of a breach,
claim, or threatened claim; (ii) the Indemnified party provides all reasonable
assistance to the Indemnifying party in defending the claim, at the Indemnifying
party's expense; and (iii) the Indemnifying party shall have sole control over
the defense of the claim and all settlement negotiations. No settlement shall be
effective (or indemnified) unless it is approved in writing by the Indemnifying
party. The foregoing indemnity shall be a party's sole remedy for a breach of
any warranty given by such party hereunder.
(d) EXCEPT FOR THE WARRANTIES SET FORTH IN THIS ARTICLE, NEITHER
PARTY MAKES ANY OTHER WARRANTIES IN CONNECTION WITH THE SUBJECT MATTER OF THIS
AGREEMENT, AND DISCLAIMS ALL SUCH WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT. IBEAM SPECIFICALLY DISCLAIMS ALL WARRANTIES THAT THE WEBCAST
DISTRIBUTION SERVICE WILL MEET ANY STANDARD OF PERFORMANCE OR ACCURACY OR THAT
IT WILL BE ERROR-FREE.
7. LIMITATION OF LIABILITIES. IN NO EVENT WILL EITHER PARTY BE LIABLE TO
THE OTHER OR ANYONE ELSE FOR DAMAGES IN EXCESS OF $250,000.00, SPECIAL,
COLLATERAL, PUNITIVE, EXEMPLARY, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING WITHOUT LIMITATION, LOSS OF GOODWILL, LOSS OF PROFITS OR REVENUES,
LOSS OF SAVINGS, LOSS OF USE, INTERRUPTIONS OF BUSINESS, AND CLAIMS OF
CUSTOMERS) WHETHER SUCH DAMAGES OCCUR
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
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<PAGE>
PRIOR OR SUBSEQUENT TO, OR ARE ALLEGED AS A RESULT OF, TORTIOUS CONDUCT OR
BREACH OF ANY OF THE PROVISIONS OF THIS AGREEMENT, EVEN IF EITHER PARTY HAS
BEEN ADVISED BY THE OTHER OR ANY OTHER THIRD PARTY OF THE POSSIBILITY OF SUCH
DAMAGES.
8. NON DISCLOSURE. Each party acknowledges that during the term of this
Agreement it may receive Confidential Information of the other party.
"Confidential Information" shall mean all business, technical and financial
information, whether in tangible form or communicated orally, which is labeled
or stamped "confidential," "proprietary," or words to that effect.
Notwithstanding the foregoing, any technology used by iBEAM to provide the
Webcast Distribution Service shall be deemed to be Confidential Information of
iBEAM. Excluded from the foregoing definition is information which: (i) is or
becomes generally known or available to the public other than as a consequence
of a breach of this Agreement; (ii) was properly known or otherwise available to
the receiving party prior to its disclosure; (iii) was properly disclosed by a
third party to the receiving party without restriction; or (iv) is independently
developed by the receiving party without access to Confidential Information. The
party receiving Confidential Information shall not, during the term of this
Agreement and for three (3) years after the termination of this Agreement,
disclose any Confidential Information of the disclosing party to any third party
or use any Confidential Information for its benefit or for the benefit of any
third party except as permitted herein. The receiving party shall take
reasonable precautions to maintain the confidentiality of all Confidential
Information, and in no case lesser precautions than the receiving party takes
with its own similar Confidential Information. Upon termination of this
Agreement for any reason, each party shall immediately return or destroy all
Confidential Information of the other party in its possession or control.
9. MISCELLANEOUS.
Force Majeure: Neither Party shall be responsible for the effects of
events of force majeure, including, but not limited to, an act of God, strike,
lockout or other interference with work, war declared or undeclared, blockade,
disturbance, lightning, fire, earthquake, storm, flood, explosion, network
failures, error in the coding of electronic files, software limitations, or
inability to obtain telecommunications services, governmental or
quasi-governmental restraint expropriation prohibition intervention direction or
embargo, unavailability or delay in availability of equipment or transport,
inability or delay in obtaining governmental or quasi-governmental approvals
consents permits licenses authorities or allocations, and any other cause
whether of the kind specified above or otherwise which is not reasonably within
the control of the Party affected.
Assignment: Neither Party may assign or transfer this Agreement or any
right, duty or obligation hereunder to any third party without prior written
consent of the other Party, and any such attempt shall be void and without
effect, except that a Party may assign this Agreement in its entirety to a third
Party that acquires all or substantially all of the business or assets of such
Party.
Choice of Law: This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of California, without regards
to its choice of law provisions. The exclusive jurisdiction for any legal
proceeding regarding this Agreement shall be in the courts of the State of
California and the Parties hereto expressly submit to the jurisdiction of said
courts.
Waiver: A waiver of a breach or default under this Agreement shall not
be a waiver of any subsequent default. Failure of either Party to enforce
compliance with any term or condition of this Agreement shall not constitute a
waiver of such term or condition.
Drafting: If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining portions shall not in any way be affected or
impaired thereby.
No Partnership: The Parties shall remain independent contractors to
each other, and neither Party shall have the right or authority to bind the
other Party to any obligation not expressly and unambiguously stated herein.
Notices: All notices hereunder shall be in writing, made via registered
mail or facsimile to the addresses first written above (or such replacement
addresses provided by proper notice), and shall be deemed to be received when:
(i) in the case of registered mail, on the date of registration or (ii) in the
case of facsimile, on the date indicated in the confirmation of transmission.
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
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<PAGE>
Integration: This Agreement supercedes and replaces any and all prior
agreements, understandings or arrangements, whether oral or written, heretofore
made between the Parties and relating to the subject matter hereof and
constitutes the entire understanding of the Parties with respect to the subject
matter of this Agreement. This Agreement may not be altered or amended except by
an express written agreement signed by both parties hereto.
IN WITNESS WHEREOF each party executes this Agreement by an officer duly
authorized to bind such party as of the date set forth below.
iBEAM Broadcasting Corporation Entertainment Boulevard, Inc.
By: /s/ Tom Gillis By: /s/ Stephen Brown
--------------------------------- --------------------------------
Printed: Tom Gillis Printed: Stephen Brown
---------------------------- ---------------------------
Title: Vice President Marketing Title: CEO
------------------------------ -----------------------------
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
5
<PAGE>
SCHEDULE A PRICING
A: EDGE SERVING ON-DEMAND PRICING
<TABLE>
<CAPTION>
- ------------------------- ------------------------
COMBINED VOLUME PRICE
- ------------------------- ------------------------
<S> <C>
1-10 Million MB $0.0014 per Megabyte
transferred Transferred
- ------------------------- ------------------------
</TABLE>
B: EDGE STORAGE CHARGES FOR ON-DEMAND CONTENT
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ---------------------- ----------------------
SPECIAL SPECIAL
ENTERTAINMENT ENTERTAINMENT
BOULEVARD PRICE BOULEVARD PRICE
- ------------------------- ---------------------- ---------------------- ----------------------
MB PASSED BASE STORAGE ADDITIONAL STORAGE ADDITIONAL STORAGE
(51 MB to 1000MB) (greater than 1000 MB)
- ------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
1-10 Million MB 50 MB $0.33 per MB Stored $1.10 per MB Stored
transferred
- ------------------------- ---------------------- ---------------------- ----------------------
</TABLE>
C: REAL NETWORKS ADDITION
<TABLE>
<CAPTION>
- ------------------------- ------------------------
COMBINED VOLUME PRICE
- ------------------------- ------------------------
ON DEMAND
- ------------------------- ------------------------
<S> <C>
1-10 Million MB $0.0010 per Megabyte
transferred Transferred
- ------------------------- ------------------------
</TABLE>
Pricing Evaluation: After the first ninety (90) day period pricing will be
subject to change at the end of each three month period as measured from ninety
(90) days from the Service Start Date. Notice of price change may be effectuated
anytime. In the event that Content Provider does not wish to continue the
Webcast Distribution Service at the new iBEAM proposed pricing they may
terminate this Agreement pursuant to Article 4.
