<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 2000
REGISTRATION NO. 333-91825
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
TO
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.
VANITA J. TYLER, ESQ.
RICHMAN, MANN, CHIZEVER, PHILLIPS & DUBOFF
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 [ ], 2000.
[LOGO]
ENTERTAINMENT BOULEVARD, INC.
9,814,077 SHARES OF COMMON STOCK
- Our common stock is traded on the over-the-counter bulletin board under
the symbol "EBLD."
- All of the shares of common stock offered in this prospectus are being
sold by the selling stockholders listed on pages 53 and 54 of this
prospectus.
- This prospectus covers the resale of 9,814,077 shares of common stock,
including common stock to be issued to the selling stockholders upon the
conversion of preferred stock and upon the exercise of warrants.
- 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.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 7 IN DETERMINING WHETHER
TO PURCHASE SHARES OF OUR COMMON STOCK.
---------------------
THE DATE OF THIS PROSPECTUS IS [ ], 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.......................................... 4
RISK FACTORS................................................ 7
FORWARD-LOOKING STATEMENTS.................................. 9
ABOUT THIS PROSPECTUS....................................... 9
USE OF PROCEEDS............................................. 9
TRADING INFORMATION......................................... 10
DIVIDEND POLICY............................................. 10
SELECTED FINANCIAL DATA..................................... 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 12
RECENT DEVELOPMENTS......................................... 18
BUSINESS.................................................... 21
MANAGEMENT.................................................. 42
PRINCIPAL STOCKHOLDERS...................................... 46
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 48
DESCRIPTION OF OUR SECURITIES............................... 49
SHARES ELIGIBLE FOR FUTURE SALE............................. 52
SELLING STOCKHOLDERS........................................ 53
PLAN OF DISTRIBUTION........................................ 56
LEGAL MATTERS............................................... 57
EXPERTS..................................................... 57
WHERE YOU CAN FIND MORE INFORMATION......................... 57
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
ENTERTAINMENT BOULEVARD, INC.
We develop and license entertainment-related video programming for broadcast
over the Internet, using advanced data transmission technologies. We have
launched the following four programming categories on our website at vidnet.com:
- MUSIC--Music video programming, including music videos from most genres,
music news and reviews.
- MOVIES--Movie trailers from upcoming films, new releases and films on
video, plus movie news and reviews.
- SPORTS--Sports programming from across the country and sports news.
- NETFOMERCIALS--Video programming offering a broad range of product
infomercials.
---------------------
We 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
vidnet.com.
The information contained on our Web site does not constitute part of this
prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered................................. 9,814,077 shares
Common stock outstanding after this offering......... 23,370,447 shares
Use of proceeds...................................... We will not receive any proceeds from
the shares sold by the selling
stockholders, but 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 and
administrative costs, computer and
related costs and marketing.
Over-the-counter bulletin board symbol............... EBLD (formerly SDMT)
</TABLE>
The number of shares of common stock outstanding after this offering
includes 6,376,000 shares of common stock issuable upon the exercise of certain
outstanding warrants. It does not, however, include up to 4,598,000 shares of
common stock that could be issued upon the exercise of certain other outstanding
warrants and options.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
Revenues............................................ $ 268,039 --
Costs and expenses.................................. 7,030,323 $ 1,431,398
------------ -----------
Operating loss...................................... (6,762,284) (1,431,398)
Interest expense.................................... (6,169,676) (3,755)
Income taxes........................................ $ -- --
------------ -----------
Net loss............................................ $(12,931,960) $(1,435,153)
============ ===========
Net loss per share.................................. $ (1.09) $ (.30)
============ ===========
Shares used in computing net loss per share......... 11,868,537 4,814,266
============ ===========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets....................................... $ 660,228 $ 200,072
Working capital deficiency........................... (3,049,509) (432,609)
Total assets......................................... 3,352,060 267,178
Total liabilities.................................... 3,709,737 1,484,949
Stockholders' deficiency............................. (357,677) (1,217,771)
</TABLE>
6
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
INVESTING IN OUR COMMON STOCK.
OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS DOUBT OUR ABILITY TO CONTINUE AS A
GOING CONCERN.
Our financial statements for the years ended December 31, 1999 and December
31, 1998 and for the periods from April 1, 1997, the date of inception, through
December 31, 1999 were audited by our independent certified public accountants.
Their report states that the financial statements were prepared assuming we will
continue as a going concern although we have incurred significant net losses and
have working capital deficiencies that raise substantial doubts about our
ability to do so.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY BE UNABLE TO SUCCESSFULLY
MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY.
We incorporated in December 1997 and acquired International Net
Broadcasting, LLC in January 1999. International Net Broadcasting began
operating in April 1997 as All Media Distribution, LLC and its Web site first
became available in March 1998. Our management faces the challenge of developing
a business in a rapidly evolving market. We may not be able to maintain or
develop the strategic relationships necessary to achieve or maintain
profitability. In addition, our financial results cover periods prior to the
acquisition of our Internet business and may not be indicative of our future
operating results.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES.
We have not yet achieved profitability and expect that our operating losses
will continue for the foreseeable future. If our revenues grow more slowly than
we anticipate, or if our operating expenses exceed our expectations, our
financial performance will be adversely affected. 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 approximately $12,931,960 during the year ended
December 31, 1999. As of December 31, 1999, our accumulated deficit was
approximately $15,016,739. We need to generate significant revenues to achieve
and maintain profitability. See "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
OUR ABILITY TO MEET OUR WORKING CAPITAL NEEDS WILL BE SIGNIFICANTLY LIMITED IF
WE CANNOT OBTAIN ADDITIONAL FINANCING.
To meet our anticipated working capital and capital expenditure requirements
for the foreseeable future we need substantial capital, which we may not be able
to
7
<PAGE>
obtain. We are in the process of negotiating a $1 million line of credit but we
do not have a line of credit at this time, however, we have raised approximately
$10 million in a private placement of our securities subject to the successful
completion of an exchange offer. See "Recent Developments--Sale of units and
unit exchange offer." That amount, plus cash reserves, proceeds of $2 million
from the most recent sale of Series A preferred stock and projected cash flow
from operations, should be sufficient to meet our requirements for the
foreseeable future. If, however, 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.
Additional financing may not be available on terms favorable to us, or at
all. If adequate funds are not available, or are not available on acceptable
terms, our ability to meet our working capital needs will be significantly
limited, which would adversely affect our business.
BECAUSE OUR REVENUES DEPEND ON A LIMITED NUMBER OF ADVERTISERS WE MUST RETAIN
OUR CURRENT ADVERTISERS OR ATTRACT NEW ONES.
Our results of operations in any given period depend to a significant degree
upon revenues from a small number of advertisers. In addition, few advertisers
are contractually obligated to purchase any advertising in the future. Our
failure to sell a sufficient number of advertisements or to increase the number
of advertisers during a particular period could adversely affect our results of
operations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN STEPHEN BROWN AND OTHER KEY
PERSONNEL.
We believe that the music industry background of Stephen Brown, our
president and chief executive officer, is critical to our success. Mr. Brown's
experience and his industry connections are key factors in forming the
cooperative ventures and strategic alliances that insure the availability of
variety and high quality content on vidnet.com. The loss of his services would
have a detrimental impact on our business. Our success also depends on our
ability to hire and retain other qualified employees. We may not be able to
locate and hire those employees because of intense competition in the Internet
industry for personnel with the requisite skills.
THE PRICE OF OUR COMMON STOCK COULD BE ADVERSELY AFFECTED WHEN OUR OUTSTANDING
DEBT IS CONVERTED TO EQUITY.
We have offered the holders of our outstanding short-term notes the
opportunity to participate in an exchange offer in which we would exchange their
notes for common stock and warrants to purchase common stock. Because the
exchange rate at the time of the offer is beneficial to the debt holders, we
will incur a charge to earnings of approximately $25,500,000 if all of the note
holders participate in the exchange. This could adversely affect the price of
our common stock.
8
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We intend to identify
forward-looking statements in this prospectus by using words such as
"anticipates," "believes," "intends," "expects," "may," "should," "plan,"
"projected," "contemplates," or similar statements. These statements are based
on our beliefs and assumptions we made using information currently available to
us. Because these statements reflect our current views concerning future events,
these statements involve risks, uncertainties and assumptions. Actual future
results may differ significantly from the results discussed in the
forward-looking statements. You should not place undue reliance on those
forward-looking statements which apply only as of the date of this prospectus.
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 that 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,"
"we," "us," and "our" refer to Entertainment Boulevard, Inc., a Nevada
corporation, and International Net Broadcasting, its sole subsidiary. We use
vidnet.com as the registered domain name of our Web site. We intend to apply for
registration of the marks "Vidnet," "Vidnet.com Music," "Vidnet.com Movies,"
"Vidnet.com Sports" and "Vidnet.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 receive from this offering will be from the exercise of
warrants held by some of the selling stockholders. However, some of those
warrants have an exercise option that allows the holder to exercise the warrants
without paying the exercise price in cash. Instead, the holder would receive
common stock with a dollar value that is equal to the the market price of the
common stock minus the exercise price of the warrants multiplied by the number
of warrants exercised. If all the selling stockholders exercise their warrants
by paying the exercise price in cash, we will receive a maximum of $8,200,000.
Any net proceeds received by Entertainment Boulevard will be used for general
corporate purposes, including working capital for our business. We intend to
allocate the net proceeds as follows:
<TABLE>
<CAPTION>
<S> <C>
approximately
General and administrative costs... $2.8 million
approximately
Computer and related costs......... $2.5 million
approximately
Marketing costs.................... $2.9 million
</TABLE>
We intend to invest any net proceeds in short-term, interest-bearing,
investment-grade securities before using those proceeds as indicated.
9
<PAGE>
TRADING INFORMATION
Our common stock is publicly traded on the over-the-counter bulletin board,
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 under the symbol "EBLD" on
February 5, 1999. From November 20, 1998 until that time, it traded under the
symbol "SDMT." As of March 13, 2000, the closing bid price for our common stock
was $6.1875. The 52-week low bid price was $1.50 and the 52-week high bid price
was $8.00. Information as to trading volumes and bid and asked prices for our
common stock may be obtained directly from the over-the-counter bulletin board.
The following table sets forth the high and low bid prices for our common
stock as reported to us by the over-the-counter bulletin board. These prices
indicate the prices that a market maker is willing to pay. These 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
December 31, 1999.......................... $1.6875 $4.1875
</TABLE>
As of March 13, 2000, there were 78 holders of record of our common stock.
DIVIDEND POLICY
To date, we have not paid cash dividends on our common stock and we do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. Our board of directors will determine, in its sole discretion, whether
to declare any dividends on our common stock in the future based on our
earnings, capital requirements, financial condition and other relevant factors.
10
<PAGE>
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
included with this prospectus. The statement of operations data for the years
ended December 31, 1999 and 1998, and the balance sheet data at December 31,
1999 and 1998, are derived from financial statements of Entertainment Boulevard
which have been audited by Singer Lewak Greenbaum and Goldstein LLP, independent
certified public accountants.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
Revenues.................................................... $ 268,039 --
Costs and expenses.......................................... 7,030,323 $ 1,431,398
------------ -----------
Operating loss.............................................. (6,762,284) (1,431,398)
Interest expense............................................ (6,169,676) (3,755)
Income taxes................................................ $ -- --
------------ -----------
Net loss.................................................... $(12,931,960) $(1,435,153)
============ ===========
Net loss per share.......................................... $ (1.09) $ (.30)
============ ===========
Shares used in computing net loss per share................. 11,868,537 4,814,266
============ ===========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets.............................................. $ 660,228 $ 200,072
Working capital deficiency.................................. (3,049,509) (432,609)
Total assets................................................ 3,352,060 267,178
Total liabilities........................................... 3,709,737 1,484,949
Stockholders' deficiency.................................... (357,677) (1,217,771)
</TABLE>
11
<PAGE>
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 THE RELATED NOTES 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. 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 that
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.vidnet.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
depends primarily upon our ability to obtain advertising and sponsorship revenue
and to achieve sales through our Web site. To date, Entertainment Boulevard has
not generated any significant revenue and our ability to do so in the future is
substantially uncertain.
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 like
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.
We may not 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.
Currently, our Internet ads are priced on a cost-per-thousand ads displayed
basis. These are measured by the number of times viewers click on that specific
advertisement. As a result, we believe that our future Internet commerce and
advertising revenue depends largely on increasing the vidnet.com audience.
Revenues
12
<PAGE>
from Internet-generated transactions are recorded at the time the vendor ships
the product to the customer. Revenues from advertisements on vidnet.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 may spend substantial funds for advertising without receiving revenues
during our sales cycles. Our dependence on advertising revenues 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 affected by factors over which we
have little or no control. If sales are delayed or do not occur, our operating
results for a particular period may be adversely affected.
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.
We have entered into various license arrangements and strategic alliances in
order to build our audience, provide 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 may involve significant amounts of intangible assets, or non-cash
charges that may affect our operating results over the next several fiscal
periods. As of December 31, 1999 those transactions have not resulted in any
material affect on our operations. However, future operating results may be
adversely affected by amortization of any intangible assets acquired.
We have incurred significant net losses and negative cash flows from
operations since our inception. As of December 1999, we had an accumulated
deficit of approximately $15,016,739. We intend to continue to make significant
financial investments in marketing and promotion, content, technology and
infrastructure development. As a result, we believe that we will continue to
incur operating losses
13
<PAGE>
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. To
achieve profitability, we need to increase the size of our audience and our
revenues from advertising, e-commerce sales and encoding services.
RESULTS OF OPERATIONS--FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 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 $268,039 for the year ended December 31,
1999, from $0 for the same period in 1998. Such increase is due to advertising
revenues.
COMPENSATION EXPENSE. Compensation expense increased approximately 313% to
$2,921,494 for the year ended December 31, 1999, from $708,145 for the same
period in 1998. This increase was due primarily to non-cash charges related to
stock-based compensation of $2,159,858 and an increase in our staff to
twenty-four employees at December 31, 1999 from seven employees at December 31,
1998, partially offset by the elimination of an officer's salary.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 254%
to approximately $71,200 for the year ended December 31, 1999, from
approximately $20,100 for the same period in 1998, primarily as a result of
increased capital expenditures.
CONSULTING EXPENSE. Consulting expense increased to approximately $631,900
for the year ended December 31, 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 340% to approximately
$3,095,734 for the year ended December 31, 1999, from approximately $703,000 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 $54,400 for
the year ended December 31, 1999, from $3,755 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 approximately $6,115,237 for
the year ended December 31, 1999, from $0 for the same period in 1998. This
non-cash expense relates primarily to the January 1999 conversion of long-term
debt owed by International Net Broadcasting into shares of our common stock at a
below market price and the issuance of debt with detachable stock purchase
warrants.
14
<PAGE>
RESULTS OF OPERATIONS--FISCAL YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM
APRIL 1, 1997 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, the date of our 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 our inception, we have financed our
operations primarily through loans totaling $3,861,393 and private sales of our
equity securities totaling $3,621,025. We incurred offering costs of
approximately $456,800 in connection with these sales. As of December 31, 1999,
we had on hand approximately $429,408 in cash, cash equivalents and short-term
investments. We are currently negotiating a $1 million line of credit but we do
not have access to a line of credit at this time. In addition, since
December 31, 1999, we have raised $2,000,000 through the sale of additional
shares of Series A preferred stock and another approximately $10 million through
the sale of units consisting of short-term promissory notes and warrants to
purchase common stock. These units are involved in an exchange offer which, if
successful, will convert the promissory notes to common stock. For the year
ended December 31, 1999, we had revenues of approximately $268,000 derived
primarily from the sale of advertising. We anticipate that we will continue to
generate revenue from advertising in the future, as well as from our video
encoding service.
For the year ended December 31, 1999, operating activities used net cash of
approximately $3,565,000, primarily from a net loss from operations of
approximately $12,932,000 which was partially offset by non-cash stock-based
compensation and financing charges of approximately $8,907,000. In addition,
financing activities provided net cash of approximately $4,193,000, primarily
from the proceeds from the placement of short-term debt and the sale of equity
securities which totaled approximately $4,551,000. This was partially offset by
payments on the short-term debt
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and offering costs which totaled approximately $1,089,000. For the year ended
December 31, 1999, our investing activities used net cash of approximately
$399,000, primarily to purchase equipment.
For the period from inception to December 31, 1999, operating activities
used net cash of approximately $5,453,000, primarily from a net loss from
operations of approximately $15,017,000 which was partially offset by an
increase in accounts payable and accrued liabilities of approximately $956,000.
In addition, financing activities provided net cash of approximately $6,370,639,
primarily from the proceeds from the placement of debt and the sale of equity
securities. This was partially offset by offering costs of approximately
$456,784. For the period from inception to December 31, 1999, our investing
activities used net cash of approximately $488,653, primarily to purchase
equipment.
We have experienced a substantial increase in our compensation expenses,
capital expenditures and operating lease costs since our inception. This is
consistent with the growth in our operations and staffing and we anticipate that
this trend will continue for the foreseeable future. Additionally, we plan to
expand our sales and marketing programs and conduct more aggressive brand
promotions. Based on our anticipated operating expenses of approximately
$300,000 per month, we expect that our present cash balance, plus net proceeds
from the recent sale of additional shares of Series A preferred stock and units,
subject to the successful completion of the pending exchange offer involving
those units, and revenues from operations will be sufficient to meet our
anticipated needs for working capital and capital expenditures for the
foreseeable future. Our ability to grow will depend in part on our ability to
expand and improve our Web site content material.
We may need to raise additional funds to:
- Take advantage of unanticipated opportunities including--
- more rapid expansion;
- acquisition of complementary businesses; and
- development of new products.
- React to unforeseen difficulties including--
- loss of key personnel;
- rejection by users of our Web site; and
- other competitive pressures.
If we raise additional funds 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. Additional financing may not be available on terms
acceptable to Entertainment Boulevard, or at all. If we are unable to obtain
sufficient funds on a timely basis, we
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may be unable to implement our business plans, which could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
RECENT ACCOUNTING PRONOUNCEMENTS. In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position No. 98-1, "Software
for Internal Use," which provides guidance on accounting for the cost of
computer software developed or obtained for internal use. Statement of Position
No. 98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. We do not anticipate that the adoption of Statement of
Position No. 98-1 will have a material impact on Entertainment Boulevard's
financial statements.
In April 1998, the AICPA issued Statement of Position No. 98-5, "Reporting
on the Costs of Startup Activities." Statement of Position No. 98-5, 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.
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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., or the
purchasers, that provided for:
- the immediate sale of 2,000 shares of Series A preferred stock to those
entities for $2 million; and
- the sale of another 2,000 shares of Series A preferred stock to those
entities for an additional $2 million.
The second transaction closed on March 15, 2000. All 4,000 shares of
Series A preferred stock were converted into 2,723,647 shares of common stock at
that time.