Under no event will payments for any month be less than $500.00 per month for
Edge Distribution Service of On-Demand Content.
Total volume of Content Provider Content broadcast via satellite or stored will
be subject to iBEAM approval.
iBEAM hereby waives the first ninety (90) days of payment for the Edge
Distribution Service, thereafter pricing shall be as set forth above.
All information contained with this document is confidential to the Parties
hereto and shall not be reproduced or disclosed to any third party without
written consent of the Parties.
6
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EXECUTION COPY
CONTENT PROVIDER AGREEMENT
This agreement (the "AGREEMENT"), dated as of September 8th, 1999 (the
"EFFECTIVE DATE"), by and between Entertainment Boulevard, Inc. a Nevada
corporation having a principal place of business at 4052 Del Rey Avenue,
Suite 108, Marina Del Rey, CA 90292 ("PROVIDER") and SERVICECO, LLC, a
Delaware limited liability company doing business as Road Runner, having a
principal place of business at 13241 Woodland Park Road, Herndon, Virginia
20171 ("ROAD RUNNER").
WHEREAS, Road Runner has entered into agreements with certain third
party service affiliates ("SERVICE AFFILIATES") for the provision of a
co-branded on-line broadband IP-based service comprised of content and
applications (the "ROAD RUNNER SERVICE").
WHEREAS, Provider creates and distributes certain programming content
and services, part or all of which is delivered via web sites located on the
World Wide Web, currently at the addresses ("URLs") set forth on EXHIBIT A
hereto (the "PROVIDER WEB SITES"); and
WHEREAS, the parties wish to enter into an agreement for the
distribution and promotion by Road Runner of certain of the Provider content
as part of the Road Runner Service, on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, the receipt and sufficiency of which are hereby
acknowledged, Provider and Road Runner agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
1.1. "BROADBAND PROGRAMMING" shall mean Content optimized for high
speed bandwidth as set forth in the Producer's Guide.
1.2. "CATEGORY" shall mean the subject matter of broadly-related
content designated by a button which leads to a group of Primary
Channels as further described on EXHIBIT D.
1.3. "CATEGORY WELCOME SCREEN" shall mean the promotions and/or
editorials which provide a topical description of the Content available
within a Category, as well as other relevant third party content,
promotions and/or editorials determined by Road Runner.
1.4. "CATEGORY WELCOME SCREEN HIGHLIGHT" shall mean the portion of the
Provider Promotional Materials contained in the Category Welcome Screen.
1.5. "CO-BRANDED AREA" shall mean the on-line area comprised of the
Road Runner Interface and the Co-Branded Content which has been
referenced or uploaded by Road Runner. The Co-Branded Area is
accessible as specified in EXHIBIT D.
1.6. "CO-BRANDED CONTENT" shall mean Content other than advertising
which is created, operated, modified, updated and maintained by
Provider, in accordance with the parameters set forth in EXHIBIT B
hereto, and made accessible at all times to Road Runner for inclusion in
the Co-Branded Area.
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CONFIDENTIAL ROAD RUNNER
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1.7. "CONTENT" shall mean all works of authorship in any form including
but not limited to video, slides, text, scripts, photographs, art,
illustrations, animation, graphics, interface designs, images, music,
sound effects, lyrics, narration, advertising and other audio, visual,
audiovisual and streaming media works.
1.8. "CONFIDENTIAL INFORMATION" shall mean any information in any form
including but not limited to oral, written, graphic or electromagnetic
forms, which the disclosing party desires to protect against
unrestricted disclosure or use, and is designated as proprietary or
confidential in the following manner: (i) if in writing or other
tangible form, shall be conspicuously labeled as "confidential" or
"proprietary" at the time of delivery; (ii) if oral, shall be identified
as "confidential" or "proprietary" prior to disclosure, and after
disclosure shall be reduced to writing or other tangible form that is
labeled as described in the preceding clause (i) and delivered to the
receiving party no later than 30 days after such disclosure. Without
limiting the generality of the foregoing, (x) the Confidential
Information of Road Runner shall include all End User Information and
the terms of this Agreement, and (y) the Confidential Information of
Provider shall include all information regarding Provider's marketing
strategies, prospective marketing campaigns and programming and content
information. Confidential Information shall not include information
which (i) is or becomes generally known to the public through no act or
omission of the Receiving Party (as defined in SECTION 12.1); (ii) was
in the Receiving Party's possession prior to the disclosure hereunder
without an obligation of confidentiality, (iii) is disclosed to the
Receiving Party by a third party not under an obligation of
confidentiality, or (iv) was independently developed by the Receiving
Party.
1.9. "END USER" shall mean a subscriber of the Road Runner Service.
1.10. "MARKS" shall mean the trademarks, trade names, service marks,
designs, characters, logos and other indicia of origin of Provider and
Road Runner, respectively, as set forth on EXHIBIT A.
1.11. "PRIMARY CHANNEL" shall mean a specified grouping of related
Content, within a Category, that is provided by Road Runner content
providers, including Provider, as specified on EXHIBIT D.
1.12. "PRIMARY CHANNEL HIGHLIGHT" shall mean the portion of the Provider
Promotional Materials which appears on the End User's screen while
viewing the Primary Channel.
1.13. "PRODUCER'S GUIDE" shall mean the technical guidelines that Road
Runner provides Provider, as such guidelines may change from time to
time.
1.14. "PROVIDER HIGHLIGHT" shall mean, individually and/or collectively,
the Primary Channel Highlight, Category Welcome Screen Highlight, and
the Welcome Screen Highlight.
1.15. "PROVIDER MATERIALS" shall mean, collectively, the Co-Branded
Content, the Provider Web Site, the Provider Promotional Materials and
Provider's Marks.
1.16. "PROVIDER NAME/LOGO" shall mean the name and/or logo of Provider,
as set forth in Exhibit A.
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1.17. "PROVIDER PROMOTIONAL MATERIALS" shall mean information provided
by Provider to Road Runner relating to and/or derived from, as
applicable, Provider, the Co-Branded Area, Provider Highlights and other
on-line promotional Materials.
1.18. "ROAD RUNNER INTERFACE" shall mean the Road Runner proprietary
graphical interface displayed along the margins of an End User's screen
while accessing the Road Runner Service and includes, without
limitation, the navigational bar and channel look and feel.
1.19. "TERM" shall have the meaning set forth in SECTION 11.1.
1.20. "WELCOME SCREEN" shall mean the window on the home page of the
Road Runner Service in which Provider Promotional Materials may be
displayed by Road Runner in accordance with this Agreement.
1.21. "WELCOME SCREEN HIGHLIGHT" shall mean the portion of the Provider
Promotional Materials which appears on the End User's screen while
viewing the Welcome Screen.
2. OBLIGATIONS OF PROVIDER. Throughout the Term, Provider shall
provide and manage the Co-Branded Content and the Provider Web Sites, at
its own expense, as follows:
2.1. CREATION OF CO-BRANDED CONTENT. Provider shall create and make
available to Road Runner the Co-Branded Content in accordance with
the Producer's Guide and EXHIBIT B. Provider shall use
commercially reasonable efforts to incorporate the best Provider
Content available into the Co-Branded Content. Provider shall
comply with any guidelines for Content that Road Runner provides
generally to its content providers. The Co-Branded Content shall
not include advertising.
2.1.1. BROADBAND PROGRAMMING. It is the intention of the parties
that all or part of the Co-Branded Content will be
comprised of Broadband Programming, and Provider will use
commercially reasonable efforts, in consultation with Road
Runner, to develop Broadband Programming for the
Co-Branded Content. To the extent that Provider creates,
or has created, Broadband Programming within the subject
matter of the Primary Channel, Provider will use
commercially reasonable efforts to include all such
Broadband Programming in the Co-Branded Content, which
shall be no less than those required in EXHIBIT B.
2.1.2. LINKS. The Co-Branded Content may include links solely to
one or more Provider Web Sites.
2.1.3. When technically feasible, Road Runner intends to
implement a method for End Users who have linked from the
Road Runner Service to a Provider Web Site to return
easily to the Road Runner Service. Provider agrees to
reasonably cooperate with Road Runner in these efforts.
2.2. MANAGEMENT AND UPDATES OF CO-BRANDED CONTENT. Throughout the
Term, Provider shall manage, review, edit, update and otherwise
maintain the Co-Branded Content, in a
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timely and professional manner and in accordance with the
frequency, formatting and other specifications set forth in
EXHIBIT B and the Producer's Guide.
2.3. PROVIDER PROMOTIONAL MATERIALS. Provider acknowledges that Road
Runner intends to promote the Co-Branded Content and the Provider
Web Site in the Primary Channel, as well as in other areas
throughout the Road Runner Service, as specified in EXHIBIT D.
Provider shall regularly provide Road Runner with Provider
Promotional Materials at no charge and in quantities at least as
frequently as specified in EXHIBIT B, and in accordance with
EXHIBIT C and with the Producer's Guide, it being understood that
Road Runner shall have the right to use such Provider Promotional
Materials with the frequency and in the places within the Road
Runner Service as Road Runner, in its sole discretion,
determines, except as otherwise specified in EXHIBIT D. Provider
acknowledges that a portion of the Primary Channel Highlight
positions is intended to include highlight positions for the
insertion by Service Affiliates of their content providers'
promotional materials, and that Road Runner does not control the
use of such promotional materials. Accordingly, it is understood
and agreed that the provisions of Exhibit D shall not be
interpreted to require that Provider Promotional Materials be
displayed, within the Primary Channel or otherwise, as frequently
as the promotional materials of any Service Affiliate content
provider.
2.4. AVAILABILITY OF CONTENT. Provider agrees to make the Co-Branded
Content and Provider Promotional Materials available at all times
to Road Runner for access by Road Runner's software retrieval
system, except for scheduled downtimes for Provider's servers.
2.5. SUPPORT SERVICES. Provider shall respond fully, promptly and
professionally to questions, complaints and requests for
assistance received by End Users via electronic mail, public
posting areas and other means of delivery or transmission
regarding the Co-Branded Content and the Provider Web Site.
Provider shall provide Road Runner and any Road Runner help desk
contractor with a telephone or beeper number where Provider can be
reached during normal business hours 9 a.m. to 6 p.m. Eastern
Standard Time, and will respond to any support request within
three (3) business hours; provided that Road Runner agrees to use
the beeper number for emergency use only. To the extent that
Provider has on-line customer support accessible to End Users from
one or more of the Provider Web Sites, Provider shall provide such
access from the Co-Branded Area to the same extent such support is
given to any other end users of the Provider Web Sites.
2.6. END USER INFORMATION. Provider agrees to include links in the
Co-Branded Content and the Provider Web Site to Provider's privacy
policy which, at a minimum, shall provide End Users with the right
to "opt out" of the disclosure by Provider to third parties of any
personally identifiable information collected by Provider (except
as necessary for the use of the Co-Branded Content or the Provider
Site). Provider shall honor any "opt out" request of an End User
in accordance with the foregoing. Further, Provider shall not
provide End User names, screen names, addresses or other
identifying information, including without limitation any
navigational information obtained by Provider through access to an
I/PRO account (or equivalent tracking system), if any, as specified
in EXHIBIT D ("END USER INFORMATION") to any third party in a
manner which identifies End Users as subscribers to the Road
Runner Service.
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2.7. LOCATION. Provider shall design, develop and operate the
Co-Branded Content at and from its location set forth on EXHIBIT A
and, to enable Road Runner to meet internal technical
requirements, shall provide Road Runner with thirty (30) days
written notice prior to changing such location.
3. OBLIGATIONS AND RIGHTS OF ROAD RUNNER.
3.1. DISTRIBUTION OF CONTENT.
3.1.1. Throughout the Term, except as otherwise provided in this
Agreement, Road Runner shall include the Co-Branded
Content in its entirety (upon collection by the Road
Runner software retrieval system) in the Co-Branded Area
and distribute the same to Service Affiliates for
distribution to End Users.
3.1.2. QUALITY CONTROL.
3.1.2.1. Provider agrees that the Provider Materials
shall not contain (i) pornographic material,
(ii) Content or links to third party Content
which may result in a third party claim against
or civil or criminal liability to Road Runner
or one or more Service Affiliates, (iii) Content
that, in the reasonable opinion of Road Runner,
may constitute libel, defamation, infringement
or otherwise violate the privacy, publicity or
other rights of a third party, or (iv)
advertisements for tobacco or alcohol, get rich
quick schemes, or products or services involving
deceptive marketing practices, or gambling. In
addition, Provider agrees that it shall use
commercially reasonable efforts not to provide
to Road Runner Content that contains
adult-themed material which is contrary to the
written rules and guidelines provided by Road
Runner to Provider which may be updated,
revised, supplemented, or amended from time to
time. Content which does not meet the
requirements set forth above will be referred to
herein as "Unacceptable Content".
3.1.2.2. While Road Runner does not intend, and does not
undertake, to monitor the Provider Materials, if
Road Runner at any time during the Term (i)
becomes aware of a breach or inaccuracy of any
representation or warranty set forth in SECTION
8, (ii) determines, in its sole discretion, that
any Content contained in the Provider Materials
constitutes Unacceptable Content, Road Runner
shall have the right, but not the obligation, to
immediately cease transmitting the relevant
Provider Materials and/or the relevant link(s)
to the Service Affiliate(s), or permit the
affected Service Affiliates to immediately cease
transmitting the same to its End Users, until
such time as Provider shall have demonstrated,
to Road Runner's satisfaction, that such breach
or inaccuracy has been cured, or the Content
creating the likelihood of a claim or liability
removed. Provider shall cooperate reasonably
with Road Runner with respect to the foregoing,
which cooperation may include deleting or
removing particular Content by Provider from the
Co-Branded Content or Provider Promotional
Materials upon Road Runner's request.
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3.1.2.3. The Provider will use commercially reasonable
efforts to avoid the existence of any viruses,
trap doors, hidden sequences, hot keys or time
bombs in the Provider Materials.
3.2. PROVIDER POSITIONING. Within the Road Runner Service, the
Provider Name/Logo will appear as specified in EXHIBIT D.
Provider acknowledges and agrees that (i) Road Runner may
determine in its sole discretion whether to use Provider's name
alone or in combination with Provider's logo as the Provider
Name/Logo, and that such determination shall not be considered a
factor in determining relative prominence, (ii) the actual
position on the Primary Channel shall not be considered a factor in
determining relative prominence, and (iii) the dimensions and
colors of the various content provider's logos, including
Provider's are not within the control of Road Runner and,
therefore, shall not be considered a factor in determining
relative prominence. The Co-Branded Content will be displayed
within the Road Runner Interface, which together will comprise the
Co-Branded Area and will be accessible by End Users as specified
in EXHIBIT D. Road Runner reserves the right to make changes to
the Road Runner Interface at its sole discretion.
3.3. ON-LINE PROMOTION. Road Runner will provide Provider with the
on-line promotions described in EXHIBIT D.
3.4. ROAD RUNNER RESOURCES. Road Runner will make
available to Provider certain proprietary methods
and/or tools that (i) will enable Provider to preview
the Co-Branded Area, and (ii) are necessary for
Provider to format and make available to Road Runner
the Co-Branded Content and the Provider Promotional
Materials, and all modifications and updates thereto,
in a manner designed to enable automated harvesting,
uploading and distribution of the Co-Branded Content
and the Provider Promotional Materials as contemplated
hereby without reformatting by Road Runner (as the
same may be modified, updated, supplemented or
replaced, the "ROAD RUNNER RESOURCES").