Under the agreement, the purchasers were 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, for two years the purchasers
have the right to approve the appointment of any new or replacement member to
our board of directors, and the right to have Robb Peck McCooey Clearing
Corporation appoint a board observer to attend meetings of our board of
directors.
Under the agreement, until 180 days after the date of this prospectus, with
certain exceptions, we can not offer, sell, grant any option to purchase, or
otherwise dispose of any of our equity or equity-equivalent securities at a
price that is less than the market price of the common stock at the time of
issuance of such security without the prior written consent of the purchasers.
We must also get the written consent of the purchasers before offering or
selling a convertible security if the conversion price is less than the market
price of our common stock at the time of issuance of such security. In addition,
with certain exceptions, for a period of not less than 90 trading days after the
date of this prospectus, we cannot, without the prior written consent of the
purchasers:
- register any of our securities for resale; or
- issue or sell any of our equity or equity-equivalent securities.
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 and some of its key employees were
granted:
- warrants to purchase 250,000 shares of our common stock for $2.00 per
share any time from September 3, 2000 until September 2, 2004; and
- warrants to purchase additional 250,000 shares upon the same terms upon
completion of the sale of the additional shares of Series A preferred
stock.
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If Robb Peck provides us with investment banking services, it will be paid
additional fees as specified in the agreement. The shares underlying Robb Peck's
and its employees' warrants have the benefit of certain registration rights. As
a result, Robb Peck and its employees are included as selling stockholders in
this prospectus. In connection with the sale of the Series A preferred stock,
Stephen Brown, our chief executive officer, agreed to a 270 day lock-up as to
the sale of 1,425,000 shares obtainable by him through the exercise of warrants.
See "Shares Eligible for Future Sale" and "Certain Transactions and
Relationships."
SHORT-TERM LOANS TO ENTERTAINMENT BOULEVARD. On January 14, 2000,
H.A.A. Inc. and Forest Equities, Ltd. loaned us a total of $200,000 with an
interest rate of 10% per year. On March 15, 2000, the principal and interest
were converted into 203,388 shares of our common stock at the lenders' election.
In connection with the loan, the lenders received five-year warrants to purchase
a total of 50,000 shares of our common stock at $1.00 per share. The shares
obtained upon conversion of the loan, as well as the shares issuable upon
exercise of the warrants, are included in the shares being registered for
H.A.A. Inc. and Forest Equities, Ltd. as selling stockholders in this
prospectus.
SHORT-TERM LOAN BY ENTERTAINMENT BOULEVARD. In January 2000, we made
advances of approximately $486,000 to a digital production company. The note is
due and payable on demand.
SALE OF UNITS AND UNIT EXCHANGE OFFER. On December 28, 1999, we entered
into an agreement with an investment banking firm to act as placement agent for
units of our securities. From December 28, 1999 through February 3, 2000, the
placement agent sold 112.65 units. Each unit consists of a $100,000 note payable
in 90 days with an interest rate of 10% per year and a five-year warrant to
purchase 40,000 shares of common stock at $1.00 per share. The shares issuable
upon exercise of the warrants will have certain piggy-back registration rights.
Proceeds from the unit offering were used for working capital and general
corporate purposes. In accordance with generally accepted accounting principals,
we will recognize the fair market value of the warrants as financing costs over
the term of the notes. The aggregate value of the warrants issued in connection
with this debt would be approximately $15,500,000 which is expected to be
recorded in the first quarter of 2000.
On February 24, 2000, we offered these note holders the opportunity to
exchange their notes for shares of common stock. The aggregate amount of debt
outstanding related to this potential exchange was approximately $11,265,000 at
the time the offer was made. The exchange rate offered to the note holders is
50,000 shares of common stock and 20,000 stock purchase warrants with an
exercise price of $4.00 per share for every $100,000 of debt held. The exchange
rate at the time of the offer was beneficial to the note holders. If all of the
note holders were to participate in the exchange, we would incur a charge to
earnings of approximately $25,500,000, which represents the difference between
the trading price of the common stock and the exchange rate of
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the notes which we expect would be recorded in the first quarter of 2000. To the
extent a note holder does not participate in the exchange, we expect to repay
the notes out of the proceeds we received from the sale of the additional shares
of Series A preferred stock.
TERMINATION AGREEMENT. In connection with our agreements with the
investment banking firm that placed 112.65 units of our securities from December
1999 through February 2000, Robb Peck agreed to terminate certain of its rights
under the Placement Agency Agreement dated September 3, 1999 in return for
warrants to purchase an additional 500,000 shares of common stock, provided that
the investment banking firm is able to raise $5 million for Entertainment
Boulevard on or before March 15, 2000. The shares issuable upon exercise of
those warrants are included in the shares being registered for Robb Peck and its
key employees as selling stockholders in this prospectus.
The termination agreement also provided that if the investment banking firm
raised at least $5 million on or before March 15, 2000, Robb Peck would use its
best efforts to cause all outstanding shares of Series A preferred stock to be
converted into common stock. Entertainment Boulevard agreed that the conversion
rate under these circumstances would be one share of common stock for each $1.50
of stated value of Series A preferred stock. As of March 15, 2000, the required
amount had been met and the holders of the outstanding shares of Series A
preferred stock converted their shares into 2,723,647 shares common stock.
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BUSINESS
ENTERTAINMENT BOULEVARD
Entertainment Boulevard is a digital media company focused on creating the
premier destination for streaming Internet entertainment and information video.
Streaming is a technique for transferring data so that it can be heard or viewed
as it is received. Taking advantage of the unique benefits of digital media,
Entertainment Boulevard strives to offer 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.
We deliver content on-demand to our users in an interactive format so our
Web site users are not confined to receiving content in the programmed, linear
sequences broadcast by radio and television. Broadband access to the Internet is
achieving greater consumer acceptance and enables us to add our highest quality
audio and video content to vidnet.com. Broadband channels have a wider bandwidth
than conventional telephone lines, which gives them the ability to carry video,
voice and data simultaneously. 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 services, Entertainment Boulevard is the only streaming media encoder
on the Internet to provide in-house content for its own established network.
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. and acquired certain mining rights in
Tooele County, Utah. Although we still hold those rights, we are no longer in
that line of business. Instead, our only operations are through our wholly owned
subsidiary, International Net Broadcasting, which we acquired in January 1999.
Our present operations, assets and employees are primarily those of
International Net Broadcasting. On January 31, 2000, we re-launched our Web site
at www.vidnet.com. A link from our previous address at
www.entertainmentblvd.com, which was launched in March 1998, automatically
directs traffic to our new Web site. Prior to March 1998 Entertainment Boulevard
and/or International Net Broadcasting operated several 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, 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
approximately 11%, with a dollar
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value of $11.4 billion in 1998. The Recording Industry Association 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. This allows music 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 this 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 reach 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 must limit the amount and range of music or videos
they broadcast 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 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. We believe that sports
broadcasting companies and movie studios can take advantage of the opportunity
to reach a large and diverse audience by using the Internet to promote their
products.
GROWTH OF DIGITAL MEDIA. Significant growth in consumer use of personal
computers and other interactive devices has created new opportunities for
digital media like the Internet. According to International Data Corporation,
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, International Data
Corporation projects that worldwide Internet usage will grow from approximately
196 million users in 1999 to over 500 million users in 2003. As a new mass
medium, the Internet is already attracting significant advertising spending.
Forrester Research estimates that worldwide Internet advertising revenues will
be approximately $15 billion by 2002.
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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 CD-quality
audio and full-motion video, particularly in the entertainment context where
they are accustomed to such audio and video quality from traditional media. New
platforms, such as cable and DSL modem and satellite data broadcast, were
created to provide high speed access to digital media. DSL, or Digital
Subscriber Lines, use sophisticated methods to transmit data over regular
telephone lines at much higher speeds than are normally possible. Using
satellites to transmit data avoids the congestion associated with low bandwidth,
thereby speeding delivery. High speed Internet access provider excite@Home
reported that it had approximately 840,000 cable modem subscribers at
September 30, 1999. Road Runner reported that the subscriber base for its cable-
delivered online service was over 420,000 at the end of the same period.
If new distribution technologies do not become widely used, we may be unable
to effectively distribute our audio and video content in its most compelling
format. Consumers must access our content over a high-bandwidth connection to
fully appreciate the quality of our audio and full-motion video content.
Bandwidth refers to the capacity of a network to carry data. High bandwidth
refers to a network that is able to transmit intensive data streams like the
audio and video offered on vidnet.com. The failure of those technologies to gain
widespread acceptance will negatively impact our business.
THE OPPORTUNITY FOR A MEDIA BRAND IN DIGITAL MEDIA. We believe that the 12
to 40 year-old consumers are a valuable demographic segment for advertisers.
Research conducted by Mediamark Research Inc. demonstrates that this audience
generally:
- invests substantial amounts of time and money in music and music-related
merchandise;
- adopts technological advancements early; and
- watches less television than they used to.
Despite their common affinity for music and movies, these consumers have
diverse tastes and interests and advertisers typically find it difficult to
target them as a group in a cost effective manner. As traditional media brands
have tried to address the changing viewing and listening habits of this audience
for the benefit of
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advertisers, such traditional methods have become less effective outlets for
marketing new music and movies. These limitations have encouraged:
- active music consumers to find new ways to discover music;
- the music and movie industries to pursue alternative methods to promote
new releases; and
- advertisers to use new media vehicles to promote and sell their products.
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. We believe a significant opportunity exists to create
a brand in digital media that serves as a single destination for the:
- consumer to discover new music and movies;
- entertainment industry to promote new releases; and
- advertising community to target a highly attractive demographic.
THE ENTERTAINMENT BOULEVARD MEDIA PROPERTIES
Our media properties are accessed through our Web site. Those properties
are:
ENTERTAINMENT BOULEVARD MUSIC. Entertainment Boulevard Music is an
interactive music video channel on the Web. Since its launch in March 1998,
traffic to the site has risen dramatically and the viewer base has expanded to
include viewers from over 115 countries. There are approximately 2,000 videos
available on Entertainment Boulevard Music and more are added each week.
Entertainment Boulevard Music's video selection features a wide variety of
musical formats, including:
<TABLE>
<S> <C> <C>
Rock/Metal Urban Christian
Pop Country Jazz/Swing
Dance Reggae Latin
</TABLE>
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
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.
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ENTERTAINMENT BOULEVARD MOVIES. Entertainment Boulevard Movies provides
movie trailers from the motion picture studios to be broadcast over our Web
site. Trailers are separated into three categories:
- "Coming Soon"
- "Now Playing"
- "On Video"
Users can also 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 can purchase videos and DVDs through Entertainment
Boulevard's arrangement with CheckOut.com.
ENTERTAINMENT BOULEVARD NETFOMERCIALS. Entertainment Boulevard recently
launched a unique and cost-effective way for infomercial companies to expose
their products to viewers. The "netfomercials" are separated into such
categories as beauty, auto and home and can be viewed via the RealPlayer G2 and
Microsoft Windows Media Player. Each netfomercial page includes a detailed
description of the individual product as well as ordering information and
product and shipping costs. The companies selling the products provide us with
the finished infomercials and handle their own product sales. 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
audio broadcasts of Tim McCarver's interviews with such sports stars as
Katarina Witt, Tony Gwynn, Marcus Allen, Yogi Berra, Serena Williams and
many others.
- 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 begins with the picks of the week, followed
by fantasy and rotisserie news covering key player movement and injuries
for the week. Additional content
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includes interviews and baseball statistics and trends with fantasy and
rotisserie implications.
- BEARS-PACKERS SHOWDOWN. This weekly football show provides locker room
audio from the NFL. Each show features interviews, discussion and parodies
highlighting the rivalries in pro sports and football games of national
interest in the NFL. The Bears-Packers Showdown has broadcast locker room
interviews with pro football players such as John Elway, Randy Moss,
Terrell Davis and Deion Sanders, among others.
- SPORTSNETWORK. This 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 an outdoor
recreation show to be broadcast in weekly audio and video formats.
THE ROLE OF ENTERTAINMENT BOULEVARD
We believe that Entertainment Boulevard offers access to a greater selection
of music, movie trailers and sports programming than is typically available
through traditional media. We also believe Entertainment Boulevard allows record
labels, movie studios and sports programmers to promote their content to a
broader market than can be reached through traditional media. Since its
introduction in March 1998, visits to our Web site have grown by approximately
20% per quarter. Currently we average 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. We work closely with many independent and
major record labels and movie studios. We 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.
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 music buyers and movie fans who make up the
Entertainment Boulevard user community. Record companies can use Entertainment
Boulevard to introduce users to a variety of new artists and to inform them of
new releases from established artists. Movie studios can use Entertainment
Boulevard as an additional outlet to broadcast their trailers and inform the
movie-going public of new releases in theaters or on video and DVD.
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EFFECTIVE ENVIRONMENT FOR ADVERTISING AND COMMERCE. Entertainment Boulevard
provides advertisers with access to a highly desirable group of consumers in an
entertainment environment. Advertisers who have difficulty reaching this
audience can turn to Entertainment Boulevard for targeted advertising and direct
marketing to this group. Entertainment Boulevard's access to a large audience of
music consumers also provides us with a strategic advantage in selling digitally
downloaded music. In addition, the content on vidnet.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. Key elements of
our strategy are:
DEVELOP AND COMPILE APPEALING CONTENT. We have developed strong working
relationships with many 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 vidnet.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 those labels or studios may not continue to make their content
available to us on reasonable terms, or at all. We are also committed to adding
new features and services.
INCREASE OUR AUDIENCE. We believe that increasing the size and loyalty of
our audience is critical to our success. In addition to providing 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, including trade advertising and contests. Use of our
pop-up video players on other Web sites has been a valuable source of increased
traffic. Pop-up players are windows developed to provide streaming video on
another Web site.
BUILD BRAND AWARENESS. Increasing awareness of the Entertainment Boulevard
brand is essential to our ability to increase our audience and attract
advertisers. We intend to build brand awareness through online advertising and
strategic alliances with high traffic Web sites and through the traditional
mediums of 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 target music, movies, or sports
fans in relevant environments. We believe that Entertainment Boulevard offers an
engaging interactive
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environment where leading brand marketers can target their messages to an
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 high quality
transmission already available on vidnet.com. We believe that our extensive
experience in developing high quality, 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 aggressively pursue strategic and
marketing relationships with retailers focused on Web distribution to enable us
to exploit
e-commerce opportunities. Entertainment Boulevard is well positioned to sell
music through digital downloads through its alliance with Liquid Audio. We also
offer our users the ability to easily and economically purchase CDs, DVDs,
videos and games through our relationship with CheckOut.com. Our netfomercial
programming provides infomercial producers an Internet outlet for their
products. Entertainment Boulevard shares in the profits from these on-line
sales. Another future e-commerce opportunity includes the sale of athletic
equipment through Entertainment Boulevard Sports.
INCREASE ENCODING SERVICES. Entertainment Boulevard intends to expand its
new encoding services department to increase revenues and further augment its
brand awareness as a premiere encoding company. We are building awareness
through trade shows and a press announcement.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. We believe that our strategic
relationships with various media and Internet-related companies such as the GO
Network, Bolt.com, CheckOut.com and Scour.Net will help attract users and
facilitate advertising sales, although some of our agreements with strategic
partners may prohibit us from entering into similar arrangements with
competitors of those partners. This may limit our ability to enter into
favorable arrangements with complementary businesses and could limit our growth.
Our failure to maintain or renew our existing strategic alliances or to
establish new ones could also have a negative impact on our business. We may
also seek to increase our Web site traffic, market share and revenues through
strategic acquisitions if the opportunity arises.
REVENUE SOURCES
ADVERTISING AND SPONSORSHIPS. Entertainment Boulevard derives a portion of
its advertising revenues from banner advertisements that are prominently
displayed at the top of pages throughout vidnet.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 may purchase either run-of-site banners or
banners specifically targeted to a subset of Entertainment Boulevard. For
example, advertisers can target baseball fans by placing banner ads in
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the "Talking Baseball" section of the sports programming or they can target
country music fans by placing banner ads on the country music page of
Entertainment Boulevard Music.
Advertisers may 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 targeting teenagers could place ads on the Bolt.com music
video player. Entertainment Boulevard plans to charge premium advertising rates
for any level of targeted advertising.
In addition to traditional banner ads, Entertainment Boulevard also sells
streaming video ads. These fifteen to thirty second advertisements stream prior
to videos that play on Entertainment Boulevard Music. Arizona Jeans is currently
taking advantage of this new advertising opportunity.
Advertising orders are short term and subject to cancellation without
penalty until shortly before the advertisement actually runs. Entertainment
Boulevard outsources its advertising to multiple sources, including The Virtual
Music Vault. The Virtual Music Vault targets exclusively music-oriented Web
sites, so advertisers know their products will be relevant for Entertainment
Boulevard Music users. These 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.
If we do not generate sufficient advertising and/or sponsorship revenues,
our business may not grow or survive. Internet advertising rates are based on
the size of the audience at the Web site where the advertising is displayed. If
our audience at vidnet.com is smaller than that at other Web sites, our
advertising rates could be reduced. To increase our audience we need to
establish and maintain distribution relationships with high traffic Web sites.
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 do enter into distribution relationships with those Web sites,
our audience may not increase as of result of the relationship if those Web
sites do not continue to attract significant numbers of users. Because Internet
advertising is relatively new, it is difficult to predict the extent of further
growth, if any, in Web advertising expenditures.
If the Internet advertising market fails to develop, our business will be
adversely affected. Our future success depends on an increase in the use of the
Internet and other forms of digital media for advertising. If advertisers
believe the Internet is undesirable or less effective than traditional
advertising for promoting their products and services, our growth will be
limited. In addition, the widespread use of available
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software that limits or prevents advertising from being delivered to an Internet
user's computer could adversely affect our ability to sell Internet advertising.
Software programs that track Internet usage and other tracking methodologies
are rapidly evolving and may not keep pace with the information needs of our
advertisers. 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. Companies may not advertise on vidnet.com or may pay less for
advertising if they don't believe our measurements are reliable. 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 cause us to incur additional costs or cause interruptions in our business
during the time we are replacing those services.
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. We expect our two-year alignment with
CheckOut.com to generate significant revenues as time progresses because we will
split all net proceeds from products sold to Entertainment Boulevard users
equally with CheckOut.com. 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 vidnet.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
product delivery. CheckOut.com offers 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 became an
affiliate in the Liquid-TM- Music Network. This affiliation provides our 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. A secure
digital download encrypts a music file so that it is impossible for others to
"steal" a copy of the music file during the download.
Entertainment Boulevard Netfomercials broadcasts infomercials on demand in
such categories as beauty, auto and home. Each infomercial company handles its
own product sales and Entertainment Boulevard earns a percentage of the sales.
Entertainment Boulevard intends to continue to pursue opportunities to sell
other lifestyle products relevant to its audience.
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Based on these e-commerce arrangements, we may be liable to consumers of the
products and services because of the links we provide, even though we do not
provide the products or services. While our agreements may provide that we will
be indemnified against any liabilities, the indemnification, if available, may
not be adequate. In addition, our insurance may not adequately protect us
against these claims. Even if the claims do not result in liability, we could
incur significant costs in investigating and defending against them.
VIDEO ENCODING AND OTHER SERVICES. As an additional source of income, we
provide digital encoding services to various third parties, including the Health
Channel/ Discovery Channel and DVD Express. Typically, the client provides us
with a finished master videotape. We 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.
We have also entered into an agreement with Youthline USA, Inc. to build,
serve and produce a Website for that company. For those services, Youthline has
paid $100,000 of a $200,000 contract. In addition, gross revenues are split
equally.
STRATEGIC BUSINESS ALLIANCES
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 these relationships.
DISTRIBUTION AGREEMENTS. In October 1998, International Net Broadcasting,
our subsidiary, entered into a license agreement with Marathon Sports Group,
Inc. for the exclusive use of the sports audio interview show, "McCarver One on
One." The initial term expired in October 1999 and Entertainment Boulevard
exercised its option to renew the agreement for another year. Marathon Sports
Group receives 70% of the advertising revenues and Entertainment Boulevard
receives 30%.
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
the advertising revenue equally. Dimension Music is a site dedicated to
promoting music through the MP3 standard, a file format enabling near CD-quality
music download in minutes. The initial term of the agreement expired 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.
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In February 1999, Entertainment Boulevard also entered into an agreement
with Scour, Inc., for Entertainment Boulevard to provide music videos and movie
trailers to 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 split the advertising revenue equally 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 March 1999, Entertainment Boulevard entered into a license agreement with
SRN Broadcasting & Marketing for the exclusive use of the Bears-Packers Showdown
program. Advertising revenues are split equally between the parties. The initial
term of the agreement expires in March 2000 with an option to renew for one
year.
Also in March 1999, Entertainment Boulevard entered into an agreement with
Earthlink to build an entertainment-driven Internet service provider to attract
the demographics relevant to Entertainment Boulevard's users. Entertainment
Boulevard receives a percentage of the setup fees upon the first sale of all
eligible services, plus a percentage of the monthly residuals once the initial
qualifying quotas are met. The initial term of the agreement is for one year and
is renewable for additional one-year terms thereafter unless either party
cancels within 30 days of the end of the term then in effect.
In addition, in March 1999, Entertainment Boulevard entered into an
agreement with Hearme.com for the syndication of an audio chat feature that
allows users to interact with each other in real time by using a microphone,
sound card and speakers. Either party may terminate the agreement by giving the
other party 30 days' notice.
In March 1999, Entertainment Boulevard also entered into an agreement with
LA Group to license infomercials for broadcast at its Netfomercial site.
LA Group offers products from Ronco and Entertainment Boulevard receives a
percentage of the purchase price for each product sold.
In June 1999, Entertainment Boulevard entered into distribution agreements
with Synge.com and Sonique. Links on the Synge.com and Sonique sites take the
user to a co-branded music video pop-up player with player pages and streaming
content hosted by Entertainment Boulevard. Each party will sell and serve ad
banners on the player and any co-branded pages and will split the advertising
revenue equally. The initial term of each agreement expires in June 2000 and
will continue for additional one-year terms unless a party cancels the agreement
30 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
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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 sales, 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. CheckOut.com pays Entertainment Boulevard a commission on sales that
originate from vidnet.com, as well as a referral fee for each new customer who
originated from our Web site. The initial term of the agreement expires in July
2001 and will continue for additional one-year terms unless either party cancels
the agreement 30 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 Entertainment
Boulevard. Bolt.com will serve ad banners on the player and any co-branded
pages and will split the advertising revenue equally with Entertainment
Boulevard. The initial term of the agreement expired in January 2000 and will
continue for three additional six-month terms unless either party cancels the
agreement 30 days prior to the end of term then in effect.
In August 1999, Entertainment Boulevard entered into a distribution
agreement with College Broadcast, Inc., for Entertainment Boulevard to provide
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 split the advertising revenue with
Entertainment Boulevard equally. The term of the agreement expires in August
2000 and will continue for additional one-year terms unless either party cancels
the agreement 30 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.
According to Media Metrix, Inc., a media measurement service, the GO Network is
one of the top five digital media and Web properties. 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, unless Infoseek cancels the agreement upon thirty days notice at any time.
In December 1999, Entertainment Boulevard entered into an agreement with
IFILM Corp., under which IFILM will display a portion of the content at its Web
site at vidnet.com. Under the agreement, Entertainment Boulevard and IFILM will
split equally any advertising revenue derived from IFILM's presence at
vidnet.com. The agreement has an initial term of one year. IFILM maintains a Web
site at
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www.ifilm.com which features, among other things, a community for the viewing
and discussion of films.
In January 2000, Entertainment Boulevard entered into an agreement with
Virgin Holdings, Inc. to stream selected catalog and new music videos of artists
on all EMI labels including Capitol Records, Capitol Nashville, Virgin Records,
EMI Latin, Christian Music Group, Angel Records and Blue Note Records. The
agreement provides for an annual licensing fee of $100,000 plus a share of the
gross receipts derived from Entertainment Boulevard's Web sites. Entertainment
Boulevard will also provide Virgin with 30,000 free banner impressions each
month to promote EMI artists. In addition, Entertainment Boulevard issued to
Virgin 678,685 shares of common stock of Entertainment Boulevard. The term of
the agreement is for one year and may be renewed by Virgin for additional
one-year periods by providing written notice to Entertainment Boulevard 30 days
prior to the end of the term then in effect.
In February 2000, Entertainment Boulevard entered into an agreement with
Sony Music Entertainment, Inc. to stream new music videos of Sony recording
artists. The agreement provides for licensing fees equal to a portion of the
gross revenues received by Entertainment Boulevard in connection with the
licensed material. Entertainment Boulevard will also provide Sony with 30,000
banner impressions per month to promote Sony artists. In addition, Entertainment
Boulevard issued to Sony 678,875 shares of common stock of Entertainment
Boulevard. The term of the agreement is for one year.
TECHNOLOGY AGREEMENTS. Entertainment Boulevard houses its Web page servers
in a data facility at Level 3 Communications, Inc., 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 uses 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, a cable set-top box company. 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 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
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technology allows Entertainment Boulevard to offer a higher quality of streaming
video and reduce the cost.
In September 1999, Entertainment Boulevard 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.
In October 1999, Entertainment Boulevard entered into an agreement with
Microsoft Corp. 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 parties' services to deliver
content to customers of Network Credits Program participants through the use of
Windows media technologies.
Also in October 1999, Entertainment Boulevard entered into an agreement with
AltaVista Company by which the content at vidnet.com is made available to users
of AltaVista's Web search services. As part of the agreement, Entertainment
Boulevard produces a co-branded viewing page which appears as a part of an
AltaVista search results page and pays AltaVista a specified percentage of the
monthly net e-commerce revenue generated by Entertainment Boulevard. The
agreement has an initial term of one year.
In February 2000, Entertainment Boulevard entered into a content provider
agreement with Channelseek, Inc., a global Internet distribution company that
offers a comprehensive guide to Web-delivered broadcast media. Under that
agreement, which is terminable by either party on 90 days notice, Entertainment
Boulevard has its programming content listed in Channelseek's Program Guide and
has the benefit of certain other promotional services provided by Channelseek.
In return, Entertainment Boulevard pays a fee of $12,000 per month, subject to
certain discounts when applicable.
In March 2000, Entertainment Boulevard entered into an agreement to become a
participant on the RealNetworks RealChannels. Under that agreement, RealNetworks
will install Entertainment Boulevard's Channel as a "soft default" channel. As a
result, every user, upon download of the standard RealNetworks player from the
RealNetworks Web site, will receive the Entertainment Boulevard channel as a
default channel on their RealChannels if they select "entertainment" as a
category of interest. As a participant, Entertainment Boulevard pays fees
totaling $200,000 plus certain access charges which cannot exceed $100,000.
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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 a program that allows a potential user
the opportunity to sample the product. We developed our pop-up player to 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 intend to pursue
efforts 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. These
shows allow Entertainment Boulevard to showcase its Web site and content to
potential advertisers, potential alliances and the media.
Our future success depends on our ability to build brand awareness. We
believe that brand recognition for vidnet.com is essential to maintaining high
traffic and loyalty at our Web site. According to Neilsen/NetRatings, even
though people spend about two hours at a time on the Internet, they only visit
six sites during that time. Most people tend to visit a few sites that they are
familiar with, and visit them repeatedly. To be successful, we must build
awareness of our name. If our marketing efforts fail to promote our brand
successfully, our business could be adversely affected.
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. In addition to performance and service availability, a key
attribute of our infrastructure is the ability of our computer systems to adapt
to increased demands without degrading the quality of service.
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 vidnet.com production servers
at the Los Angeles data center of Level 3. Entertainment Boulevard's operations
are
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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 a day, seven
days a week. Level 3 also provides the means of connectivity for Entertainment
Boulevard's servers to end-users via the Internet. The Level 3 facility is
connected to two independent power sources, has multiple independent
uninterruptible power supplies, or 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.
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.
For our business to succeed, our Web site must be able to accommodate a high
volume of traffic and deliver frequently updated information. In the past, our
Web site has experienced 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 limit access to our Web site and adversely affect our
business, operating results and financial condition.
COMPETITION
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;
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- 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;
- 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.
REGULATORY UNCERTAINTIES AND GOVERNMENTAL REGULATION
Currently, there are few laws and regulations directly applicable to
Internet communications, commerce and advertising. Legislation addressing such
issues as user privacy, pricing and the characteristics and quality of products
and services may be adopted in the future. For example, recently proposed
federal legislation sought to prohibit transmission of 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.
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
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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.
Entertainment Boulevard does not collect sales or other taxes on goods sold
through referrals from vidnet.com. However, one or more states may impose sales
tax collection obligations on companies like Entertainment Boulevard that 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. Legislation limiting
the ability of states to impose taxes on Internet-based transactions has been
proposed in the U.S. Congress. This legislation may become law or the tax
moratorium in the final version of the legislation may 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.
INTELLECTUAL PROPERTY
The music videos, movie trailers, sports programming and infomercials
featured on vidnet.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 for the particular performance and others with rights in the musical
composition for 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.
The content we offer could be severely limited if record labels, music
publishers, artists or movie studios begin to charge significant fees for their
content or discontinue their relationships with us. Much of our musical content,
including audio and video performances, is provided to us by record labels at
minimal or no charge.
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Also, motion picture companies do not charge us for our use of their movie
trailers. 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.
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. The steps we have taken to 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, may not be sufficient. If third parties 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.
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 vidnet.com contains errors, third
parties could make claims against us for losses incurred in reliance on such
information.
PRIVACY POLICY
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
vidnet.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
40
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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.
PERSONNEL
As of December 31, 1999, we had twenty-four full-time employees, of which
twelve were engaged in technical activities, six in general administration and
executive activities and six 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 has 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, 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 under which we:
- made payments in the amount of $300,000 against the outstanding loan and
$10,000 in attorneys' fees and costs;
- 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
- 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 agreed to personally guarantee repayment of the remaining
principal and interest. As of the date of this prospectus, the outstanding
balance was paid in full and no judgment was entered with the court.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS. The following table sets forth certain
information regarding our executive officers and directors. Presently we have
two directors, both of whom serve until the next annual meeting of stockholders
or until their successors are elected and qualified. 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
Paul C. Mattoon 33 Chief financial officer
Arthur P. Brown 49 Director
Debra L. Gilson 30 Secretary
</TABLE>
STEPHEN BROWN has served as president, chief executive officer, treasurer
and a director of Entertainment Boulevard since May 1999. Prior to that,
Mr. Brown founded International Net Broadcasting in 1997. Mr. Brown co-founded a
Los Angeles-based independent record company, Big City Entertainment, Inc., and
served as an executive officer of that company for eight years prior to founding
International Net Broadcasting. Mr. Brown graduated with honors from Easingwold
Technical Institute in 1971 with a degree in commercial design.
PAUL MATTOON has served as chief financial officer of Entertainment
Boulevard since February 28, 2000. Prior to joining Entertainment Boulevard, Mr.
Mattoon was director of acquisitions for R&B Realty Group from February 1998 to
February 2000. Prior to that he was an investment and acquisitions manager for
R&B Realty Group from October 1994 to January 1998. Mr. Mattoon sourced,
underwrote and negotiated acquisitions for R&B Realty Group related
partnerships. Mr Mattoon graduated from Pepperdine University in 1988 with a
Bachelor of Science degree in Accounting.
ARTHUR BROWN has been a director of Entertainment Boulevard since May 6,
1999. Prior to that, since 1998, Mr. Brown assisted Entertainment Boulevard in
raising its initial capital. From 1994 to 1998, Mr. Brown assisted Dynamic
Ventures, an oil and gas exploration company, in raising capital by advising
management of that company as to potential financing sources.
DEBRA GILSON has served as secretary of Entertainment Boulevard since
October 1999 and was with International Net Broadcasting since inception in
April 1997. Prior to joining International Net Broadcasting, Ms. Gilson was an
executive assistant at Sony Music from March 1994 until March 1997. Ms. Gilson
has a seven year background in the music industry in the areas of contractual
negotiations, marketing and business development. 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 December 31, 1999. Other than Stephen Brown, none of our executive
officers had compensation in excess of $100,000 during fiscal 1999.
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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 OPTIONS
- --------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen Brown,
Chief executive officer....... 1999 $320,000 $ -0- $-0- 50,000
</TABLE>
The following table provides information through December 31, 1999
concerning stock options granted to Mr. Brown during the year 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 ....... 1999 50,000 11.2% $1.00 March 26, 2004
</TABLE>
No options have ever been exercised by Mr. Brown. As to Mr. Brown, the
following table sets forth the number and value of vested and unvested options
held as of December 31, 1999.
OPTION VALUE AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31 OPTIONS AT DECEMBER 31
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen Brown......................... 50,000 -0- $151,560 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. 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. Entertainment Boulevard has adopted the 1999 Stock 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.
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<PAGE>
As of December 31, 1999, there were 828,000 options outstanding under the
option plan at a weighted average price of $1.57 per share.
EMPLOYMENT ARRANGEMENTS. On November 1, 1999, we entered into a two-year
employment agreement with Mr. Brown. Mr. Brown receives the following annual
compensation:
- $240,000 for the first year, with a minimum annual increase of 15% for the
second year;
- a discretionary bonus as determined by our board of directors, based on
his performance or Entertainment Boulevard's profitability;
- $1,500 per month as a car allowance and payment of automobile operating
expenses;
- option grant to purchase a minimum of 50,000 shares of common stock under
our option plan, at the end of each twelve-month period of employment.
During the two-year term, the employment agreement is terminable only upon Mr.
Brown's death or disability or by either party for cause.
LIMITATION ON LIABILITY AND INDEMNIFICATION ARRANGEMENTS. As permitted under
Nevada law and our Articles of Incorporation, our directors and officers are not
personally liable to Entertainment Boulevard or its stockholders for damages for
breach of fiduciary duty as a director or officer, except for:
- acts or omissions that involve intentional misconduct, fraud or a knowing
violation of law or
- 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 and bylaws provide for the indemnification of
our directors, officers, employees and agents to the full extent permitted by
Nevada law. Nevada law allows individuals to 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. This applies to civil, criminal, administrative or investigative
actions, other than derivative actions by or in the right of Entertainment
Boulevard, so long as the individual acted in good faith and in a manner they
reasonably believed to be in the best interests of Entertainment Boulevard.
In a criminal action or proceeding the individual must have had no
reasonable cause to believe their conduct was unlawful. A similar standard of
care is applicable in
44
<PAGE>
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 under Nevada law is not to be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled.
We have entered into, or intend to enter into, 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 common stock as of March 15, 2000. 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;
- each of our directors;
- Stephen Brown, our current chief executive officer, as named in the
Summary Compensation Table; and
- all of our directors and executive officers as a group.
"Beneficial ownership" includes shares of common stock:
- that a stockholder has the power to vote or transfer;
- issuable upon the exercise of outstanding warrants or stock options that
are exercisable within 60 days of the date of this prospectus;
"Percentage of Class" is based on 16,994,447 outstanding shares of common
stock assumes exercise of warrants and options, of the holder only. 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 or as
otherwise noted.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TITLE OF CLASS BENEFICIALLY OWNED PERCENTAGE OF CLASS
- ---- -------------- ------------------ -------------------
<S> <C> <C> <C>
Stephen Brown............................. Common 1,925,000 10.4%
c/o Entertainment Boulevard, Inc.,
12910 Culver Boulevard, Suite I,
Los Angeles, California 90066
Arthur P. Brown........................... Common 187,500(1) (2)
c/o Entertainment Boulevard, Inc.,
12910 Culver Boulevard, Suite I,
Los Angeles, California 90066
Wilfred L. Von der Ahe, Jr................ Common 1,245,000 7.3%
2964 Triangle Road,
Mariposa, California 95338
H.A.A. Inc.(2)............................ Common 1,279,242 7.5%
1601 42nd St., Brooklyn, NY 11204
Beestons Investment Ltd.(4)............... Common 1,636,094 9.6%
P. O. Box 65, Duke Street, Gretton
House, Grand Turks, Caicos
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TITLE OF CLASS BENEFICIALLY OWNED PERCENTAGE OF CLASS
- ---- -------------- ------------------ -------------------
<S> <C> <C> <C>
All executive officers and directors as a
group (Stephen Brown, Paul Mattoon,
Arthur Brown and Debra Gilson)........... Common 2,112,500 11.3%
</TABLE>
- ------------------------
(1) The shares are obtainable upon exercise of warrants held by 531287 BC Ltd.
of which Mr. Brown is principal.
(2) Less than 1%.
(3) The principal of this entity is Aaron Langsam.
(4) The principal of this entity is C.B. Williams.
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<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Entertainment Boulevard was founded as Sedmet Exploration Inc. 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 Entertainment Boulevard's common stock for $3,650.
In conjunction with Entertainment Boulevard's formation, Dr. Porter advanced
$8,500 to Entertainment Boulevard, which has since been repaid. Dr. Porter no
longer provides services to Entertainment Boulevard in any capacity.
In December 1998, we issued 2,925,000 units of our 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 Entertainment Boulevard 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, Entertainment Boulevard acquired all of the equity
interests in International Net Broadcasting from two persons, one of whom was
Stephen Brown, the founder of International Net Broadcasting and a director and
executive officer of Entertainment Boulevard. In connection with this
acquisition, Entertainment Boulevard issued 500,000 shares of common stock to
each of the equity owners. Entertainment Boulevard and the owners of
International Net Broadcasting entered into a written agreement in which they
provided various representations, warranties and covenants to each other. In
addition, Entertainment Boulevard issued 1,600,000 shares of common stock to 44
persons in cancellation of International Net Broadcasting's indebtedness to
them.