3.5. ROAD RUNNER SERVICE. Provider acknowledges that in order to
maintain a desirable End User experience, Road Runner shall have
the right to modify the navigational model of the Road Runner
Service and the Road Runner Interface from time to time.
4. LICENSES.
4.1. PROVIDER LICENSES.
4.1.1. PROVIDER MATERIALS. Provider hereby grants to Road Runner
a worldwide, non-exclusive, royalty-free license during
the Term to: (i) download the Co-Branded Content for
inclusion in the Co-Branded Area; (ii) reproduce, cache,
store on its servers, distribute, display, perform, stream
and transmit the Co-Branded Content (including without
limitation all Content and links contained therein) as
part of the Co-Branded Area included in the Road Runner
Service; (iii) reproduce, cache, store on its servers,
distribute, display, perform, stream and transmit the
Provider Materials, or any portion thereof, in connection
with the advertising, marketing and promotion (on-line or
otherwise, including without limitation in connection with
screen shots of the Road Runner Service in
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television commercials) of the Road Runner Service; (iv)
link to the Provider Web Sites via the links contained in
the Co-Branded Content within the Co-Branded Area; (v)
sublicense to End Users the rights to print and download
portions of the Co-Branded Content and the Provider Web
Site (linked to via the Co-Branded Area) for their own
personal uses, without the right of redistribution, and
(vi) make one copy of the Co-Branded Content and the
Provider Promotional Materials for backup or archival
purposes. Road Runner will have the right in its
reasonable discretion to edit and reformat any Provider
Materials for use within the Road Runner Service or for
use in any off-line promotions, in accordance with
Provider's Usage guidelines; provided that if Provider
objects to any such use, Provider shall have the right to
request that Road Runner cease such use, and Road Runner
agrees to comply with any such written request within two
(2) days of receipt thereof.
4.1.2. PROVIDER MARKS. Provider hereby grants Road Runner a
royalty-free, non-exclusive, worldwide license to use
Provider's Marks, during the Term, in accordance with
Provider's usage guidelines set forth on EXHIBIT E, in
connection with the advertising, marketing, promotion
(on-line and otherwise) and distribution of the Road
Runner Service, the Co-Branded Area and the Provider
Promotional Materials. Such license shall include the
right to use the Provider Name/Logo as (i) the links from
the Co-Branded Area to the Provider Web Site and (ii) the
launching point into the Co-Branded Area. Provider will
retain all goodwill and all other rights thereto, and Road
Runner will obtain no goodwill or any other rights thereto
as a result of the use of the Provider Marks.
4.1.3. RIGHT TO SUBLICENSE. Road Runner shall have the right to
sublicense the rights granted in SECTIONS 4.1.1 AND 4.1.2
to each Service Affiliate. Upon request by Provider, Road
Runner agrees to reasonably cooperate with Provider to
determine whether a particular Road Runner Affiliate is in
compliance with any such sublicense.
4.2. ROAD RUNNER LICENSES.
4.2.1. ROAD RUNNER RESOURCES. Road Runner hereby grants Provider
a non-exclusive, nontransferable royalty-free license
during the Term to use the Road Runner Resources solely to
format and make available to Road Runner the Co-Branded
Content and Provider Promotional Materials. Provider may
make one copy of the Road Runner Resources for backup or
archival purposes.
4.2.2. ROAD RUNNER MARKS. Road Runner hereby grants Provider a
royalty-free, non-exclusive, non-transferable royalty-free
license to use the Marks designated by Road Runner from
time to time during the Term, all in accordance with Road
Runner's usage guidelines communicated to Provider in
writing with respect thereto, solely as necessary to
advertise, market and promote (on-line and otherwise) the
Co-Branded Content and Provider Web Site as part of the
Road Runner Service as provided in EXHIBIT D; provided
that all uses of such Marks shall require the prior
written consent of Road Runner. Road Runner will retain
all goodwill and all other rights thereto, and Provider
will obtain no goodwill or any other rights thereto as a
result of the use of the Road Runner Marks.
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4.2.3. SUBLICENSES. Provider shall not sublicense any of the
rights set forth in this SECTION 4.2 without the prior
written permission of Road Runner.
5. OWNERSHIP. Provider shall retain all right, title and interest in
and to the Provider Materials and the Provider Marks. As among Road
Runner, the Service Affiliates, and Provider, Road Runner shall own all
right, title and interest in the Road Runner Resources, the Road Runner
Marks, and the Road Runner Service, subject to Provider's ownership of
all right, title and interest in the Provider Materials contained in the
Road Runner Service. Except for the Provider Materials, Road Runner
shall own anything developed under this Agreement. Provider shall not
decompile, disassemble, reverse-assemble, analyze or otherwise examine
the Road Runner Resources for reverse engineering.
6. ADDITIONAL FEATURES. The parties acknowledge and agree that (i)
retail sales will not be conducted via the Co-Branded Area other than as
provided for in Exhibit D, and the Provider Web Sites are and will
remain primarily informational and entertainment programming, and not
transaction, based, and (ii) this Agreement does not address the
exploitation, and it is impossible to anticipate the introduction or
development, of enhanced distribution features such as the transmission
of pay-per-view and/or streaming events.
6.1. RETAIL/TRANSACTIONAL ON-LINE SERVICE. Provider shall not conduct
any transactional activities other than as provided for in Exhibit
D within the Co-Branded Area without Road Runner's prior written
approval.
6.2. ENHANCED DISTRIBUTION FEATURES. In the event that Provider wishes
to include in the Co-Branded Area or the Provider Web Sites
programming such as pay-per-view, streaming or other events that
would exploit enhanced distribution features, the parties shall
negotiate in good faith the terms and conditions, including fees,
applicable to the distribution thereof.
7. ADVERTISING.
7.1. GENERAL. The parties will conduct on-line and off-line
advertising activities as specified in EXHIBIT D.
7.2. ADVERTISING. The Road Runner Service will contain advertising
avails for the sale and placement of advertising and/or third
party promotional materials (collectively, "Advertising") by Road
Runner and Service Affiliates (collectively, the "Road Runner
Parties"), including but not limited to one or more designated
spaces within the Road Runner Interface contained within the
Co-Branded Area (such space, the "Co-Branded Ad Avail"). The
parties agree that Road Runner shall have the right to sell and
place, and to permit its Service Affiliates to sell and place, all
such Advertising, including Advertising within the Co-Branded Ad
Avail as further specified in EXHIBIT D.
7.3. MARKET INFORMATION. Subject to applicable law and Road Runner's
privacy policies in effect from time to time, Road Runner will
share with Provider aggregate usage information related
specifically to the Co-Branded Area when the Road Runner usage
tracking system is successfully tested and implemented, and
Provider will share relevant
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market information regarding the Co-Branded Content and the
Provider Web Site with Road Runner. Road Runner also may, in its
discretion, share relevant general market research with respect to
the Road Runner Service.
8. REPRESENTATIONS AND WARRANTIES.
8.1. MUTUAL WARRANTIES. Each party represents and warrants to the
other that it has the right to enter into and fully perform its
obligations under this Agreement and to grant the rights granted
hereunder, and that the foregoing shall not constitute a breach or
violation of any other agreement entered into by such party.