Stephen Brown, our chief executive officer, entered into an employment
agreement with Entertainment Boulevard in November 1999. In addition, Mr. Brown
was previously granted options to acquire 50,000 shares of common stock under
Entertainment Boulevard.
In July 1999, in order to resolve certain disputes between them,
Entertainment Boulevard, Akbar Alikhan, a former officer and director of
Entertainment Boulevard, Stephen Brown, Arthur Brown and Rizman Alikhan, Akbar
Alikhan's son, entered into a settlement agreement under which, among other
things,
- Arthur Brown and Akbar Alikhan made an unsecured loan of $400,000 to
Entertainment Boulevard at 8.0% annual interest,
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<PAGE>
- Entertainment Boulevard loaned $400,000 to Stephen Brown for five years,
payable without interest,
- Entertainment Boulevard issued to Stephen Brown and the former debtholders
of International Net Broadcasting warrants to purchase up to 1,900,000
shares of common stock for $1.00 per share until August 1, 2004, of which
1,500,000 were issued to Stephen Brown, and
- 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 Entertainment Boulevard. These loans have been the subject of litigation. The
outstanding balance of those loans is currently approximately $260,000, bears
interest at 8% per year and is due January 31, 2000.
Ms. Gilson, Entertainment Boulevard's secretary, was granted options under
Entertainment Boulevard's 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 Entertainment Boulevard's outstanding Series A preferred
stock. Prior to that purchase, Beestons Investment Ltd. loaned $250,000 to
Entertainment Boulevard 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 Entertainment Boulevard. In consideration of the loan,
Entertainment Boulevard issued the lenders a total of 140,000 shares of common
stock. The principal and accrued interest on the loan were converted into
258,542 shares of common stock on March 15, 2000. On January 14, 2000, H.A.A.
Inc. and Forest Equities, Ltd. loaned an aggregate of $200,000 to Entertainment
Boulevard. In consideration of the loan, Entertainment Boulevard issued the
lenders warrants to purchase 50,000 shares of common stock at $1.00 per share.
The principal and accrued interest on the loan were converted into 203,388
shares of common stock on March 15, 2000.
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, 16,994,447 shares of our common stock are issued and
outstanding. On all
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<PAGE>
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. Except for dividend preferences applicable
to any 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.
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. There are no redemption or sinking fund provisions applicable to our
common stock. Our articles of incorporation also provide that 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.
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 no issued and outstanding preferred stock.
We currently have no plans to issue any 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 that may arise. If opportunities arise that make it desirable to
issue preferred stock through either public or private offerings, the provision
for preferred stock in our articles of incorporation makes it possible to avoid
the delay and expense of a stockholders' meeting, except as may be required by
law or regulatory authorities.
Issuance of additional preferred stock could result, however, in a series of
securities outstanding that would have dividend or liquidation preferences over
our common stock. This would result in dilution of the income per share and net
book value of our common stock. Issuance of additional common stock upon 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 our common stock.
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<PAGE>
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 that
we may issue.
WARRANTS AND OPTIONS. To date, we have issued warrants representing the
right to purchase up to 10,095,000 shares of our common stock at exercise prices
ranging from $0.50 to $3.50 per share. The expiration dates of those warrants
range from one year after the date of this prospectus to January 14, 2005. All
but 3,720,000 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 our option plan, we also granted an
option to purchase 50,000 shares of common stock to Venture Catalyst.com 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 a sufficient number of shares of common stock for
issuance upon the exercise of those warrants and options.
The warrants and options do not confer upon the holder any voting or other
rights of a stockholder of Entertainment Boulevard. 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 ENTERTAINMENT BOULEVARD. The shares of
common stock issued to Sony and Virgin in connection with license agreements,
and the shares of common stock issued upon conversion of the Series A preferred
stock have registration rights in certain circumstances and the holders of
outstanding warrants, options 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.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
If the maximum number of shares offered under this prospectus are issued,
23,370,447 shares of our common stock will be outstanding. Of that number, all
but 3,946,370 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.
As of the date of this prospectus, we had outstanding 16,994,447 shares of
common stock. Of our outstanding shares of common stock, 13,048,077 are freely
tradable and another 2,600,000 shares may be transferred under Rule 144 of the
Securities Act beginning 90 days after the date of this prospectus.
Upon the exercise of all of our outstanding warrants and options, additional
shares of common stock are issuable in an amount that is not yet determinable.
Of those shares, up to 6,376,000 are covered by this prospectus and will be
freely tradeable, with the exception of 1,425,000 shares obtainable by Stephen
Brown upon the exercise of warrants. He has agreed not to sell or otherwise
transfer those shares 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 in this
offering.
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:
- one percent of the number of shares of common stock then outstanding,
which is approximately 170,000 shares as of the date of this prospectus;
or
- the average weekly trading volume of the common stock on the over-the-
counter bulletin board 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.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the persons or entities that are offering
their shares of common stock in this prospectus and the number of shares of
common stock being offered by each selling stockholder:
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE SHARES OWNED AFTER THE
OFFERING OFFERING
NUMBER OF SHARES ------------------------- ------------------------
SELLING STOCKHOLDER OFFERED NUMBER PERCENT(1) NUMBER PERCENT(1)
- ------------------- ---------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Stephen Brown(2)........ 1,425,000(3) 1,925,000 10.4% 500,000 2.9%
Daniel A. Thomas........ 75,000(3) 75,000 (5) -0- N/A
Farida Alikhan(4)....... 312,500(3) 312,500 1.8% -0- N/A
Rochford Young.......... 50,000(3) 110,000 (5) 60,000 (5)
Rohail Alikhan.......... 312,500(3) 325,000 1.9% 12,500 (5)
Loretta Harty........... 312,500(3) 325,000 1.9% 12,500 (5)
Ray Longstaff........... 312,500(3) 312,500 1.8% -0- N/A
531287 BC Ltd.(6)....... 187,500(3) 187,500 1.1% -0- N/A
RAK Enterprises(7)...... 187,500(3) 187,500 1.1% -0- N/A
Oughton York
Holdings(6)............ 312,500(3) 312,500 1.8% -0- N/A
Brunswick Ltd.(8)....... 312,500(3) 312,500 1.8% -0- N/A
Ray Alikhan............. 312,500(3) 380,000 2.2% 67,500 (5)
Raaheen Alikhan......... 312,500(3) 325,000 1.9% 12,500 (5)
Latymer Investments
Limited(9)............. 146,640(3) 581,978 3.4% 435,338 2.6%
Simon Ford.............. 50,000(3) 166,059 1.0% 116,059 (5)
Elizabeth Bradley....... 69,610(3) 259,610 1.5% 190,000 (5)
Marionette
Limited(10)............ 34,000(3) 296,529 1.8% 262,529 2.1%
David Ruellan........... 12,000(3) 84,533 (5) 72,533 (5)
Pauline Phillips........ 12,000(3) 77,225 (5) 65,225 (5)
Anthony Phillips........ 12,000(3) 51,857 (5) 39,857 (5)
Michael Clinton......... 8,000(3) 47,826 (5) 39,826 (5)
Christopher Wilkinson... 5,000(3) 18,470 (5) 13,470 (5)
Sorciere Limited(11).... 5,000(3) 26,104 (5) 21,104 (5)
Colin Campbell.......... 5,750(3) 37,776 (5) 32,026 (5)
Anthony Goldsmith....... 4,000(3) 30,378 (5) 26,378 (5)
Paul Wood............... 3,500(3) 25,181 (5) 21,681 (5)
Graham Wedlake.......... 3,000(3) 31,888 (5) 28,888 (5)
William Healey.......... 3,000(3) 21,688 (5) 18,688 (5)
Anthony Cartmell........ 2,250(3) 13,457 (5) 11,207 (5)
Philip Wylie............ 2,000(3) 15,214 (5) 13,214 (5)
Carol McKearney......... 500(3) 5,526 (5) 5,026 (5)
Jonathan Steel.......... 2,000(3) 10,418 (5) 8,418 (5)
Derwent Jeffrey......... 250(3) 1,886 (5) 1,636 (5)
Henrik Hansen........... 2,250(3) 14,276 (5) 12,026 (5)
Peter Thomson-Smith..... 2,000(3) 14,370 (5) 12,370 (5)
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE SHARES OWNED AFTER THE
OFFERING OFFERING
NUMBER OF SHARES ------------------------- ------------------------
SELLING STOCKHOLDER OFFERED NUMBER PERCENT(1) NUMBER PERCENT(1)
- ------------------- ---------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
R.A.M. Williams......... 1,500(3) 18,704 (5) 17,204 (5)
William Mills........... 1,500(3) 11,387 (5) 9,887 (5)
John Trotter............ 1,250(3) 10,252 (5) 9,002 (5)
Nick Ivey............... 1,250(3) 10,252 (5) 9,002 (5)
John Craig.............. 1,250(3) 10,252 (5) 9,002 (5)
Alan Quarterman......... 1,000(3) 7,229 (5) 6,229 (5)
John Barkhan............ 1,000(3) 7,605 (5) 6,605 (5)
Michael Wainright....... 1,000(3) 7,605 (5) 6,605 (5)
Jeffrey Worboys......... 1,000(3) 7,605 (5) 6,605 (5)
John Grieves............ 1,000(3) 10,629 (5) 9,629 (5)
Lawrence Olsen.......... 1,250(3) 10,958 (5) 9,708 (5)
Peter Krause............ 1,000(3) 7,229 (5) 6,229 (5)
Industrial Maintenance
Group, Ltd.(12)........ 500(3) 3,781 (5) 3,281 (5)
Joanne Chandra.......... 250(3) 3,235 (5) 2,985 (5)
William Waters.......... 500(3) 3,781 (5) 3,281 (5)
Clive Taylor............ 500(3) 500 (5) -0- N/A
Rev. Bonita Appleton.... 500(3) 3,781 (5) 3,281 (5)
Stephen S. McKeag(13)... 15,000 265,000 1.6% 250,000 1.5%
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(14)........ 568,000(3) 568,000 3.2% -0- N/A
Richard Rosenblum(14)... 325,000(3) 325,000 1.9% -0- N/A
David Stefansky(14)..... 325,000(3) 325,000 1.9% -0- N/A
Steven Freifeld(14)..... 102,000(3) 102,000 (5) -0- N/A
Vincent Calicchia(14)... 100,000(3) 100,000 (5) -0- N/A
Anthony K. Soich(14).... 80,000(3) 80,000 (5) -0- N/A
H.A.A. Inc.(15)......... 1,279,242(16) 1,279,242 7.5% -0- N/A
Lowen Holdings(15)...... 408,547 408,547 2.4% -0- N/A
Beestons Investment
Ltd.(4)(15)............ 1,636,094 1,636,094 9.6% -0- N/A
Forest Equities,
Ltd.(16)(17)........... 126,694 126,694 (5) -0- N/A
</TABLE>
- ---------------------
(1) Calculated for each selling stockholder based on 16,994,447 shares of common
stock presently outstanding plus the shares specified for that person in
footnote (3).
(2) Mr. Brown is an officer, director and major stockholder of Entertainment
Boulevard.
54
<PAGE>
(3) All of the shares being offered are issuable upon the exercise of warrants.
(4) This selling stockholder has previously loaned money to Entertainment
Boulevard.
(5) Indicates less than one percent of the total outstanding common stock.
(6) The principal of this entity is Arthur Brown.
(7) The principal of this entity is Ray Alikhan.
(8) The principal of this entity is Julie de Jersey.
(9) The principal of this entity is Robin Phillips.
(10) The principal of this entity is Richard Weedon.
(11) The principals of this entity are David Moorhouse, John Michael Murphy,
Karen Lesley Gough, Paul de Rome and Harriett C. Blum.
(12) The principals of this entity are Roger Gundry, Alfred Gundry, Nigel
Cotterill and John Traynor.
(13) Mr. McKeag is a consultant to Entertainment Boulevard.
(14) This entity provided investment banking services to Entertainment Boulevard
and has a one-year right to appoint a designee to attend meetings of
Entertainment Boulevard's board of directors. Richard Rosenblum,
David Stefansky, Steven Freifeld, Vincent Calicchia and Anthony K. Soich are
affiliates or employees of Robb Peck McCooey Clearing Corporation.
(15) This entity is a principal stockholder of Entertainment Boulevard and has
various other relationships with Entertainment Boulevard.
(16) Includes 25,000 shares issuable upon the exercise of warrants.
(17) The principal of this entity is Joseph Franck.
55
<PAGE>
PLAN OF DISTRIBUTION
We are registering the common stock on behalf of the selling stockholders.
Each selling stockholder is free to offer and sell their shares of common stock
at such times, in such manner and at such prices as they determine. The 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 that 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 on the over-the-counter bulletin board, 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 sell common stock directly to purchasers or
through broker-dealers which may act as agents or principals. Broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders.
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, they will be subject to
prospectus delivery requirements under the Securities Act. Furthermore, in the
event of a distribution of their 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.
56
<PAGE>
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 years ended December 31, 1999
and 1998 and the period from April 1, 1997, inception, to December 31, 1999,
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. The 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. You may
examine a copy of that contract or other document if it has been filed as an
exhibit to the registration statement. All statements about 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.
57
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet................................ F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Deficit.......... F-5 - F-6
Consolidated Statements of Cash Flows..................... F-7 - F-9
Notes to Consolidated Financial Statements................ F-10 - F-28
</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, dba Vidnet (a development stage company) as of
December 31, 1999, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for each of the two years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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, dba Vidnet as of December 31,
1999, and the results of their consolidated operations and their consolidated
cash flows for each of the two years in the period ended December 31, 1999 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 years
ended December 31, 1999 and 1998, the Company incurred net losses of $12,931,960
and $1,435,153, respectively. In addition, the Company's net cash used in
operating activities was $3,564,777 and $1,300,205 for the years ended
December 31, 1999 and 1998, respectively, and the Company's accumulated deficit
was $15,016,739 as of December 31, 1999. 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
February 29, 2000
F-2
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 429,408
Accounts receivable....................................... 222,324
Prepaid expenses.......................................... 8,496
------------
Total current assets.................................... 660,228
NOTE RECEIVABLE--RELATED PARTY.............................. 400,000
FURNITURE AND EQUIPMENT, NET................................ 419,549
DEPOSITS.................................................... 26,700
DEBT ISSUANCE COSTS, NET.................................... 110,000
DEFERRED FINANCING COSTS.................................... 1,735,583
------------
TOTAL ASSETS.......................................... $ 3,352,060
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Short-term debt........................................... $ 1,854,095
Note payable--related party............................... 400,000
Convertible notes......................................... 500,000
Accounts payable.......................................... 589,241
Accrued liabilities....................................... 299,401
Advances on contracts..................................... 67,000
------------
Total current liabilities............................... 3,709,737
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Series A preferred stock, $0.01 par value 1,000,000 shares
authorized 2,000 shares issued and outstanding.......... 20
Common stock, $0.001 par value 50,000,000 shares
authorized 12,477,500 shares issued and outstanding..... 12,478
Deferred compensation..................................... (252,685)
Additional paid-in capital................................ 14,899,249
Deficit accumulated during the development stage.......... (15,016,739)
------------
Total stockholders' deficit........................... (357,677)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT......... $ 3,352,060
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED APRIL 1, 1997
DECEMBER 31, (INCEPTION) TO
-------------------------- DECEMBER 31,
1999 1998 1999
------------ ----------- --------------
<S> <C> <C> <C>
REVENUE................................ $ 268,039 $ -- $ 268,039
------------ ----------- ------------
OPERATING EXPENSES
Compensation expense................. 2,921,494 708,145 4,045,024
Consulting expense................... 631,875 -- 631,875
Depreciation and amortization........ 71,220 20,089 94,074
Other operating expense.............. 3,095,734 703,164 4,030,374
Settlement expense................... 310,000 -- 310,000
------------ ----------- ------------
Total operating expenses........... 7,030,323 1,431,398 9,111,347
------------ ----------- ------------
LOSS FROM OPERATIONS................... (6,762,284) (1,431,398) (8,843,308)
------------ ----------- ------------
OTHER EXPENSE
Interest expense..................... (54,439) (3,755) (58,194)
Financing costs...................... (6,115,237) -- (6,115,237)
------------ ----------- ------------
Total other expense................ (6,169,676) (3,755) (6,173,431)
------------ ----------- ------------
NET LOSS............................... $(12,931,960) $(1,435,153) $(15,016,739)
============ =========== ============
BASIC AND DILUTED LOSS PER SHARE....... $ (1.09) $ (0.30) $ (2.36)
============ =========== ============
WEIGHTED-AVERAGE SHARES OUTSTANDING.... 11,868,537 4,814,286 6,366,332
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
SERIES A PREFERRED ACCUMULATED
STOCK COMMON STOCK ADDITIONAL DURING THE
----------------------- -------------------- DEFERRED PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT COMPENSATION CAPITAL STAGE TOTAL
---------- ---------- --------- -------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1,
1997 (Inception)... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Capitalization of
International
Net Broadcasting,
LLC................ 1,000,000 1,000 (900) 100
Common stock issued
in private
placement.......... 3,700,000 3,700 30,475 34,175
Stock issued in
connection with
mineral rights..... 50,000 50 (50) --
Capital
contributions...... 88,500 88,500
Net loss............. (649,626) (649,626)
---------- ---------- --------- ------- --------- ------- ---------- ----------
Balance, December 31,
1997............... -- -- 4,750,000 4,750 -- 118,025 (649,626) (526,851)
Capital
contributions...... 533,000 533,000
Common stock issued
in private
placement.......... 2,925,000 2,925 208,308 211,233
Net loss............. (1,435,153) (1,435,153)
---------- ---------- --------- ------- --------- ------- ---------- ----------
Balance, December 31,
1998............... -- -- 7,675,000 7,675 -- 859,333 (2,084,779) (1,217,771)
Warrants exercised... 2,925,000 2,925 728,325 731,250
Stock options issued
to vendors......... 578,750 578,750
Stock options issued
as compensation.... (252,685) 632,043 379,358
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
------------------- --------------------- DEFERRED PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT COMPENSATION CAPITAL STAGE TOTAL
-------- -------- ---------- -------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conversion of long-
term debt........... $ $1,600,000 $ 1,600 $ $ 850,668 $ $ 852,268
Warrants issued to
executive for
compensation........ 1,780,500 1,780,500
Warrants issued to
debt holders........ 474,800 474,800
Financing costs on
conversion of long-
term debt........... 4,597,000 4,597,000
Stock-based interest
on bridge
financing........... 252,500 253 535,267 535,520
Preferred stock
sale................ 2,000 20 1,999,980 2,000,000
Warrants issued in
conjunction with
bridge financing.... 2,198,500 2,198,500
Stock issued for
services............ 25,000 25 53,100 53,125
Fixed discount on
convertible debt.... 45,000 45,000
Offering costs........ (434,017) (434,017)
Net loss.............. (12,931,960) (12,931,960)
----- --- ---------- ------- --------- ----------- ------------ ------------
Balance, December 31,
1999................ 2,000 $20 12,477,500 $12,478 $(252,685) $14,899,249 $(15,016,739) $ (357,677)
===== === ========== ======= ========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, FROM APRIL 1, 1997
-------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1999
--------------- -------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................... $(12,931,960) $(1,435,153) $(15,016,739)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization........ 71,220 20,089 94,074
Warrants issued for compensation..... 1,780,500 -- 1,780,500
Stock options issued for
compensation....................... 379,358 -- 379,358
Financing charges.................... 6,115,237 -- 6,115,237
Stock options issued to vendors...... 578,750 -- 578,750
Stock issued to vendors.............. 53,125 -- 53,125
(Increase) decrease in Accounts
receivable........................... (222,324) -- (222,324)
Prepaid expenses..................... (8,496) -- (8,496)
Deposits............................. (26,700) -- (26,700)
Debt issuance costs.................. (135,000) -- (135,000)
Increase (decrease) in Accounts
payable.............................. 543,138 25,558 589,241
Accrued liabilities.................. 171,375 89,301 299,401
Advances on contracts................ 67,000 -- 67,000
------------ ----------- ------------
Net cash used in operating
activities........................... (3,564,777) (1,300,205) (5,452,573)
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and
equipment.......................... (398,693) (64,410) (478,653)
Purchase of mineral rights........... -- -- (10,000)
------------ ----------- ------------
Net cash used in investing
activities........................... (398,693) (64,410) (488,653)
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD
DECEMBER 31, FROM APRIL 1, 1997
---------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1999
---------- --------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt........... $2,550,573 $ 432,302 $2,982,875
Payments on short-term debt............. (655,000) -- (655,000)
Proceeds from long-term borrowings...... -- 389,994 878,518
Capital contributions................... -- 533,000 621,600
Proceeds from private placement......... 2,000,000 234,000 2,268,175
Proceeds from execution of warrants..... 731,250 -- 731,250
Offering costs.......................... (434,017) (22,767) (456,784)
---------- --------- ----------
Net cash provided by financing
activities.............................. 4,192,806 1,566,529 6,370,634
---------- --------- ----------
Net increase in cash...................... 229,336 201,914 429,408
---------- --------- ----------
CASH (BOOK OVERDRAFT), BEGINNING OF
PERIOD.................................. 200,072 (1,842) --
---------- --------- ----------
CASH, END OF PERIOD....................... $ 429,408 $ 200,072 $ 429,408
========== ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
INTEREST PAID........................... $ 4,166 $ -- $ 4,166
========== ========= ==========
INCOME TAXES PAID......................... $ -- $ -- $ --
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1999
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
On January 15, 1999, the Company converted long-term debt of $852,268 to
1,600,000 shares of common stock. In connection with the conversion, the Company
recognized financing costs of $4,597,000 related to beneficial conversion rates.