8.2. WARRANTY DISCLAIMERS. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS
SECTION 8, NEITHER PARTY MAKES ANY WARRANTIES CONCERNING THE ROAD
RUNNER SERVICE, THE CATEGORIES, THE PRIMARY CHANNEL, THE CONTENT,
OR THE ROAD RUNNER RESOURCES, EXPRESS OR IMPLIED. EACH PARTY
SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT
TO THE ROAD RUNNER SERVICE, THE CATEGORIES, THE PRIMARY CHANNEL,
THE CONTENT, THE ROAD RUNNER RESOURCES, RELATED SERVICES, AND ANY
AND ALL CONTENT AND TOOLS AND RELATED DELIVERIES PROVIDED BY ROAD
RUNNER OR PROVIDER IN CONNECTION WITH THIS AGREEMENT. ROAD RUNNER
DOES NOT GUARANTEE THAT END USERS' USE OF THE ROAD RUNNER SERVICE,
INCLUDING WITHOUT LIMITATION THE CO-BRANDED AREA, WILL BE
UNINTERRUPTED OR ERROR-FREE.
8.3. YEAR 2000. Provider represents and warrants to Road Runner that
to the best of its knowledge as of the Effective Date the Provider
Materials provided to Road Runner under this Agreement are Year
2000 Compliant. Road Runner represents and warrants to Provider
that to the best of its knowledge as of the Effective Date the
Road Runner Service is Year 2000 Compliant. For purposes of this
Year 2000 Compliance warranty, each of the Provider Materials and
Road Runner Service shall include, but is not limited to, any and
all software, hardware, microcode (including, but not limited to,
source code, object code, and machine readable code), firmware,
operating systems, applications, programs, or databases. "Year
200 Compliant" shall mean that the Provider Materials or the Road
Runner Service, as the case may be, accurately processes
date/time data, including, but not limited to, recording,
storing, calculating, functioning, operating, sorting, comparing,
and presenting calendar dates (including leap year dates) falling
before, on, during, and after (and, if applicable, spans of time
including) January 1, 2000. "Year 2000 Compliant" shall also
mean that the Provider Materials or the Road Runner Service, as
the case may be, will process any information dependent on or
relating to such dates without loss of functionality, data
integrity, and performance. In the event of any breach of the
foregoing warranty, each party's entire liability, and the other
party's sole and exclusive remedy shall be for the breaching
party to use commercially reasonable efforts to repair or replace
the defective Provider Materials or Road Runner Service, as the
case may be. Each party shall notify the other party as soon as
reasonably practical of any information of which it becomes aware
that the Provider Materials or the Road Runner Service, as the
case may be, is not or will not be Year 2000 Compliant
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where such non-compliance is likely to disrupt the delivery of
Provider Materials to Road Runner or the operation of the Road
Runner Service.
9. INDEMNITY.
9.1. MUTUAL. Each party (the "INDEMNIFYING PARTY") hereby indemnifies
and holds harmless the other party and such other party's
affiliates (each, an "INDEMNIFIED PARTY") from and against all
third party claims, costs, liabilities, judgments, expenses and
damages (including amounts paid in settlement and reasonable
attorneys' fees) (collectively, "LOSSES") arising out of or in
connection with the Indemnifying Party's breach of any covenants,
warranties or representations made herein.
9.2. BY PROVIDER. Provider hereby indemnifies and holds harmless Road
Runner from and against all Losses incurred by Road Runner and by
its Service Affiliates as a result of any claim, demand or action
against Road Runner or any Service Affiliate based on, relating
to or arising out of: (A) any claim that the Provider Materials
(i) infringe any patent, copyright, trademark or trade secret
right of a third party, (ii) contain any viruses, trap doors,
hidden sequences, hot keys or time bombs, or (iii) violate any
applicable law or regulation, any third party's right of privacy
or publicity, or (iv) contain any libelous, defamatory, obscene
or indecent content or materials otherwise objectionable to a
person with reasonable sensibilities; or (B) the sale of any
products by or through the Co-Branded Area, the Provider Sites or
the CO Site as set forth on Exhibit D, including without
limitation any claims brought by Checkout.com arising from or
related to the activities contemplated by Exhibit D.
9.3. CONDITIONS. The foregoing indemnities shall be contingent upon
(i) the Indemnified Party giving prompt written notice to the
Indemnifying Party of any claim, demand or action for which
indemnity is sought; and (ii) the Indemnified Party fully
cooperating in the defense or settlement of any such claim, demand
or action, at the expense of the Indemnifying Party. The
Indemnifying Party shall obtain the prior written agreement of the
Indemnified Party to any non-monetary settlement or proposal of
settlement.
10. LIMITATION OF LIABILITY.
10.1. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY OR THE SERVICE
AFFILIATES BE LIABLE TO THE OTHER PARTY (WHETHER IN CONTRACT OR IN
TORT) FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES) ARISING FROM THE USE OR INABILITY TO
USE THE ROAD RUNNER SERVICE OR PROVIDER MATERIALS, SUCH AS, BUT
NOT LIMITED TO, LOSS OF REVENUE, ANTICIPATED PROFITS, DATA,
CONTENT OR BUSINESS, OR DAMAGES RESULTING FROM LOSS,
MISAPPROPRIATION OR UNAUTHORIZED ACCESS TO OR MODIFICATION OF THE
ROAD RUNNER SERVICE OR CONTENT CONTAINED THEREIN, WHETHER CAUSED
BY FAILURE OF PERFORMANCE BY SERVICE AFFILIATES, OR THEFT OR
DESTRUCTION OF THE ROAD RUNNER SERVICE OR ROAD RUNNER RESOURCES.
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10.2. EXCEPT FOR DAMAGES PAYABLE WITH RESPECT TO THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN SECTION 9, THE LIABILITY OF EITHER PARTY,
OR ANY OF THE SERVICE AFFILIATES FOR BREACH OF THIS AGREEMENT OR
OTHERWISE ARISING OUT OF OR ARISING OUT OF ANY CLAIM RELATING TO
THIS AGREEMENT (INCLUDING TORT CLAIMS) SHALL NOT EXCEED FIVE
THOUSAND DOLLARS ($5,000).
10.3. IN NO EVENT SHALL ROAD RUNNER BE LIABLE FOR OR IN CONNECTION
WITH, AND AS BETWEEN ROAD RUNNER AND PROVIDER, PROVIDER SHALL BE
SOLELY LIABLE FOR: (i) ANY AND ALL PRODUCTS OFFERED OR SOLD ON OR
VIA THE CO-BRANDED AREA, THE PROVIDER SITES OR AS SET FORTH IN
EXHIBIT D; OR (ii) THE PROVISION, OFFER OR USE BY ANY THIRD PARTY
OF ANY PRODUCT OFFERED OR SOLD ON OR VIA THE CO-BRANDED AREA, THE
PROVIDER SITES OR AS SET FORTH IN EXHIBIT D.
11. TERM AND TERMINATION.
11.1. TERM. The Term of this Agreement (the "TERM") shall commence on
the date hereof and, unless terminated earlier in accordance with
SECTION 11.2 below, shall continue until the first anniversary
hereof. Thereafter, this Agreement may be renewed upon mutual
written agreement of the parties.
11.2. TERMINATION FOR BREACH. Either party may terminate this
Agreement if the other party materially breaches any of its
representations, warranties, obligations or agreements hereunder,
and fails to cure such breach within thirty (30) days following
receipt of written notice thereof. Road Runner shall have the right
to terminate this Agreement immediately upon notice to Provider in
the event that Road Runner has advised Provider in writing that
Provider is in default of this Agreement by reason of providing
Unacceptable Content in the Provider Materials on at least three
separate occasions within any ninety (90) day period.
11.3. RETURN OF INFORMATION. Upon the expiration or termination of
this Agreement, each party shall promptly return all information,
documents, manuals and other materials belonging to the other party
except as otherwise provided in this Agreement, including, without
limitation, all Confidential Information.
11.4. EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement for any reason, the licenses granted herein shall
terminate, Road Runner shall, and shall require the Service
Affiliates to, promptly remove or delete all Provider Materials
from their respective servers and from the Road Runner Service.
Provider shall promptly return the Road Runner Resources and all
copies thereof to Road Runner.
12. CONFIDENTIALITY.
12.1. CONFIDENTIAL TREATMENT. Each party acknowledges that in performing
under this Agreement, it may gain access to Confidential
Information belonging to the other party and that such Confidential
Information may contain trade secrets of such party. Accordingly,
when a party (the "RECEIVING PARTY") receives Confidential
Information from another party (the "OWNING PARTY") the Receiving
Party shall, and shall obligate
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its employees and agents to, both during the term of this
Agreement and for a period of five (5) years after expiration or
termination thereof, (i) maintain the Confidential Information
received from the Owning Party in strict confidence, (ii) not
disclose the Confidential Information received from the Owning
Party to a third party without the Owning Party's prior written
approval, and (iii) not, directly or indirectly, use the
Confidential Information received from the Owning Party for any
purpose other than for the purposes permitted by this Agreement.
The Receiving Party shall disclose the Confidential Information
received from the Owning Party only to those employees and agents
who need to know the same, and each party undertakes to ensure that
such employees and agents are bound by confidentiality and
nondisclosure obligations with respect to such Confidential
Information that are no less strict than the confidentiality and
nondisclosure obligations set forth in this SECTION 12. Each party
shall take reasonable measures to protect the Confidential
Information of the other party, which measures shall not be less
than the measures taken by such party to protect its own
confidential and proprietary information. All Confidential
Information shall remain the sole property of the Owning Party.
13. GENERAL.
13.1. PUBLIC ANNOUNCEMENTS. Except as required by applicable law,
neither party shall make any public announcement or press release
regarding the existence or contents of this Agreement or the other
party's performance under this Agreement without the prior written
approval of the other party.
13.2. NO AGENCY OR JOINT VENTURE. The Parties agree and acknowledge
that the relationship of the parties is in the nature of an
independent contractor. This Agreement shall not be deemed to
create a partnership or joint venture and neither party is the
other's agent, partner, employee, or representative.
13.3. FORCE MAJEURE. Neither party shall be deemed in default of this
Agreement to the extent that performance of its obligations or
attempts to cure any breach are delayed or prevented by reason
of any act of God, fire, natural disaster, accident, or act of
government, telecommunications failure, shortages of materials or
supplies or any other cause beyond the control of such party;
provided that such party gives the other party written notice
thereof promptly upon discovery thereof and, in any event, within
twenty-four (24) hours of discovery thereof, and uses its best
efforts to cure the delay.
13.4. SEVERABILITY. Should any provision of this Agreement be held to
be void, invalid or unenforceable, such provision shall be enforced
to the maximum extent permissible, and the remaining provisions of
this Agreement shall remain in full force and effect.
13.5. NOTICES. Each party shall promptly inform the other of (i) any
information related to the Co-Branded Content, Provider Web Site or
the Road Runner Service that could reasonably lead to a claim,
demand, or liability of or against the other party by any
third-party; and (ii) any changes in the Provider Web Sites which
would substantially change the Provider Content in any area to
which Road Runner has linked from the Co-Branded Area.
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13.6. NO WAIVER. The failure of either party to partially or fully
exercise any right or the waiver by either party of any breach
shall not prevent a subsequent exercise of such right or be deemed
a waiver of any subsequent breach of the same or any other term of
this Agreement.
13.7. NO ASSIGNMENT. Neither party may assign this Agreement or any of
its rights or obligations under this Agreement, whether by
operation of law or otherwise, without the prior written consent of
the other party, except that either party may assign this Agreement
to a party that purchases all or substantially all of its assets.
Any attempted assignment or other transfer in violation of the
foregoing shall be void and of no force or effect.
13.8. BINDING AGREEMENT. This Agreement shall be fully binding upon,
inure to the benefit of and be enforceable by the parties hereto
and their permitted successors and assigns.
13.9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed duly given
(i) if delivered personally, when received, (ii) if
transmitted by facsimile, upon the generation by the
transmitting facsimile machine of a confirmation that the
entire document has been successfully transmitted, (iii) if
sent by recognized overnight courier service, on the business
day following the date of deposit with such courier service,
or (iv) if sent by registered mail, postage prepaid, return
receipt requested, on the third business day following the
date of deposit in the United States mail. All such notices
shall be addressed to a party at the following address:
If to Road Runner:
Karl Rogers, VP Programming
Road Runner
13241 Woodland Park Road, Herndon, VA 20171
Telephone: 703/345-2400
Telecopy: 703/345-3555
With copies to:
Audra Kalench
Road Runner
13241 Woodland Park Road, Herndon, VA 20171
Telephone: 703/345-2400
Telecopy: 703/345-3555
Jim Brueneman
Road Runner
13241 Woodland Park Road, Herndon, VA 20171
Telephone: 703/345-2400
Telecopy: 703/345-3555
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If to Provider, to:
Gerald Chizever
Richman, Lawrence, Mann, Chizever & Phillips
Penthouse, 9601 Wilshire Blvd.
Beverly Hills, CA 90210
Telephone: (310) 274-8300
Telecopy: (310) 274-2831
Stephen Brown, CEO
Entertainment Boulevard, Inc.
4052 Del Rey Avenue Suite 108
Marina Del Rey, CA 90292
or to such other address or facsimile number as a party shall
notify the other in accordance with this SECTION 13.9.
13.10. ENTIRE AGREEMENT. This Agreement and the exhibits hereto set
forth the entire agreement between the parties regarding the
subject matter hereof and supersede in their entirety all prior
written or oral negotiations, understandings and agreements between
the parties concerning the subject matter hereof. Any amendment or
modification of this Agreement must be in writing and signed by
both parties. In the event of a conflict between the Producer's
Guide and the terms and conditions of this Agreement, the terms and
conditions of this Agreement will govern.
13.11. SURVIVAL. The provisions of Articles 5, 9, 10, 12, and 13 and
Sections 11.3 and 11.4 shall survive the expiration or earlier
termination of this Agreement.
13.12. GOVERNING LAW. This Agreement shall be governed by the laws of
the Commonwealth of Virginia, exclusive of the choice of law rules
thereof.
13.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the Effective Date.
SERVICECO, LLC ENTERTAINMENT BOULEVARD, INC.
Signatory: /s/ Karl Rogers Signatory: /s/ Stephen Brown
--------------- -----------------
Name: Karl Rogers Name: Stephen Brown
----------- -------------
Title: VP Programming Title: CEO
-------------- ---
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EXECUTION COPY
EXHIBIT A
URL(S) OF PROVIDER WEB SITE(S): www.entertainmentblvd.com
LINKS TO www.checkout.com WILL BE PERMITTED IF THE LINKS ARE EMBEDDED WITHIN
THE PROVIDER POP-UP WINDOWS THAT ARE PART OF THE CO-BRANDED CONTENT AND IF
THE LINKS GO DIRECTLY TO THE TRANSACTION THAT CORRESPONDS WITH THE CONTENT
DISPLAYED ON THE POP-UP WINDOW.
PROVIDER MARKS:
Entertainment Boulevard Inc.
EntertainmentBlvd.com
EntertainmentBlvd.com Music
EntertainmentBlvd.com Movies
PROVIDER NAME AND LOGO:
Entertainment Boulevard Inc.
EntertainmentBlvd.com
EntertainmentBlvd.com Music
EntertainmentBlvd.com Movies
All logos will be provided electronically.
ROAD RUNNER MARKS: To be designated by Road Runner from time to time.