During the year ended December 31, 1999, the Company issued options to
purchase 425,000 shares of common stock to vendors. The options were valued at
$578,750.
During the year ended December 31, 1999, the Company issued stock options to
employees as compensation. Related to these options, the Company capitalized
deferred compensation of $252,685 and recognized compensation expense of
$379,358.
During the year ended December 31, 1999, the Company issued 252,500 shares
of common stock as interest expense on bridge loans. In connection with the
shares of common stock, the Company recognized financing charges of $535,520.
During the year ended December 31, 1999, the Company settled a dispute with
a stockholder by issuing a note payable for $400,000.
During the year ended December 31, 1999, the Company issued warrants to
purchase a total of 940,000 shares of the Company's common stock in conjunction
with the issuance of short-term debt. The Company recognized financing costs of
$462,917 in conjunction with these warrants.
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. In connection with
the warrants, the Company recognized compensation expense of $1,780,500.
On July 14, 1999, the Company issued warrants to purchase 400,000 shares of
the Company's common stock to certain debt holders. In connection with the
warrants, the Company recognized financing charges of $474,800.
On November 12, 1999, the Company recognized $45,000 of financing costs
related to the issuance of debt convertible to common stock at rates beneficial
to the debt holders.
F-9
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
("EBI"). The acquisition has been accounted for in a manner similar to a pooling
of interests.
Subsequent to and in connection with the acquisition, certain of INB's debt
was converted to common stock of EBI.
Subsequent to the year ended December 31, 1999, EBI and INB (collectively,
the "Company") began to do business as Vidnet.
The Company remains in the business of providing Internet sales and
distribution of entertainment products and services, as well as the distribution
of certain other infomercial-related merchandise and sports-related information
services. To date, the Company 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 years ended December 31, 1999 and 1998, the Company
incurred losses of $12,931,960 and $1,435,153, 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.
F-10
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 2--GOING CONCERN MATTERS (CONTINUED)
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 and an additional $9,000,000 in
bridge financings, which the Company expects to convert to common shares in
early 2000. Management expects these financings 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 EBI and its
wholly owned subsidiary, INB. 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.
CASH
The Company maintains cash balances in one bank located in Southern
California. Deposits at the bank are insured by the Federal Deposit Insurance
Corporation up to $100,000. As of December 31, 1999, uninsured portions of the
balance totaled approximately $357,000.
F-11
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three months or
less to be cash equivalents.
INTANGIBLE ASSET
Intangible asset represents the rights to certain mining and related leases
(see Note 10) and has been accounted for at cost. As of December 31, 1999, the
rights were fully amortized.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives of
the assets. The principal classes and estimated useful lives are as follows:
<TABLE>
<S> <C>
Computer equipment........... 3 years
Furniture.................... 7 years
Leasehold improvements....... The shorter of the life of
the lease, or useful life of
the improvements
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized.
DEBT ISSUANCE COSTS
Costs incurred in connection with issuing short-term debt are capitalized
and amortized over the term of the related debt. As of December 31, 1999,
accumulated amortization of debt issuance costs amounted to $25,000.
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 taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and
F-12
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
ADVANCES ON CONTRACTS
The Company has received an advance on a fixed price contract in excess of
revenue earned.
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.
F-13
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting 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.
F-14
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
F-15
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 4--ACQUISITION OF INTERNATIONAL NET BROADCASTING, LLC ("INB") (CONTINUED)
accounts and operations of INB. The combined entities' separate operating
results for the years ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Net revenues
The Company....................... $ -- $ --
INB............................... 268,039 --
------------ -----------
COMBINED........................ $ 268,039 $ --
============ ===========
Net loss
The Company....................... $ -- $ --
INB............................... (12,931,960) (1,435,153)
------------ -----------
COMBINED........................ $(12,931,960) $(1,435,153)
============ ===========
Net loss per common share
PRIOR TO ACQUISITION.............. $ -- $ --
============ ===========
AS RESTATED....................... $ (1.09) $ (0.30)
============ ===========
</TABLE>
NOTE 5--FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1999 consisted of the following:
<TABLE>
<S> <C>
Computer equipment................................. $317,877
Furniture.......................................... 36,478
Leasehold improvements............................. 124,298
--------
478,653
Less accumulated depreciation and amortization..... 59,104
--------
TOTAL............................................ $419,549
========
</TABLE>
F-16
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6--SHORT-TERM DEBT
During the years ended December 31, 1999 and 1998, the Company received
advances from various investors through short-term, unsecured debt instruments.
The advances bear interest at 10% and are generally due within one year of the
original advance date. Balances on these short-term advances aggregated to
$754,095 and $458,552 at December 31, 1999 and 1998, respectively.
In December 1999, the Company issued $750,000 of short-term, secured
promissory notes. The notes are convertible in three months from the issuance
date, bear interest at 10% per annum, and are secured by substantially all of
the assets of the Company. The notes included detachable stock purchase warrants
for 300,000 shares of common stock, which were immediately exercisable at $1 per
share and expire in five years. Related to the warrants, the Company recorded
deferred financing costs of $1,086,000, which represents the fair market value
of the warrants. In accordance with generally accepted accounting principles,
this discount is being amortized over the term of the debt.
In December 1999, the Company issued three-month, secured promissory notes
totaling $350,000. The notes bear interest at 10% and are secured by the assets
of the Company. The promissory notes included detachable stock purchase warrants
for 140,000 shares of the Company's common stock, which were immediately
exercisable at $1 per share and expire in five years. At December 31, 1999, the
Company recorded the fair market value of the warrants as deferred financing
costs of $233,373, which is being amortized into finance costs over the term of
the notes. The Company recognized finance costs in the amount of $46,667 related
to these warrants.
From time to time, the Company has borrowed unsecured amounts for working
capital requirements from officers of the Company. During the year ended
December 31, 1999, advances and repayments of these bridge financings aggregated
to $500,000, none of which were outstanding at December 31, 1999. Associated
with these bridge financings, the Company issued 252,500 shares of its common
stock as interest and recorded $535,520 of financing costs related to the stock.
NOTE 7--CONVERTIBLE NOTES
On November 12, 1999, the Company issued $500,000 of short-term bridge notes
that are convertible into 250,000 shares of common stock at the lender's
election. These notes are secured by all assets of the Company and are payable
on or before
F-17
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 7--CONVERTIBLE NOTES (CONTINUED)
February 15, 2000, including interest at 10% per annum. In connection with these
notes, the Company recognized $45,000 of financing costs due to a conversion
rate below the fair market value of the Company's common stock at the date of
issuance.
Additionally, the note holders received warrants to purchase 250,000 shares
of common stock at $2.50 per share and 250,000 shares of common stock at $3 per
share. The warrants are immediately exercisable and expire in five years.
Related to these warrants, the Company recorded deferred financing costs of
$416,250 and finance costs of $416,250. The remaining deferred costs will be
amortized over the remaining term of the notes.
NOTE 8--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 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.
Certain long-term debt holders were granted 400,000 warrants subsequent and
related to the conversion (see Note 13). As of December 31, 1999, there were no
long-term advances outstanding.
NOTE 9--RELATED PARTY TRANSACTIONS
The Company incurred expenses in the amounts of approximately $210,000 and
$520,000 related to compensation for officers of the Company during the years
ended December 31, 1999 and 1998, respectively. Included in these amounts are
consulting fees and expenses paid on behalf of the officers.
On August 20, 1999, the Company settled a dispute with a major stockholder
by issuing a note payable for $400,000. The note bears interest at 8%, was due
and payable on November 30, 1999, and is currently in default. In addition, the
Company paid the stockholder $310,000 in accordance with that agreement.
Related to the above 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 eight years, and management believes it is fully
collectible.
F-18
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)
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 stock option grants to purchase a minimum of 50,000 shares of the
Company's common stock per year. The options expire two years from issuance.
NOTE 10--COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its facilities under a non-cancelable lease, which
commenced on September 1, 1999 and expires on December 31, 2004. The lease
includes a yearly increase of 3.5% in the monthly rent and requires the Company
to pay a percentage of the operating expenses associated with the property. The
lease also includes a provision for an additional security deposit of $135,595
to be paid in January 2000.
Minimum annual payments required under the lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING,
DECEMBER 31,
------------
<S> <C>
2000............................................. $ 323,871
2001............................................. 335,206
2002............................................. 346,939
2003............................................. 359,081
2004............................................. 371,649
----------
TOTAL.......................................... $1,736,746
==========
</TABLE>
Rent expense was $211,165 and $36,585 for the years ended December 31, 1999
and 1998, respectively.
MINING RIGHTS
Prior to the acquisition of INB, the Company entered into an agreement,
whereby the Company assumed all terms and obligations of a 20-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.
F-19
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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. As of December 31, 1999, the Company has not paid any
amounts related to this agreement.
AGREEMENTS
On February 2, 1999, 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>
2000............................................... $37,428
2001............................................... 9,357
-------
TOTAL............................................ $46,785
=======
</TABLE>
On July 31, 1999, the Company executed an agreement with an investor
relations firm. The agreement calls for monthly payments in the amount of $5,000
and an option to purchase 50,000 shares of the Company's common stock (see
Note 13).
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-20
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 11--INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
for federal income taxes for the years ended December 31, 1999 and 1998
consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Deferred tax assets
Operating losses....................... $1,978,000 $13,000
Temporary differences from stock
options and warrants................. 931,000 --
Valuation allowance...................... (2,909,000) (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 and warrants
for compensation. The federal net operating loss carryforwards at December 31,
1999 were approximately $6,815,000.
NOTE 12--STOCKHOLDERS' DEFICIT
SERIES A PREFERRED STOCK
On September 3, 1999, the Company sold 2,000 shares of its Series A, $0.01
par value, convertible preferred stock for $1,000 per share. The sale provided
for an additional 2,000 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, which consisted of lawyers' fees and placement agent
fees. In addition, a warrant for the purchase of 250,000 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
F-21
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 12--STOCKHOLDERS' DEFICIT (CONTINUED)
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 December 31, 1999, none of the convertible shares
were exercisable. Due to the nature of the conversion feature, changes in the
trading price of the underlying stock could result in significant changes in the
number of common shares issued upon conversion.
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, an officer of the Company
contributed $533,000 to the Company.
NOTE 13--STOCK OPTIONS AND WARRANTS
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 and an additional 2,925,000 shares of common stock at $1 per
share. During the year ended December 31, 1999, all of the $0.25 warrants were
exercised for $731,250 with associated costs of $106,175. The $1 warrants are
exercisable for a period of one year from the effective date of the Registration
Statement. As of December 31, 1999, none of the $1 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.
F-22
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 13--STOCK OPTIONS AND WARRANTS (CONTINUED)
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.
The following tables summarizes information about warrants outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
EXERCISE WARRANTS WARRANTS
PRICE OUTSTANDING EXERCISABLE
--------------------- ----------- -----------
<S> <C> <C>
$1.00 5,265,000 3,765,000
$2.00 250,000 250,000
$2.50 250,000 250,000
$3.00 250,000 250,000
---------- ----------
6,015,000 4,515,000
========== ==========
</TABLE>
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 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 85% 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.
F-23
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 13--STOCK OPTIONS AND WARRANTS (CONTINUED)
STOCK OPTIONS
Stock options were granted during the year ended December 31, 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 of 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 $252,685 and recognized compensation expense of $379,358 during
the year ended December 31, 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 to an investor relations firm. 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.
On November 2, 1999, the Company issued 250,000 options to purchase common
stock at $1.25 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 $252,500.
The Company has adopted only the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." It applies Accounting Principles
Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related
F-24
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 13--STOCK OPTIONS AND WARRANTS (CONTINUED)
Interpretations in accounting for its plans and does not recognize compensation
expense for its stock-based compensation plans other than for restricted stock
and options/warrants issued to outside third parties. If the Company had elected
to recognize compensation expense based upon the fair value at the grant date
for awards under these plans consistent with the methodology prescribed by
SFAS 123, the Company's net loss and loss per share would be reduced to the pro
forma amounts indicated below for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Net loss
As reported....................... $(12,931,960) $(1,435,153)
Pro forma......................... $(13,071,752) $(1,435,153)
Loss per common share
As reported....................... $ (1.09) $ (0.30)
Pro forma......................... $ (1.10) $ (0.30)
</TABLE>
The fair value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for the year ended December 31, 1999. (The Company granted no
options during the year ended December 31, 1998): dividend yields of 0%,
expected volatility of 100%, risk-free interest rates of 6.5%, and expected life
of five years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-25
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 13--STOCK OPTIONS AND WARRANTS (CONTINUED)
The following summarizes the Company's stock option transactions:
<TABLE>
<CAPTION>
ALL OPTIONS EMPLOYEE PLAN OTHER OPTIONS
------------------------ -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
OPTIONS OUT- EXERCISE OUT- EXERCISE OUT- EXERCISE
STANDING PRICE STANDING PRICE STANDING PRICE
------------ --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
ISSUED AND OUTSTANDING,
DECEMBER 31, 1999...... 1,253,000 $ 1.44 828,000 $ 1.21 425,000 $ 1.88
========= ======= =======
EXERCISABLE AT
DECEMBER 31, 1999...... 710,000 $ 1.53 285,000 $ 1.00 425,000 $ 1.88
========= ======= =======
</TABLE>
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
WEIGHTED- AVERAGE AVERAGE
AVERAGE EXERCISE EXERCISE
RANGE OF STOCK STOCK REMAINING PRICE OF PRICE OF
EXERCISE OPTIONS OPTIONS CONTRACTUAL OPTIONS OPTIONS
PRICES OUTSTANDING EXERCISABLE LIFE OUTSTANDING EXERCISABLE
- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$1.00 - $1.75.. 1,203,000 660,000 9.6 years $ 1.21 $ 1.00
$6.00.......... 50,000 50,000 2.6 years $ 6.00 $ 6.00
--------- -------
1,253,000 710,000
========= =======
</TABLE>
NOTE 14--MAJOR CUSTOMERS
The Company transacts a significant amount of business with three individual
customers. At December 31, 1999, the balances from these three customers
represented 45%, 27%, and 19% of total accounts receivable. For the years ended
December 31, 1999 and 1998, total revenue from four individual customers
aggregated to 88% of total revenue.
NOTE 15--YEAR 2000 ISSUE
The Company has completed a comprehensive review of its computer systems to
identify the systems that could be affected by ongoing Year 2000 problems.
Upgrades to systems judged critical to business operations have been
successfully installed. To
F-26
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 15--YEAR 2000 ISSUE (CONTINUED)
date, no significant costs have been incurred in the Company's systems related
to the Year 2000.
Based on the review of the computer systems, management believes all action
necessary to prevent significant additional problems has been taken. While the
Company has taken steps to communicate with outside suppliers, it cannot
guarantee that they have all taken the necessary steps to prevent any service
interruption that may affect the Company.
NOTE 16--SUBSEQUENT EVENTS
On January 1, 2000, the Company entered into an agreement with Virgin
Holdings, Inc. ("Virgin"), allowing the Company to broadcast certain licensed
videos on the Company's website for a period of one year. As consideration, the
Company paid $100,000 as a licensing fee and is required to pay to Virgin a
percentage of all gross receipts generated from the Company's website. In
addition, Virgin has been granted 678,685 shares of the Company's common stock
as additional consideration.
On January 14, 2000, the Company borrowed $200,000 with a convertible
promissory note. The note bears interest at 10% per annum and is secured by all
of the assets of the Company. The note is convertible into 200,000 shares of the
Company's common stock and was issued in conjunction with warrants to purchase
50,000 shares of the Company's common stock at $1 per share.
Subsequent to the year ended December 31, 1999, the Company made advances of
$486,223 to a digital production company. The advances are payable upon demand.
Subsequent to the year ended December 31, 1999, the Company began
negotiating a $1,000,000 line of credit with a bank.
During January and February 2000, the Company raised approximately
$10,515,000 in promissory notes, due 90 days from issuance, bearing interest at
10% per annum, and a five-year warrant to purchase 40,000 shares of common stock
at $1 per share for each $100,000 raised.
In accordance with generally accepted accounting principles, the Company
will recognize the fair market value of the warrants as financing costs over the
term of the notes. The aggregate value of the warrants issued in connection with
this debt is
F-27
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY,
DBA VIDNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
NOTE 16--SUBSEQUENT EVENTS (CONTINUED)
approximately $15,500,000 which the Company expects will be recorded in the
first quarter of 2000.
In addition, on February 24, 2000, the Company offered these debt holders
the opportunity to convert their 90-day, 10%, secured bridge notes for shares of
common stock. The aggregate amount of debt outstanding related to these
potential conversions was approximately $11,265,000 at the time the offer was
made. The exchange rate offered to these debt holders is 50,000 shares of common
stock and 20,000 stock purchase warrants with an exercise price of $4 per share
for every $100,000 of debt held. The conversion rate at the time of the offer is
beneficial to the debt holder. The closing stock price at the time of the offer
was $6.87 per share. If all of the debt holders were to convert, the Company
would incur a charge to earnings of approximately $25,500,000, which represents
the difference between the trading price of the stock and the conversion rate of
the debt. The Company expects this charge to be recorded in the first quarter of
2000.
On February 29, 2000, the Company entered into an agreement with Sony Music
Entertainment, Inc. ("Sony"), allowing the Company to broadcast certain music
videos on the Company's website for a period of one year. As consideration, the
Company paid $225,000 as a licensing fee and is required to pay to Sony a
percentage of all gross receipts generated from the Company's website.
In February 2000, the Company entered into a content provider agreement that
requires the Company to pay $12,000 monthly for certain promotional services.
On March 15, 2000, the Company raised $2,000,000 through the placement of
2,000 shares of its Series A preferred stock. On that date, all 4,000 shares
were converted to 2,723,647 shares of common stock.
F-28
<PAGE>
9,814,077 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 DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[ ], 2000
<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:
II-1
<PAGE>
"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."
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.
II-2
<PAGE>
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 38 foreign investors for a total of
$37,000 in cash. The issuances were made in reliance on Section 4(2) of the
Securities Act of 1933 using a private offering memorandum.
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. The Registrant's current management has only limited
information regarding the issuance; however, it is believed that it was made in
reliance on Section 4(2) of the Securities Act of 1933 and that the investor was
sophisticated and had access to information regarding the Registrant.
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 pursuant to Rule 504 of Regulation D under the Securities Act
of 1933. In connection with the offering, a private offering memorandum was
provided to prospective investors. All 2,925,000 of the $0.25 warrants were
exercised in February 1999.
II-3
<PAGE>
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. The offering was made in reliance on Section 4(2) of
the Securities Act of 1933 in a negotiated transaction involving a Stock
Purchase Agreement which contained various representations, warranties and other
disclosures regarding the Registrant. Each investor was sophisticated and was
provided with information regarding the Registrant.
On July 1, 1999, the Registrant privately issued 25,000 shares of Common
Stock to Typhoon Capital Consultants, LLC as payment for consulting services.
The issuance was made in reliance on Section 4(2) of the Securities Act of 1933
to a sophisticated investor, the principal of which had access to information
regarding the Registrant.
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. The issuance was made in reliance on Section 4(2) of the
Securities Act of 1933 to a sophisticated investor, the principal of which had
access to information regarding the Registrant.
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. The issuances were made pursuant to Section 4(2) of the Securities
Act of 1933 to persons who were already stockholders in the Registrant (see
above). Each investor was sophisticated and was provided with information
regarding the Registrant.
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. The issuances were made pursuant to Section 4(2) of the
Securities Act of 1933 to sophisticated investors who had access to information
regarding 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. The issuance was made pursuant to Section 4(2)
of the Securities Act of 1933 to an accredited investor as a prelude to a larger
investment (see below).
On September 3, 1999, the Registrant (i) privately issued 2,000 shares of
8.0% Mandatorily Convertible Series A Preferred Stock to three 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. The offering was made pursuant to Rule 506 of Regulation D and Section
4(6) of the Securities Act of 1933 in a negotiated transaction involving a
Securities Purchase Agreement and a Registration Rights Agreement. The
purchasers of the Series A preferred stock were
II-4
<PAGE>
accredited investors with access to information regarding the Registrant. In
connection with that transaction, the Registrant entered into a Placement Agency
Agreement with Robb Peck McCooey Clearing Corporation ("Robb Peck") pursuant to
which that entity and its affiliates were granted five-year warrants to purchase
a total of 250,000 shares of the Registrant's Common Stock for $2.00 per share
and Robb Peck was paid cash in the amount of $240,000. In addition, Robb Peck
and its affiliates will be granted additional warrants to purchase a total of
250,000 shares of the Registrant's Common Stock on the same terms upon
completion of the sale of the additional shares of Series A preferred stock. The
recipients of the warrants were accredited investors with access to information
regarding the Registrant.
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. The grants were made in
reliance on Rule 701 under the Securities Act of 1933 pursuant to compensatory
benefit plans and/or contracts relating to compensation. Through their
employment or consulting relationship, each option holder had access to
information regarding the Registrant.
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 connection with that transaction, Robb Peck and its
affiliates were granted five-year warrants to purchase a total of 500,000 shares
of the Registrant's Common Stock for $2.50 and $3.00 per share. The issuances
were made in reliance on Section 4(2) of the Securities Act of 1933 to investors
who were accredited and already held substantial interests in the Registrant
(see above).
From December 6, 1999 through February 3, 2000, the Registrant privately
issued 116.15 units of its securities, each unit consisting of a $100,000
promissory note and a warrant to purchase 40,000 shares of common stock at $1.00
per share. The issuances were made pursuant to Section 4(2) of the Securities
Act of 1933 to investors who were accredited and had access to information
regarding the Registrant.
On January 1, 2000, the Registrant privately issued 678,685 shares of Common
Stock to Virgin Holdings, Inc. as partial consideration for a license agreement.
The issuance was made in reliance on Section 4(2) of the Securities Act of 1933
to an accredited investor who had access to information regarding the
Registrant.
On January 14, 2000, the Registrant privately issued five-year warrants to
purchase 50,000 shares of Common Stock at $1.00 per share to H.A.A. Inc. and
Forest Equities, Ltd. in consideration of a $200,000 loan to the Registrant. The
loan itself is convertible into 200,000 shares of Common Stock. The issuances
were made in reliance on Section 4(2) of the Securities Act to investors who
were accredited and had access to information regarding the Registrant.
On January 25, 2000, the Registrant and Robb Peck entered into a Termination
Agreement whereby Robb Peck agreed to terminate certain contractual rights in
II-5
<PAGE>
return for five-year warrants to purchase 500,000 shares of the Registrant's
Common Stock for $0.50 and $3.50 per share. The warrants were granted in
reliance on Section 4(2) of the Securities Act of 1933 to persons who had access
to information regarding the Registrant and who had previously been granted
warrants in the Registrant (see above).
On February 29, 2000, the Registrant privately issued 667,685 shares of
Common Stock to Sony Music Entertainment, Inc. as partial consideration for a
license agreement. The issuance was made in reliance on in Section 4(2) of the
Securities Act of 1933 to an accredited investor who had access to information
regarding the Registrant.
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
4.7* Form of Warrant issued to unit purchasers in private
placement on December 28, 1999
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
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
10.8* Media Search License Agreement between the Registrant and
AltaVista Company dated October 28, 1999
10.9* Affiliate Agreement between the Registrant and IFILM Corp.
dated December 22, 1999
10.10* Bolt/EBLD Agreement between the Registrant and Bolt
Media, Inc. dated as of July 26, 1999
10.11* College Broadcast/Entertainment Boulevard Agreement between
the Registrant and College Broadcast, Inc. dated as of
August 4, 1999
10.12* Hosting Service Agreement between International Net
Broadcasting, LLC and Liquid Audio, Inc. dated August 31,
1998
10.13* License Agreement between International Net
Broadcasting, LLC and Marathon Sports Group, Inc. dated
October 29, 1998
10.14* Web Collocation Service Order Form between the Registrant
and Level (3) Communications dated February 8, 1999
10.15* Strategic and Co-Marketing Partnership Agreement between the
Registrant and Scour Inc. dated February 25, 1999
10.16* Video Content Management & Delivery Services Agreement
between the Registrant and InterVU dated February 8, 1999
10.17* License Agreement between the Registrant and Dimension
Music, Inc. dated as of February 25, 1999
10.18* License Agreement between the Registrant and SRN
Broadcasting & Marketing, Inc. dated March 4, 1999
10.19* Sales Agent Agreement between the Registrant and EarthLink
Network, Inc. dated March 11, 1999
10.20* Hearme.com Syndication Partner Program Agreement between the
Registrant and Mpath Interactive, Inc. dated March 18, 1999
10.21* Agreement between the Registrant and L.A. Group, Inc. dated
as of March 30, 1999
10.22* License Agreement between the Registrant and Synge.com dated
as of June 7, 1999
10.23* Strategic Alliance Agreement between the Registrant and
Digital Bitcasting Corp. dated July 23, 1999
10.24* 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
10.25* $125,000 Bridge Loan evidenced by promissory notes payable
to each of Steve McKeag, Richard Sandfer, John McKeag and
Dominick Guillemot
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
10.26* Loan and Security Agreement dated August 6, 1999 between the
Registrant and Beeston Investment Ltd.
10.27* $400,000 Promissory Note from the Registrant to Arthur Brown
and Riz Alikhan dated August 20, 1999
10.28* Stock Purchase Agreement between Sedmet Exploration, Inc.
and International Net Broadcasting, LLC dated as of
January 15, 1999
10.29* Securities Purchase Agreement between the Registrant and
H.A.A. Inc., Lowen Holdings and Beestons Investment Ltd.
dated as of September 3, 1999
10.30* Placement Agency Agreement between the Registrant and Robb
Peck McCooey Clearing Corporation dated September 3, 1999
10.31* Registration Rights Agreement between the Registrant and
Robb Peck McCooey Clearing Corporation to purchase 250,000
shares of common stock dated September 3, 1999
10.32* Registration Rights Agreement between the Registrant and the
purchasers of the 8.0% Mandatorily Convertible Series A
Preferred Stock dated September 3, 1999
10.33* Settlement Agreement between the Registrant, Arthur Brown,
Akbar Alikhan, Riz Alikhan and Stephen Brown dated as of
July 14, 1999
10.34* Loan and Security Agreement dated November 12, 1999 between
the Registrant and Beestons Investment Ltd. and H.A.A. Inc.
10.35* Web Site Link Agreement between the Registrant and ICTV,
Inc. dated as of April 14, 1999, with Addendum
10.36* Webcast Distribution Agreement between the Registrant and
iBeam Broadcasting Corporation dated August 3, 1999
10.37* Content Provider Agreement dated September 8, 1999 between
the Registrant and ServiceCo, LLC dba Road Runner
10.38* ISP and Microsoft Network Credits Program Services Agreement
dated October 1, 1999
10.39* Form of Loan and Security Agreement dated December 28, 1999
between the Registrant and the Cruttenden Roth investors
10.40* Form of Subscription Agreement dated December 28, 1999
between the Registrant and the Cruttenden Roth investors
10.41* Termination Agreement dated December 28, 1999 between the
Registrant and Robb Peck McCooey Clearing Corporation
10.42* Loan and Security Agreement dated January 14, 2000 between
the Registrant and each of H.A.A. Inc. and Forest Equities,
Ltd.
10.43 Agreement dated December 3, 1999 between the Registrant and
Youthline USA, Inc.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
10.44 Agreement dated January 1, 2000 between the Registrant and
Virgin Holdings, Inc.
10.45 Agreement dated January 10, 2000 between the Registrant and
Akoo.com
10.46 Content Provider Agreement dated February 2, 2000 between
the Registrant and Channelseek Inc.
10.47 Music Video License dated February 29, 2000 between the
Registrant and Sony Music Entertainment Inc.
10.48 Release and Stock Grant Agreement dated February 29, 2000
between the Registrant and Sony Music Entertainment Inc.
10.49 Agreement dated March 1, 2000 between the Registrant and
RealNetworks, Inc.
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 5.1).
24.1 Power of Attorney (see Page II-12)
27 Financial Data Schedule (electronic filing version only)
</TABLE>
- ---------------------
* Previously filed.
II-9
<PAGE>
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-10
<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, as amended, to be signed on its behalf by the
undersigned, thereunto duly authorized, in Los Angeles, California on March 15,
2000.
<TABLE>
<S> <C> <C>
ENTERTAINMENT BOULEVARD, INC.
By: /s/ STEPHEN BROWN
-----------------------------------
Stephen Brown,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND TREASURER
By: /s/ PAUL C. MATTOON
-----------------------------------
Paul C. Mattoon
CHIEF FINANCIAL OFFICER
</TABLE>
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement, as amended, 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 March 15, 2000
Stephen Brown Director
/s/ ARTHUR BROWN*
---------------------------------- Director March 15, 2000
Arthur Brown
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN BROWN
-----------------------------
Stephen Brown
ATTORNEY-IN-FACT
</TABLE>
II-11
<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-12
<PAGE>
AGREEMENT
This Agreement is dated as of December 3, 1999, between Entertainment
Boulevard, Inc., a Nevada corporation located at 12910 Culver Boulevard,
Suite I, Los Angeles, CA 90066 ("EBLD"), and Youthline USA, Inc., a Delaware
corporation, located at 4581 US9, Howell, New Jersey 07731 ("YUSA"). In
consideration of the mutual premises and undertakings stated herein, the
parties hereto agree as follows:
1. TRADEMARKS
1.1 EBLD IDENTITIES ON YUSA SITE. EBLD hereby grants a
non-exclusive cost-free license (without the right of
sublicense other than to YUSA customers or Schools) throughout
the Term of this Agreement to YUSA to use the EBLD name and
logo and other proprietary identities of EBLD (collectively,
"EBLD Mark(s)") in connection with YUSA's website called
"Youthline-USA.com" ("Youthline-USA.com") currently located
at http://www.youthline-usa.com, solely as stated in Exhibit A.
2. DEVELOPMENT OF YUSA WEBSITE
2.1 RESPONSIBILITIES OF EBLD. EBLD shall be responsible for the
development and enhancement of the YUSA website, all in
accordance with the specifications, and to the satisfaction of
YUSA. All changes with respect to the YUSA website shall be
made by EBLD. EBLD acknowledges that the YUSA site must be
relaunched no later than January 3, 2000. After the YUSA site
is relaunched, EBLD shall be required to provide weekly
services (for no additional charges) of no less than 20 hours
nor more than 40 hours (as requested by YUSA).
2.2 EBLD SERVER. EBLD shall host the YUSA website ans shall provide
access through its server at a site agreed upon by YUSA. YUSA
may, at its sole discretion, decide to host the website and
provide an alternate server for same.
3. CONTENT
3.1 SITE PRODUCTION. EBLD shall build, serve, and produce the
Youthline-USA.com website. EBLD shall give YUSA a pass code in
order for YUSA to upload content to the Youthline-USA.com
website. All content contained on the Youthline-USA.com will
be approved exclusively by YUSA.
3.2 MULTIMEDIA CONTENT. EBLD will provide YUSA the right to add
any of EBLD's content, products or services on the YUSA
website. YUSA will have sole and absolute authority to provide
such content, products or
<PAGE>
services to the YUSA website. In addition, EBLD shall provide
new multimedia products as requested by YUSA.
3.3 LICENSE. (a) EBLD hereby grants a non-exclusive cost-free
license (without the right of sublicense other than to YUSA
customers or Schools) throughout the Term of this Agreement to
YUSA to use the certain content owned and/or controlled by
EBLD, as described on Exhibit A (collectively, "EBLD Content")
in connection with YUSA, solely as stated on Exhibit A. YUSA
will not establish any direct hypertext links between
Youthline-USA.com and the site of an EBLD competitor as
outlined in Exhibit B.
(b) All content on the website as of the termination date of
this Agreement shall be the property of YUSA. All streaming
content (audio and video) shall continue to remain on the YUSA
website (for no charge) so long as same is still licensed
(including renewals thereof) to EBLD.
(c) EBLD may not publish any of the YUSA website content on
its own site but may only provide a hypertext link to the YUSA
site. Nor can EBLD license any of such content to any third
party. None of the EBLD sites may contain any educational
childrens programming (other than the reference to the YUSA
site), unless YUSA decides not to provide such specific
content on its own site. EBLD may not offer its services,
content or products to any other childrens
educational/entertainment company during the term of this
Agreement. EBLD may not establish hypertext links between EBLD
sites and the sites of any YUSA competitor as outlined on
Exhibit C (which may be updated from time to time by YUSA).
3.4 PROMOTION. EBLD shall actively promote the YUSA website within
its own site.
3.5 PUBLICATION OF CONTENT. Neither party will use the Content of
the other's site in any way without the consent of the other.
All content, technology, systems, etc. developed by EBLD on
behalf of YUSA, shall belong to YUSA at the termination of
this Agreement.
3.6 QUALITY CONTROL. EBLD agrees to maintain the quality of the
site of the Youthline-USA.com site to a level satisfactory to
YUSA. If YUSA, in its reasonable discretion, determines that
the Youthline-USA.com site falls below its expectations and
does not otherwise meet its editorial standards, YUSA will
notify EBLD to that effect in writing giving specific details
of the failure to meet such expectations or standards, and
EBLD 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
Youthline-USA.com site has not sufficiently improved, YUSA
may
2
<PAGE>
terminate the Agreement effective immediately upon the receipt by
the other party of notice of termination. EBLD shall be responsible
to cure any material malfunctions or problems with the site within
24 hours of notice of same.
3.7 LIMITATION OF RIGHTS. YUSA's use of the EBLD's Marks and Content
as well as the use of the any content 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, other than as set forth herein.
4. FINANCIAL
4.1 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.
4.2 PRODUCTION FEE. YUSA shall pay to EBLD a one-time fee of two
hundred thousand dollars ($200,000). One hundred thousand
dollars ($100,000) shall be due upon signature of this
Agreement, and the additional one hundred thousand dollars
($100,000) shall be due upon the re-launch of the
Youthline-USA.com website. The relaunching of the YUSA site
shall be no later than January 3, 2000. If same is not completed
at such date, EBLD shall return the $100,000 payment referred to
above.
4.3 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. 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. The parties acknowledge that both
YUSA and EBLD are entitled to sell advertising on the YUSA site,
PROVIDED, HOWEVER, all such advertising is pre-approved by YUSA
to ensure appropriateness of same.
(b) ADVERTISING GUIDELINES. YUSA will not sell any advertising for
Youthline-USA.com to the parties listed on Exhibit B attacthed
hereto. EBLD will not sell advertising for EBLD sites to the
parties listed on Exhibit C attached hereto.
3
<PAGE>
(c) PAYMENTS. Each party shall pay to the other with respect to all
advertising revenues generated a sum equal to that percent of the
gross revenues actually received on behalf of the Youthline-USA.com
website hereunder. For the purposes hereof, the Revenue Split will
be as follows: EBLD 50%, YUSA 50%.