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road
Runner 2.0. Such functionality, navigation, content and advertising components
of Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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EXECUTION COPY
EXHIBIT B
CO-BRANDED CONTENT DESCRIPTION AND
UPDATE SCHEDULE FOR CO-BRANDED CONTENT AND PROVIDER PROMOTIONAL MATERIALS
1. OVERVIEW
The Co-Branded Area shall be an interactive content-based resource offering a
variety of information as outlined below, consisting of Provider Co-Branded
Content residing within the Road Runner Interface. All Co-Branded Content
included in the Co-Branded Area will be distributed to Service Affiliates for
high speed delivery to End Users. Co-Branded Content will include portions of
the Provider Web Sites, stories related to Provider Highlights, links out to
the Provider Web Sites, and assets enhanced specifically for delivery of
Broadband Programming. The Co-Branded Content should reasonably leverage the
Broadband Programming capabilities of the Road Runner Service. Where
possible, the Co-Branded Content should be both nationally and
internationally relevant. Road Runner will upload the Co-Branded Content to
the Co-Branded Area. Provider agrees to consider in its creation and
selection of Content for incorporation in the Co-Branded Content factors
which include (i) End Users' evolving demand for particular types of articles
and programming, as instructed by Road Runner, (ii) infrastructure
capabilities of the Road Runner Service, as communicated by Road Runner to
Provider from time to time, and (iii) fully exploiting and showcasing the
technical capabilities of Road Runner's Broadband Programming delivery system.
2. CO-BRANDED CONTENT DESCRIPTION & PARAMETERS
2.1. The maximum length for streaming video is ten (10) minutes,
unless otherwise approved in writing by Road Runner prior to such streaming.
Road Runner will have the right to discontinue distribution of any video that
violates this maximum without express written permission.
2.2. At all times, Provider shall make available to Road Runner a
minimum of three (3) pages of Co-Branded Content for inclusion in the
Co-Branded Area.
2.3. At all times, the Co-Branded Content shall contain at least one
(1) Broadband Programming element.
2.4. At any given time, the Co-Branded Content shall be comprised of
no less than sixty percent (60%) Content. No more than forty percent (40%) of
the Co-Branded Content shall be comprised of links to the Provider Web Site.
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road
Runner 2.0. Such functionality, navigation, content and advertising components
of Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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2.5. At least one (1) time per calendar quarter, Provider shall use
best efforts to include in the Co-Branded Content at least one (1) Broadband
Programming element that Provider creates solely for use by Road Runner in
the geographic territory in which the Road Runner Service is available (the
"Territory"). During the Term, Provider agrees not to grant any right or
license to any party other than Road Runner in the Territory with respect to
such Broadband Programming element.
2.6 The Co-Branded Area will be launched within forty-five (45) days
after the Effective Date and will include but not be limited to
the following:
- Approximately 100 music videos
per week which may be viewed by End Users in the Co-Branded Area
via a video/audio player that is part of a Pop-Up Window (as
defined below).
- Links to the Top 20 videos for the then-current week and
featured videos in each genre.
The Co-Branded Content may also include links to checkout.com (the "CO Site"),
provided that the links to the CO Site are embedded within the pop-up windows
(each, a "Pop-Up Window") that are part of the Co-Branded Content and provided
further that the links take the End User directly to the "artist" page (i.e., a
page which includes Content related to the artist performing in the applicable
video) that corresponds with the content displayed on the Pop-Up Window. When
technically implemented, the links to the CO Site will take the End User
directly to the transaction page on the CO Site.
Included in a Pop-Up Window will be links to the applicable music genre pages of
the EntertainmentBlvd.com Web site.
- Provider will also supply as Co-Branded Content a select number
of movie trailers, including, all of the "coming soon" and "now
playing" trailers that are available on the Provider Site. The
trailers will launch and be viewable by End Users in a
co-branded pop up player similar to the music video player.
The Co-Branded Content shall also include links to the CO Site
and to the Provider Site where the back catalog of trailers is
located.
2.7 The Co-Branded Content may include links which will permit an
End User to link from the Co-Branded Area to Pop-Up Windows in which
advertising avails may be placed by Provider. The links and the advertising
avails to which the links provide access, described in the preceding sentence
are deemed to be Co-Branded Content hereunder.
3. CO-BRANDED CONTENT AND PROVIDER PROMOTIONAL MATERIALS UPDATE SCHEDULE
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road
Runner 2.0. Such functionality, navigation, content and advertising components
of Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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The Co-Branded Content and Provider Promotional Materials include a
combination of evergreen and timely resources which will require updates
based on the timetable below:
REQUIRED MINIMUM
Channel Lineup Update Frequency
-------------- ----------------
ENTERTAINMENT 1X/DAY
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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EXECUTION COPY
EXHIBIT C
PROVIDER PROMOTIONAL MATERIALS
1. OVERVIEW
Provider will be required to submit Provider Promotional Materials for
all Provider Highlights (the Primary Channel Highlights, Category Welcome
Screen Highlights and Welcome Screen Highlights, if any). These Provider
Promotional Materials are intended to promote and feature Provider Content in
the Road Runner Service and to drive traffic to the Co-Branded Area. EXHIBIT
B sets forth the frequency with which Provider must update the Provider
Promotional Materials to be included in the Provider Highlights.
The Producer's Guide sets forth technical requirements for all Provider
Promotional Materials.
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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EXECUTION COPY
EXHIBIT D
PROVIDER POSITIONING AND MARKETING
1. PRIMARY CHANNEL: ENTERTAINMENT: MUSIC
ENTERTAINMENT: MOVIES
A. NAME/LOGO PLACEMENT
The Provider Name/Logo will appear as follows:
Entertainment Boulevard Inc.
EntertainmentBlvd.com
EntertainmentBlvd.com Music
EntertainmentBlvd.com Movies
All logos will be provided electronically.
B. CO-BRANDED AREA
The Co-Branded Area will be accessible by End Users by mouse clicking on
the Provider Name/Logo located (a) within the Primary Channel and (ii) within
one or more Provider Highlights.
Provider acknowledges and agrees that the Co-Branded Content in the
Co-Branded Area is intended to be comprised solely of the Content described
in EXHIBIT B. Therefore, unless otherwise approved in writing by Road Runner,
Provider shall not include any advertisements in the Co-Branded Content.
ADVERTISING. Provider agrees to share fifty percent (50%) of the gross
revenues received by Provider in connection with advertising placed within
the Provider's Content that is accessible by Road Runner subscribers via the
Co-Branded Area, less all agency commissions (not to exceed fifteen percent
(15%) of the applicable fees), rebates, refunds, credits, and taxes other
than those imposed on net income.
ECOMMERCE. As part of the Co-Branded Content, End Users will be offered
the opportunity to purchase products through the CO Site with whom Provider
has a valid, existing contract as follows:
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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(a) LINKS. The Co-Branded Content will include a button to link to
the CO Site (the "CO Links").
(b) ORDER PROCESSING. Checkout ("CO"), with which Provider has an
arrangement, will receive and process product orders placed by
End Users who use the CO Links to get from the Co-Branded Area
to the CO Site. CO reserves the right to reject orders that do
not comply with any requirements that CO periodically may
establish. CO will be responsible, at its sole expense, for all
aspects of order processing and fulfillment, including without
limitation: preparing order forms; processing payments,
cancellations, and returns; and handling customer service. CO
will track sales made to End Users who purchase products using
the CO Links from the Co-Branded Area to the CO Site, and will
send Provider reports summarizing this sales activity. Provider
will send reports summarizing End User sales activity to Road
Runner.
(c) CUSTOMER DATA. CO shall own and retain all right, title and
interest in all names, addresses and other identifying
information of users of CheckOut.com.
(d) REFERRAL FEES. Provider will pay to Road Runner a referral fee
for each sale of a Qualifying Product to a third party. A
"Qualifying Product Sale" shall be a product purchased by a
customer who has: (i) linked to the CO Site from the
Co-Branded Area to the Co Site, (ii) used CO's automated
ordering system, (iii) accepted delivery of the product at the
shipping destination, and (iv) remitted full payment to CO.