(d) PAYMENT SCHEDULE. Each party shall pay the other
its share of revenue within thirty (30) days after the end of each
month.
(e) AUDITS. EBLD or EBLD's designated representative shall have
the right, at YUSA's usual place of business, during business
hours and on reasonable notice to YUSA (but in no event more
than once annually), to examine and copy at EBLD's sole expense
(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) YUSA's books and records to confirm
the accuracy of any such statmenets not otherwise deemed
accepted. In the event that such audit reveals a discrepancy in
the amounts owed EBLD from what was actually paid, YUSA 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, YUSA shall reimburse EBLD for the cost of such audit. YUSA
or YUSA'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 YUSA keeps such copies
confidential and uses them solely in connection wtih YUSA'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 YUSA from what was
actually paid, EBLD shall pay YUSA the amount of such
discrepancy. If such discrepancy is in excess of five percent
(5%) of the amounts actually paid to YUSA, EBLD shall reimburse
YUSA for the cost of such audit.
4.4 PRODUCT SALES. EBLD and YUSA will offer users the opportunity to
purchase products through an online retail stor (the "Store") as
follows: (it being understood that EBLD shall be exclusively
responsible for development and build-out of the Store).
(a) LINKS. Youthline-USA.com will include a button to link to the
Store in a mutually agreed upon design.
4
<PAGE>
(b) PRODUCTS. YUSA shall have sole and absolute discretion to
determine the products to be available from the Store.
(c) ORDER PROCESSING. The Store will process product orders
placed by customers who follow these links from
Youthline-USA.com to the Store site. The Store reserves the
right to reject orders that do not comply with any requirements
that the Store periodically may establish. The Store 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. The Store will track sales made to customers who
purchase products using the links from Youthline-USA.com and
will send EBLD and YUSA reports summarizing this sales activity.
(d) CUSTOMER DATA. EBLD and YUSA shall both own and retain all
right, title and interest in all names, addresses and other
identifying information of users of the Store. EBLD and YUSA
shall agree upon any future uses (and limitation to same) to
such data base.
(e) FEE SCHEDULE. EBLD and YUSA will share equally in the net
revenue of the Store. "Net Revenue" shall be defined as sales of
product less cost of product and costs for shipping, handling,
gift wrapping and taxes. All funds generated by the Store will
be deposited into a separate bank account of EBLD. The account
will require that all checks, wires, etc. will need two
signatures (one each from EBLD and YUSA).
(f) PRICING. EBLD and YUSA will determine the prices to be
charged for products sold in the Store, other than items
purchased through IFill.
(g) TERMINATION. Upon termination, the Store will be the exclusive
property of YUSA.
5. APPROVALS
5.1 PRIOR APPROVAL REQUIRED. All uses by either party of the other
party's Marks and 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
5
<PAGE>
6.1 TERM. This Agreement shall be effective as of the date of this
Agreement, and will continue for two (2) years (the "Term").
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 sections
5.1 or 6.1 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, other than as
set forth herein.
5.4 SURVIVAL. Sections 3.7, 5.2, 8 and 9 will survive the
termination or expiration of this Agreement.
7. 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 an 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
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 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.
6
<PAGE>
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 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 violates any intellectual property rights of
any third party, any allegation that any content on its
website 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.
9. CONFIDENTIALITY. All information about the development of the EBLD
Site and the development and launch of Youthline-USA.com disclosed to
YUSA, its officers, directors, employees and/or agents shall be
treated as confidential. All information about the development and
launch of Youthline-USA.com 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
<PAGE>
10. GENERAL
10.1 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.
10.2 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.
10.3 RELATIONSHIP OF PARTIES. This Agreement does not create a
joint venture, partnership or principal/agent relationship
between that 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.
10.4 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.
10.5 APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New
Jersey, without regard to principles of conflicts of law. Each
of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State
of New Jersey.
10.6 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.
10.7 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.
8
<PAGE>
ENTERTAINMENT BOULEVARD, INC. YOUTHLINE USA, INC.
By: /s/ Stephen Brown By: /s/ Saki Dodelson
------------------------- -------------------------
Name: Stephen Brown Name: Saki Dodelson
Title: CEO Title: President
9
<PAGE>
Exhibit 10.44
AGREEMENT
This Agreement is made and entered into as of January 1, 2000 (the
"EFFECTIVE DATE"), by and between Entertainment Boulevard, Inc., a Nevada
corporation with its principal place of business located at 12910 Culver
Boulevard, Suite I, Los Angeles, California 90066 ("EBLD"), and Virgin
Holdings, Inc., a Delaware corporation with its principal place of business
located at 338 North Foothill Road, Beverly Hills, California 90210 ("VIRGIN").
The parties hereto agree as follows:
1. DEFINITIONS.
(a) "AFFILIATE" has the meaning assigned to such term in the
Securities Act of 1933 and the rules and regulations promulgated thereunder.
(b) "EBLD WEB SITES" means: (i) www.entertainmentblvd.com; (ii)
www.vidnet.com; and (iii) any other Web Site owned, operated, licensed or
controlled by EBLD which is hereafter approved by Virgin in writing in its
sole discretion. EBLD Web Sites shall also include mirror sites, caching
servers or equivalent devices whose distribution function for purposes
hereunder is determined solely by actions directed at the URL's listed in the
foregoing clauses (i) through and (iii).
(c) "LABEL AFFILIATES means those entities listed on EXHIBIT A
hereto, as such schedule may be amended by Virgin in its sole discretion from
time to time.
(d) "LICENSED VIDEO" means a Video that, from and after the date
hereof, (i) Virgin or its Label Affiliates owns or has acquired the right to
license the exhibition of and (ii) Virgin, in its sole discretion, has
designated for use by EBLD solely upon the terms and subject to the
conditions of this Agreement.
(e) "STREAM" or "STREAMING" means the digital transmission solely
by means of the Internet of a Video that is substantially contemporaneous
with its visual and audible performance on a customer's personal computer and
that does not produce a computer file embodying such performance on such
customer's computer that is usable without a simultaneous active connection
to the digital transmission source, other than as temporarily required to
render such contemporaneous performance as in the form of a data buffer. For
the avoidance of any doubt, telephone service or Internet access provided
over either cable television physical plant or satellite broadcast or any
other medium now known or hereafter developed capable of data transfer rates
in excess of 300 kilo-bits per second is hereby excluded from this definition.
(f) "TERM" means one year from the date hereof and includes any
Renewal Term, if applicable.
<PAGE>
(g) "TERRITORY" means the world, subject to the requirements of
Sections 2(b) and 6 hereof.
(h) "USERS" means individual visitors to the EBLD Web Sites.
(i) "VIDEO" means a moving picture comprising a soundtrack which
is primarily a duplicate of a sound recording of a single musical composition
synchronized with a moving picture which is primarily an accompaniment to the
performance of the musical composition embodied in such sound recording.
(j) "WEB SITE" means any specific or unique physical or logical
address on that portion of the publicly available network of computer networks
commonly referred to as the Internet and also known as the "World Wide Web."
2. GRANT OF RIGHTS.
(a) Subject to and in accordance with the terms, conditions,
restrictions and limitations contained in this Agreement, and solely to the
extent of the rights of Virgin or any of its Label Affiliates, Virgin grants
to EBLD, during the Term and in the Territory, a non-exclusive license,
without the right to sublicense, to (i) encode in an appropriate digital
format (the "DIGITAL FILE FORMAT") and transmit solely from the EBLD Web
Sites using Streaming technology via the Internet, and cause to be performed
on a User's personal computer solely as a result of such Streaming, each
Licensed Video, and (ii) make copies of each Licensed Video only to the
extent necessary to exercise its rights in clause (i) above, it being
understood that such copies shall only reside on the network servers, mirror
sites, caching servers, workstations or equivalent devices under the control
of EBLD and not on any third-party's digital recording device (which digital
recording devices include, but are not limited to the User's digital
recording device, whether such a device is a personal computer or any other
machine now known or hereafter invented) network servers, caching servers, or
equivalent devices under the control of any Co-Branded Site (as defined
below).
(b) Notwithstanding the foregoing, with respect to any Licensed
Video, the Territory shall not exceed the territories for which Virgin or any
of its Label Affiliates owns or has acquired the right to license the rights
granted to EBLD pursuant to this Agreement.
(c) Not less than 60 days prior to the expiration of the Term
(and each Renewal Term, if any, (as hereafter defined)), EBLD shall notify
Virgin in writing that the Term (or Renewal Term, as the case may be) of this
Agreement is due to expire in 60 days (a "NOTICE OF RENEWAL"). Upon receipt
by Virgin of such Notice of Renewal, Virgin shall have the right to renew
this Agreement for an additional one-year period (each a "RENEWAL TERM") by
notifying EBLD in writing of its desire to renew this Agreement (a "RENEWAL
ACCEPTANCE NOTICE") at least 30 days prior to the expiration of the Term (or
Renewal Term, as the case may be). If, prior to the expiration of the Term or
any Renewal Term, Virgin fails to deliver to EBLD a Renewal Acceptance
Notice, EBLD shall deliver to Virgin another Notice of Renewal
<PAGE>
and Virgin shall have 30 days from the date of receipt of such other Notice
of Renewal to deliver a Renewal Acceptance Notice. If EBLD fails to deliver
to Virgin Notices of Renewal in accordance with the foregoing, Virgin shall
have an unlimited time period within which to deliver to EBLD a Renewal
Acceptance Notice, and any such renewal, and any payments due hereunder,
shall be retroactive to the date of expiration of the Term or any Renewal
Term, as the case may be.
3. LIMITATIONS OF RIGHTS.
(a) EBLD may not sublicense, assign or convey to any person any
rights under this Agreement including, but not limited to, the right to
perform, transmit, or distribute the Licensed Videos without Virgin's prior
written consent.
(b) Nothing herein shall be construed as permitting EBLD to strip
the audio portion of any Licensed Video from the video portion or to exploit
in any manner the audio portion separately from the video portion.
(c) As a condition precedent to the rights granted to EBLD
hereunder, EBLD shall obtain on its own behalf: (i) valid and currently
effective mechanical and synchronization copyright licenses, where
applicable, for use of the copyrighted musical composition(s) embodied in the
Licensed Video(s) and (ii) valid and currently effective performance
licenses, where applicable, for use in Streaming the copyrighted musical
composition(s) embodied in the Licensed Video(s). EBLD shall pay all fees
due to any party other than Virgin and its Label Affiliates that become
payable as a result of the public digital performance by EBLD of the sound
recording embodied in any Licensed Video. In addition, EBLD shall become (or
shall remain) a party to the American Federation of Musicians (AFM) and
American Federation of Television and Radio Artists (AFTRA) collective
bargaining agreements covering the creation and exploitation of the EBLD Web
Sites, if applicable, and any other applicable collective bargaining
agreements. In the event that EBLD does not become a member of AFM or AFTRA,
it shall execute a separate agreement with Virgin or its applicable Affiliate
in the form attached hereto as EXHIBIT B in order to (x) assume Virgin's
and/or such Affiliate's union payment obligations under any collective
bargaining agreement to which Virgin and/or such Affiliate is a party and
(y) release and indemnify Virgin and/or such Affiliate from any and all
such obligations arising by reason of EBLD's use of the Licensed Videos.
EBLD's failure to obtain any such licenses from the proper copyright owners
or their agents, or to become or remain party to any collective bargaining
agreement or to account properly thereunder, shall result in this Agreement
being void with respect to such Licensed Video(s) and EBLD specifically
agrees that it shall have no right to transmit, perform or cause to be
performed any Licensed Video(s) embodying such unlicensed musical
compositions, Virgin reserves the right, upon written notice to EBLD, to
request copies of said valid and current licenses which EBLD promptly will
furnish to Virgin upon said written request. EBLD shall provide Virgin
copies of EBLD's relevant licenses from ASCAP, BMI and SESAC promptly after
such licenses are procured.
(d) Notwithstanding the foregoing: (i) EBLD's rights hereunder are
subject to any restrictions on Virgin or its Label Affiliates with regard
<PAGE>
to any Licensed Video; (ii) Virgin shall not be required to grant to EBLD a
license to any Video that Virgin decides to withhold in its sole discretion
for any reason; (iii) Virgin shall have the right, in its sole discretion, to
revoke or terminate the rights granted to EBLD in Section 2 with respect to
any Licensed Video at any time by providing EBLD with written notice that
henceforth such Video is not or is no longer a Licensed Video and thereafter,
EBLD shall no longer be permitted to use such Video; (iv) Virgin shall have
the right, in its sole discretion, to revoke or terminate the rights granted
to EBLD in Section 6(c) with respect to any Co-Branded Site; and (v) Virgin,
in its sole discretion, shall retain all rights to place restrictions on
EBLD's use of any Licensed Video(s), including without limitation, setting a
time period shorter than the Term after which any use by EBLD of any such
Licensed Video(s) shall immediately, automatically and thereafter be
prohibited.
(e) The rights granted by Virgin hereunder are limited to the uses
of the Licensed Video(s) in the manner described in Section 2. Any and all
other rights in connection with the Licensed Video(s) are specifically
reserved and may be exploited by Virgin, its Affiliates, and their designees,
including without limitation: (i) all rights to exploit the Licensed Videos
over or through the Internet in any manner; (ii) all rights to deliver,
using a computer network, computer files embodying the Licensed Videos to a
customer's personal computer, player, kiosk or other equivalent device; (iii)
all rights to transmit, perform, or otherwise distribute the Licensed
Video(s) using any medium or method now known or hereafter invented; and (iv)
the exercise of the same rights granted to EBLD under Section 2.
(f) Except as necessary to exercise its rights hereunder, without
the prior written consent of Virgin in each case, EBLD shall not edit, change
or prepare any derivative work from any Licensed Video including, without
limitation, attaching any other audio-visual work to the beginning or end of,
or incorporating any audio-visual work into or within, a Licensed
Video. EBLD shall not defeat, impair or alter in any way any copyright
protection technology or mechanism embedded in or associated with the
Licensed Videos.
(g) EBLD shall not use any Licensed Video in any manner that
Virgin, in its sole reasonable business discretion, finds offensive or
injurious to its interests or the interests of any EMI Artist (as defined
herein). Without limiting the foregoing, without the prior written consent
of Virgin in each case, EBLD shall not use the Licensed Videos for any
on-line or off-line original programming, product tie-ins, or marketing
campaigns of any type or nature, including games or contests.
(h) None of the rights granted hereunder permits EBLD to Stream or
otherwise transmit any Licensed Video from any Website that is not an EBLD
Web Site.
(i) None of the rights granted hereunder permit EBLD to charge
Users a fee (including, but not limited to, pay-per-view or subscription) as
a condition for access to the Licensed Videos.
(j) Without Virgin's prior written consent, which Virgin may give
or withhold in its sole discretion, no advertisement shall be Streamed to a
<PAGE>
User (i) between the time the User activates (through a hyperlink or
otherwise) a Licensed Video and the time such Licensed Video is Streamed to
the User or (ii) between the time the Licensed Video ends and the Stream
terminates or otherwise stops playing on the User's computer or other
playback device.
(k) In the event that Virgin determines that, in its
reasonable judgment, the quality of the Streams from the EBLD Web Sites or
the other exercise of EBLD's rights under Section 2(a) are below Virgin's
normal quality standards for similar usages, Virgin shall notify EBLD in
writing. Upon receipt of such notice, EBLD shall immediately improve such
quality to Virgin's normal quality standards for similar usages.
4. DELIVERY AND ENCODING OF MASTER VIDEOTAPES.
(a) Attached as EXHIBIT C is true and complete list of all
Videos in EBLD's possession embodying sound recordings owned or controlled by
Virgin or any of its Affiliates ("PRE-POSSESSED VIDEOS"). As soon as possible
after the date hereof, Virgin will notify EBLD in writing of the
Pre-Possessed Videos that are approved by Virgin as Licensed Videos
hereunder; PROVIDED, that until EBLD receives such notification, EBLD shall
not be entitled to Stream any Pre-Possessed Video. Virgin shall not be
required to designate any Pre-Possessed Video as a Licensed Video and, if a
Pre-Possessed Video is designated as a Licensed Video, such Pre-Possessed
Video will be subject to the provisions of this Agreement. If after the date
hereof and from time to time during the Term EBLD desires to Stream on the
EBLD Web sites, in accordance with the provisions of this Agreement, any
Videos embodying sound recordings owned or controlled by Virgin or any of its
Affiliates ("DESIRED VIDEOS"), EBLD (i) shall deliver to Virgin a list of the
Desired Videos that complies in all respects with submission guidelines
provided by Virgin to EBLD and (ii) shall not be entitled to Stream any such
Desired Video until it is approved in writing by Virgin as a Licensed Video
(that will be subject to the provisions of this Agreement). Virgin shall not
be required to approve any Desired Video as a Licensed Video and shall have
the right, in its sole discretion, to place restrictions on EBLD's use of any
Desired Video so approved as a Licensed Video or to revoke or terminate
EBLD's rights thereto. Notwithstanding the foregoing, EBLD shall not be
entitled to deliver more than one (1) list of Desired videos in any sixty
(60) day period, and no such list shall include more than one hundred fifty
(150) Desired Videos. At EBLD's request, Virgin shall deliver to EBLD a copy
of any Video approved as a Licensed Video, to the extent it is readily
available (a "DUPLICATE VIDEOTAPE"); PROVIDED, that promptly upon receipt of
an invoice therefor, EBLD shall reimburse Virgin for all costs (including,
without limitation, all dubbing, packaging and shipping costs) incurred by
Virgin or any of its Affiliates in connection with the Duplicate Videotapes.
As soon as commercially practicable following the commencement of the Term,
Virgin will provide to EBLD, to the extent possessed by Virgin, Videos
approved as Licensed Videos in accordance with this Section 4(a), digitized
(the "DIGITIZED VIDEOS") in a format chosen by Virgin in its sole discretion.
(b) EBLD shall take all precautions to safeguard all
Duplicate Videotapes, Digitized Videos and Digital Video Files in its
possession. EBLD shall use its best efforts to prevent any theft,
unauthorized use, including, but
<PAGE>
not limited to copies made by EBLD's employees outside the scope of their
employment, copying or duplication by others of any material furnished by
Virgin.
5. USERS' USAGE DATA.
(a) Virgin hereby acknowledges and agrees that EBLD owns all
information concerning Users' usage of Video(s) and other customer data and
information EBLD collects and retains from the use of the EBLD Web Sites (the
"USAGE DATA" and, to the extent the Usage Data concerns only Licensed Videos,
the "VIRGIN USAGE DATA").
(b) Notwithstanding the foregoing, EBLD shall provide to
Virgin (i) weekly reports summarizing on an aggregate basis the Usage Data,
such reports to include the number of Videos and the number of Licensed
Videos accessed from any EBLD Web Site, and (ii) access to the portion of any
database containing the Virgin Usage Data and permission to use the Usage
Data for the purpose of engaging in promotional activities.