Products that are added to a customer's Shopping Cart after the
customer has re-entered the CO Site (other than through a CO
Link from the Co-Branded Area), shall not be Qualifying
Products even if the customer previously followed a link from
the Co-Branded Area to the CO Site.
(e) FEE SCHEDULE. Provider shall pay Road Runner, as a referral fee
for each Qualifying Product, a fee equal to four percent (4%)
of the sale price for such product listed in CO's catalog
(each, a "Referral Fee").
(f) POLICIES AND PRICING. Customers who buy products through CO
will be deemed to be CO's customers. Accordingly, all CO rules,
policies, and operating procedures concerning customer orders,
customer service, and product sales will apply to those
customers. CO will determine the prices to be charged for
products sold under this program in accordance with CO's
pricing policies. Product prices and availability may vary from
time to time.
(g) PROMOTIONS AND INCENTIVES. During the Term of the Agreement, CO
will provide special promotions to Provider users at least six
(6) times per year. Provider
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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will extend these promotions to its Road Runner End Users upon
agreement from Road Runner.
AUDIT RIGHTS. Road Runner shall have the right to examine during normal
business hours the books and records of Provider to verify the fees due
pursuant to this Exhibit D, subject to a seven (7) day notice requirement.
Such examination shall not occur more than once per calendar quarter unless
the parties agree to more frequent examinations. Such examination shall be at
the expense of Road Runner unless the examination results show that 95% or
less of fees owing for the examined period were actually paid, in which event
Provider shall bear all expenses of the examination. Such examinations shall
be limited to fees payable during the then-current and immediately preceding
calendar years.
PAYMENT. Within thirty (30) days following the end of each calendar
quarter during the Term and for the calendar quarter ending after the end of
the Term, Provider shall remit to Road Runner the Referral Fees payable under
this Exhibit D, Section B for such quarter together with a statement setting
forth the total amount of Gross Revenue and the calculation thereof; PROVIDED,
HOWEVER, that if the total Referral Fees for any quarter are less than $100,
Provider shall be permitted to withhold payment of such amount until the
following quarter or such time as the Referral Fees due and payable are at
least $100 (but Provider shall still submit a statement for such quarter
reflecting that amounts due are less than $100). Upon the expiration of the
Term, Provider shall be required to pay all unpaid fees, whether or not such
fees aggregate to at least $100. All payments shall be made without credit,
setoff or reduction with the following exception: If a Qualifying Product is
returned by the customer to CO, the corresponding fee will be deducted from
the next payment and if there is no subsequent payment, a bill for the fee
will be sent. All amounts not paid when due shall bear interest at the rate
of 18% per annum or, if lower, the maximum rate permitted under applicable
law. Payments of all fees shall be sent to Road Runner as follows: Road
Runner Power Media, 95 Madison Avenue, New York, NY 10112, Attn: Alice Smith
ON-LINE PROMOTION.
Provider Promotional Materials will be included in Highlights as specified
below.
A. PRIMARY CHANNEL HIGHLIGHTS. Road Runner shall promote the Provider
Promotional Materials in the Primary Channel Highlights of the Entertainment
Category no less frequently than other content provider promotional
materials for the purpose of promoting and featuring programming within the
Road Runner Service.
B. CATEGORY WELCOME SCREEN HIGHLIGHTS. Road Runner shall promote the
Provider Promotional Materials in the Category Welcome Screen Highlights of
the Entertainment Category, and the Provider name, logo and link to the
Co-Branded Area will be included in the Category Welcome Screen Highlight for
a minimum frequency of fifteen (15) minutes in duration at least ten (10)
times per week.
C. WELCOME SCREEN HIGHLIGHTS. Provider Promotional Materials will be
placed in the Welcome Screen Highlights for fifteen (15) minutes in duration
at least five (5) times per week.
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
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D. OTHER ON-LINE PROMOTION.
Road Runner may promote the Co-Branded Content and Provider Web Site,
using the Provider Promotional Materials, in other channels and other areas
of the Road Runner Service. In addition, Road Runner intends to conduct
additional on-line promotions intended to increase awareness of and drive
on-line traffic to the Co-Branded Area and Provider Web Site, such as
notifying Service Affiliate subscribers of events or highlighting new
features. Except as indicated below or as the parties may agree in advance
and in writing with respect to particular Provider Promotional Materials or
other Provider Content, and subject to SECTION 4.1.1 of the Agreement, the
nature and frequency of such promotional activities, and the use of Provider
Promotional Materials and other Provider Content for promotional purposes,
shall be within Road Runner's sole discretion.
Road Runner shall (i) include Provider's name, logo, and link to the
Co-Branded Area in one (1) original programming/promotional opportunity (e.g.
the holiday gift guide or winter getaway guide) per calendar quarter; and
(ii) when ready, include Provider Promotional Materials in the Road Runner
electronic newsletter at least one (1) time per calendar quarter.
3. OFF-LINE MARKETING AND PROMOTION
A. TV COMMERCIAL. During the Term, Road Runner will feature Provider in
at least one (1) cable television commercial of thirty (30) seconds in
length, and will distribute such commercial to Road Runner's Service
Affiliates which may distribute such commercials on their cable television
networks. Provider will be the only content partner featured in such
commercial.
B. BOUNTY PROGRAM. When available, Road Runner will offer Provider the
option to participate in a Road Runner bounty program, which provides content
providers with compensation for generating leads that result in new End
Users. Provider shall be paid Road Runner's then-current affiliate bounty
rate in accordance to the then-current program rules provided by Road Runner.
C. RETENTION MARKETING CAMPAIGNS. When available, Road Runner will offer
Provider the opportunity to participate in retention marketing campaigns,
such as rewards programs.
4. MARKET RESEARCH
Road Runner shall provide Provider with an individual I/PRO account (or
equivalent tracking system) so that Provider may track access to and usage of
the Co-Branded Area. Provider acknowledges that in order to utilize such
account tracking system, Provider may be subject to certain usage
requirements of the account or tracking system or be subject to obligations
imposed by Road Runner.
5. All Road Runner promotional obligations described in this EXHIBIT D are
subject to Provider meeting the content update and technical requirements
specified on EXHIBITS B AND C.
The Exhibits attached to this Agreement substantively represent the
functionality, navigation, content and advertising components of Road Runner
2.0. Such functionality, navigation, content and advertising components of
Road Runner Service may be modified by Road Runner, from time to time, in
accordance with the terms and conditions of this Agreement. In addition,
stylistically, these specifications may change as deemed necessary by Road
Runner, and Road Runner will make all reasonable efforts - including
documentation of changes - to ensure that the presentation of the Provider
Materials, as described in the Exhibits, will not be materially altered.
Page 23
<PAGE>
Exhibit 21.1
Entertainment Boulevard Subsidiary
International Net Broadcasting, a California limited liability company.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 16, 1999, accompanying the
financial statements of Entertainment Boulevard, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to
the use of our name as it appears under the caption "Experts."
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
November 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-31-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 553,673 200,072
<SECURITIES> 0 0
<RECEIVABLES> 12,715 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 641,388 200,072
<PP&E> 297,408 79,960
<DEPRECIATION> 52,548 21,510
<TOTAL-ASSETS> 1,389,626 267,178
<CURRENT-LIABILITIES> 1,604,342 632,681
<BONDS> 0 852,268
0 0
20 0
<COMMON> 12,213 7,675
<OTHER-SE> (227,049) (1,225,446)
<TOTAL-LIABILITY-AND-EQUITY> 1,389,626 267,178
<SALES> 12,715 0
<TOTAL-REVENUES> 12,715 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,251,928 1,431,398
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,334,490 3,755
<INCOME-PRETAX> (9,573,703) (1,435,153)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,573,703) (1,435,153)
<EPS-BASIC> (0.82) (0.30)
<EPS-DILUTED> 0 0
</TABLE>