(c) Without Virgin's prior written consent in each and every
case, EBLD shall not, under any circumstances, provide to any third party any
Virgin Usage Data, except in aggregated form.
6. VIRGIN INTERNET LINKS.
(a) EBLD shall place prominently on each EBLD Web Site web
page that contains hyperlinks corresponding to any Licensed Video(s)
hyperlinks that will permit Users to access Virgin's or its Label Affiliates'
primary Web Sites as designated from time to time by Virgin. The appearance
of the screen icon/button corresponding to the hyperlinks described hereunder
shall occupy no less User screen area than any promotional hyperlink
icon/button of similar functionality that appears on any EBLD Web page,
including any other sponsor or record label's icon/button.
(b) Except as permitted in Section 6(c), EBLD shall use its
commercially reasonable efforts to prevent any third party from hyperlinking
(or any equivalent technology) to the EBLD Web Sites in any manner which
results in any Licensed Video appearing to perform from within or to be
accessed through a web page found on such third party Web Site.
(c) Subject to Section 6(d), EBLD shall have the right to
enter into Web Site linking agreements with third parties whereby certain
portions of EBLD content (excluding the Licensed Videos) are placed on such
third parties' Web Sites (which Web Sites must prominently display EBLD's
branding and may less prominently display such third parties' branding) and
whereby viewers of such third party Web Sites must activate a hyperlink to
reach a domain or sub-domain of a EBLD Web Site and, as a result, leave such
third party Web Sites in their entirety, in order to view EBLD Web Site pages
(a "CO-BRANDED SITE"). Such Co-Branded Sites may contain, for the purpose of
viewing Licensed Videos, a hyperlink that launches into the home page of the
EBLD Web Sites, or a sub-domain thereof, such hyperlink being prominently
branded with the EBLD trademark (or another EBLD owned
<PAGE>
trademark) in addition to any branding of such third party. In no case shall
a Licensed Video be directly accessible through a Co-Branded Site without
conspicuously indicating that EBLD is the licensee of the Licensed Videos.
Notwithstanding the foregoing, no hyperlink or icon/button nor appearance of
any Licensed video displayed as a result of following hyperlinks from the
Co-Branded Site to any domain within the EBLD Web Sites shall conflict with,
contravene or otherwise circumvent the provisions of this Section 6 and
Section 7. Attached as Exhibit D is a true and complete list of all Co-Branded
Sites as of the date hereof. EBLD shall update Exhibit D each time it adds a
Co-Branded Site and deliver such revised Exhibit D to Virgin in accordance
with Section 14.
(d) Until such time as either the European Flat Licensing
Fee or the Asian Flat Licensing Fee (each as hereafter defined) is paid: (i)
neither EBLD nor any Co-Branded site shall market the EBLD Web Sites or the
Co-Branded Sites in any manner directed to, or designed to attract Users to,
the EBLD Web Sites or the Co-Branded Sites from countries outside of the
United States; and (ii) EBLD shall not enter into any linking agreement with
a Co-Branded site hosted on a network server, mirror site, caching server or
equivalent device located outside the United States. The payment of an
Additional Flat Licensing Fee (as hereafter defined) shall only remove the
restrictions of this Section 6(d) for the territory to which such Additional
Flat Licensing Fee applies.
7. TRADEMARKS, TRADE NAMES, NAMES, CREDITS, COPYRIGHT NOTICE.
(a) Unless otherwise prohibited by contract and subject to
this Section 7, Virgin grants EBLD the right to use the names of the artists
(the "EMI ARTISTS") performing the Licensed Videos, solely for the purpose of
designating hyperlinks corresponding to such Licensed Videos on the EBLD Web
Site. In no event shall EBLD have the right to use the name of any EMI Artist
other than to indicate the Licensed Videos EBLD has available. In addition,
EBLD shall not use the names and likenesses of any EMI Artist in any
broadcast, cable or other television or on-line or electronic advertising
without the prior written consent of Virgin in each case.
(b) Subject to the prior written consent of Virgin (which
Virgin may give or withhold in its sole discretion) for each use. EBLD may
use the name and logo of Virgin and any of its Label Affiliates to promote
its Streaming service and the EBLD Web Site; PROVIDED, HOWEVER, that at the
request of Virgin, EBLD shall cooperate with Virgin to take all necessary
steps to protect Virgin's and its Label Affiliate's trademarks, tradenames,
service marks, logos and other intellectual property. In addition, EBLD shall
pay any costs incurred by Virgin or any of its Affiliates or otherwise
associated with such use. EBLD hereby acknowledges that any goodwill arising
out of any such use shall inure solely to the benefit of Virgin.
(c) EBLD covenants that the credits for EMI Artists in
connection with the Licensed Videos and in any advertising thereof in
accordance with this Agreement shall appear in substantially similar size,
prominence and type
<PAGE>
style to the size, prominence and type style used in connection with the
other artists whose Videos are designated or displayed on the EBLD WEb Sites.
(d) Simultaneously with the exhibition of each Licensed
Video on the Users' computer monitor screen there shall be displayed a credit
specifying: (i) the title of the musical composition featured in the Licensed
Video; (ii) the title of any album that includes the performance of the
musical composition featured in the Licensed Video, as designated by Virgin;
(iii) the name of the EMI Artist performing the musical composition featured
in the Licensed Video as designated by Virgin; (iv) the director of the
Licensed Video (if so provided by Virgin); (v) the name of the originating
Label Affiliate, as designated by Virgin, on which the performance is
distributed; and (vi) the required copyright notice in the following format:
"(P)[Year of first publication] [Virgin designated name]. All rights
reserved."
(e) In no event shall EBLD have the right to use the name of
any EMI Artist other than in the manner provided in this Section 7.
8. PAYMENTS. In consideration of the rights granted herein,
EBLD shall pay to Virgin the fees set forth below:
(a) A non-recoupable, non-returnable flat annual licensing
fee equal to One Hundred Thousand Dollars ($100,000)(the "FLAT LICENSING
FEE"), payable on the date hereof and on each anniversary of the date hereof.
(b) Commencing on the Effective Date and for each calendar
quarter during the Term, a Pro Rata Share of the Gross Receipts derived from
the EBLD Web Sites (the "PRO RATA FEE"). "PRO RATA SHARE" means an amount
equal to (x) twenty-five percent (25%) of Gross Receipts, MULTIPLIED BY (y)
a fraction, the numerator of which is the number of transmissions from the
EBLD Web Sites of Licensed Videos during the applicable calendar quarter and
the denominator of which is the total number of transmissions of all Videos
from the EBLD Web Sites during the same calendar quarter. "GROSS RECEIPTS"
means all revenues derived by EBLD from (i) the sale of all advertising and
sponsorships on the EBLD Web Sites and all Co-Branded Sites, (ii) payments
from Internet service providers and (iii) payments for syndicated and/or
co-branded selling and on-line franchising (less any actual and reasonable
Web site linking commissions); PROVIDED, that if EBLD receives any Gross
Receipts in the form of advertising inventory or other services, products or
any thing of value received in lieu of cash consideration (i.e., trade or
barter), the fair market value of any such inventory, products or services or
any thing of value shall be included in the calculation of Gross Receipts.
EBLD shall pay the Pro Rata Fee within 10 business days following the last
day of each fiscal quarter, PROVIDED, that if the Pro Rata Fee payable to
Virgin for any calendar quarter is less than One Hundred Dollars ($100), such
fee will be carried forward until the total amount due is at least One
Hundred Dollars ($100).
(c) Beginning on EBLD's first transmission of a Licensed
Video and thereafter throughout the Term from (i) a network server, mirror
site, caching server or equivalent device under its dominion and control that
is located in
<PAGE>
Canada or any European country or (ii) a EBLD Web Site resulting from a
hyperlink activated by a Co-Branded Site hosted on a network server, mirror
site, caching server or equivalent device located in Canada or any European
country, EBLD shall pay to Virgin a non-recoupable, non-returnable annual
licensing fee in addition to the Flat Licensing Fee (and the Asian Flat
Licensing Fee, if applicable) equal to $75,000 (the "EUROPEAN FLAT LICENSING
FEE") such fee to be payable in advance of the year to which it relates.
(d) Prior to EBLD's first transmission of a Licensed Video from (i)
a network server, mirror site, caching server or equivalent device under its
dominion and control that is located in any country located in Asia or (ii) a
EBLD Web Site resulting from a hyperlink activated by a Co-Branded Site
hosted on a network server, mirror site, caching server or equivalent device
located in any country located in Asia, EBLD shall pay to Virgin a
non-recoupable, non-returnable annual licensing fee in addition to the Flat
Licensing Fee (and the European Flat Licensing Fee, if applicable) such fee
to be payable in advance of the year to which it relates) of $50,000 (the
"ASIAN FLAT LICENSING FEE" and, together with the European Flat Licensing
Fee, the "ADDITIONAL FLAT LICENSING FEES").
(e) On the date hereof, EBLD shall make a non-recoupable,
non-returnable payment to Virgin in an amount equal to $200,000 (the "RELEASE
AMOUNT") as consideration for the release set forth in Section 18.
9. OTHER CONSIDERATION. EBLD shall provide to Virgin thirty thousand
(30,000) free banner impressions per month to promote EMI Artists on the EBLD
Web Sites on specific Web pages as determined by Virgin in its sole
discretion, which banners will be 468x60 pixels and will conform to EBLD's
standard and reasonable banner advertising policies applicable to all
advertisers on the EBLD Web Sites.
10. COMMON STOCK. (a) In addition to the consideration described in
Sections 8 and 9 above, on the date hereof, EBLD shall issue to Virgin
678,685 shares (the "SHARES") of common stock, par value $0.1 per share (the
"COMMON STOCK"), of EBLD representing three percent (3%) of the total number
of shares of capital stock of EBLD outstanding on the date hereof on a Fully
Diluted Basis. For purposes hereof, the term "FULLY DILUTED BASIS" means that
there are 22,622,865 shares of capital stock of EBLD issued and outstanding
on the date hereof, assuming the issuance of the Shares hereunder and,
subject to the next sentence, the conversion of all securities of EBLD
convertible into or exercisable or exchangeable for, shares of capital stock
of EBLD. The term Fully Diluted Basis does not include 4,630,000 shares of
Common Stock issuable to employees of EBLD and certain EBLD investors upon
conversion or exercise of options or warrants granted or issued to such
employees and investors.
(b) REGISTRATION RIGHTS. With respect to all Shares issued to
Virgin hereunder, Virgin (and its Affiliates, if applicable) are hereby
granted the right (and all rights related thereto) to include all or a portion
of the Shares in any registration statement filed by EBLD after the date
hereof, whether or not for sale for its own account (other than any
registration statement to Form S-8 or Form S-4 or
<PAGE>
any successor forms thereto; PROVIDED, that Virgin's indemnification
obligations in connection with any registration in which it participates in
accordance with the rights granted hereunder shall be limited to its net
proceeds in any such offering. EBLD shall (i) perform, or cause to be
performed all acts and execute and deliver all agreements, amendments,
instruments and other documents necessary or required to grant Virgin the
rights described in this Section 10(b) and (ii) do all things, and take all
actions, necessary from time to time to enable Virgin to sell the Shares
without registration under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), pursuant to Rule 144 thereunder (as such rule may be
amended form time to time) and any similar rules and regulations hereafter
adopted by the Securities and Exchange Commission.
(c) REPRESENTATIONS AND WARRANTIES OF EBLD. EBLD hereby represents
and warrants to Virgin as follows:
(i) the authorized capital stock of EBLD consists of
50,000,000 shares of Common Stock, of which 12,312,500 shares are issued and
outstanding, and 1,000,000 shares of preferred stock, of which 2,000 shares
are issued and outstanding.
(ii) the Shares are validly issued, fully paid and
non-assessable and are being issued in compliance with the registration and
qualification requirements of all applicable federal and state securities
laws:
(iii) no form of general solicitation or general advertising
was used by EBLD or its representatives in connection with the offer or sale
of the Shares and, assuming the accuracy of the representation and warranty
made by Virgin in Section 10(d) below, no registration of the Shares pursuant
to the Act or any state securities or "blue sky" laws will be required by the
offer, sale or issuance of the Shares;
(iv) EBLD is not party to any agreement which is currently in
effect, or by which EBLD is currently bound, granting any rights to any
Person which are inconsistent with the rights granted by EBLD in this
Agreement; and
(v) no consents, approvals or authorizations of any Person
are required in connection with the execution, delivery and performance of
this Agreement other than those consents, approvals and/or authorizations
already obtained by EBLD, copies of which have been provided to Virgin.
(c) REPRESENTATIONS AND WARRANTIES OF VIRGIN. Virgin hereby
represents and warrants to EBLD that as of the date hereof, Virgin is an
"accredited investor" as defined in Rule 501 promulgated as part of
Regulation D under the Securities Act of 1933, as amended. Virgin is not
acquiring the Shares with a view to a distribution or resale of any such
securities in violation of any applicable securities laws.
<PAGE>
11. ACCOUNTING.
(a) EBLD shall maintain full, true and accurate accounts
with respect to Gross Receipts received. EBLD shall account to Virgin each
calendar quarter with respect to Gross Receipts received ("Quarterly
Reports"). Quarterly Reports shall include the Gross Receipts received, the
total number of Videos Streamed, and the total number of Licensed Videos
Streamed during the corresponding quarter and the calculation of the Gross
Receipts and the Pro Rata Fee. Quarterly Reports shall be delivered to Virgin
within fifteen (15) days after the end of each calendar quarter for the
preceding quarterly period, regardless of whether any amounts are due to
Virgin. Quarterly Reports shall be delivered in a computer readable format as
specified by Virgin in its reasonable, good faith, business discretion.
(b) The Quarterly Reports delivered to Virgin under
Section 11(a) hereof shall be accompanied by payment of any and all amounts
due to Virgin under Section 8 and this Section 11. If EBLD fails to pay any
sum due to Virgin on the date for payment specified in this Agreement, in
addition to such sums payable to Virgin, EBLD shall pay to Virgin (without
limiting any other rights Virgin may have) an amount equal to interest of ten
percent (10%) per annum on such deficiency. Any late payment plus the
required interest due pursuant to this Section 11 shall not preclude or act
as waiver of any other remedies permitted under this Agreement.
(c) EBLD will permit Virgin and/or its designated agent
or agents, upon at least thirty (30) days notice to EBLD, to audit all of
EBLD's applicable books and records and to make copies of portions thereof at
EBLD's principal place of business, for the purpose of verifying the amounts
due to Virgin by EBLD hereunder, at reasonable times during regular business
hours; PROVIDED, that Virgin's audit right pursuant to this Section 11(c)
shall continue, as to all unaudited periods, for two (2) years after the
Term. In the event that the calculation of such amount is determined by a
computer-based system, Virgin shall be permitted to examine the machine
sensible data utilized by such system and the related documentation
describing such system, and EBLD agrees to retain such data for at least two
(2) years after the Term. In addition, EBLD shall provide Virgin on demand a
list of the title of every Video transmitted from the EBLD Web Sites. If any
audit reveals any statement hereunder to be in error by more than five
percent (5%), in addition to payment of the deficiency, the reasonable costs
and expenses of such inspection shall be borne by EBLD.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Each party to this Agreement represents and warrants
to the other that (i) such party has the right, power and authority to enter
into and fully perform this Agreement, to make the commitments it makes
herein and to perform fully its obligations hereunder and (ii) 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.
<PAGE>
(b) EBLD represents and warrants that it has and will
continue to have all necessary rights, licenses, permissions and consents in
and to all underlying technology (including both hardware and software)
utilized in connection with the EBLD Web Sites or as otherwise necessary in
connection with the operation of the EBLD Web Sites or any of the
transactions contemplated hereby and that such underlying technology does and
will not infringe on any patent, copyright, trademark, trade secret or other
intellectual property or proprietary right of any third party. EBLD agrees to
use the Licensed Videos only in the manner contemplated hereby, in each case
only to the extent authorized by Virgin. EBLD will at all times indemnify and
hold harmless Virgin, its Affiliates and any licensor of Virgin or any of its
Affiliates from and against any and all claims, damages, liabilities, costs
and expenses (including legal expenses and reasonable counsel fees) arising
out of (i) use of the Licensed Videos or (ii) any breach or claim of a breach
by EBLD of any representation, warranty or agreement made by EBLD herein.
EBLD will reimburse Virgin, its Affiliates and/or their respective licensors
on demand for any payment made at any time after the date hereof in respect
of any liability or claim in respect of which Virgin, its Affiliates and/or
their respective licensors are entitled to be indemnified. Virgin shall
notify EBLD of any such claim and EBLD shall have the right, at its expense,
to participate in the defense thereof.
(c) EBLD shall, upon the establishment and availability
of industry standards under the Secure Digital Music Initiative (SDMI) or any
other similar standardized digital copy protection scheme for digital video
or the audio portion of any digital video, only deliver to Users Streamed
Licensed Videos that fully comply with such standards. EBLD shall not Stream
any Licensed Videos without the inclusion of any and every ISRC code in the
digital data embodied therein.
(d) EBLD shall use its best efforts to prevent the
creation of any unauthorized copies of any Licensed Videos in any form, and
shall indemnify Virgin and its Affiliates for any losses incurred by Virgin
or any of its Affiliates as a result of such unauthorized use, including but
not limited to, copies created by employees or contractors outside the
immediate scope of their employment, Users or by any third party. If EBLD
becomes aware of any unauthorized manufacture, advertising, distribution,
lease, sale or other use by any third party, EBLD shall immediately notify
Virgin and shall cooperate with Virgin to prevent such unauthorized use.
(e) If, as of the date of this Agreement, EBLD has
entered into, or hereafter EBLD enters into or renews any license for the
exhibition of Videos, the terms and conditions of which are more favorable to
such third party than the terms and conditions applicable to Virgin as set
forth in this Agreement, then such favorable terms and conditions shall,
without any further action by Virgin, automatically apply to all Licensed
Videos exploited by EBLD as of the date of entry into such license, and EBLD
shall promptly pay to Virgin any fees due on or after such date at the
amended terms. EBLD shall provide Virgin notice in writing of any such
license, including its terms, no later than ten (10) days after the date of
entry into such license.
<PAGE>
(f) EBLD shall pay any clearances or other third party
payments necessary in order for EBLD to exercise its rights hereunder. Virgin
shall not be subject to any costs, fees or other charges (including, without
limitation, any royalties) in respect of the creation or exhibition of any
Licensed Videos or otherwise in respect of any of the provisions of this
Agreement (except that Virgin shall pay any fees or royalties due to an EMI
Artist and/or producer pursuant to the terms of the recording contracts
entered into between Virgin (or a Label Affiliate) and such EMI Artists
and/or producers).
(g) Virgin represents and warrants that it has and will
continue to have all necessary rights, licenses, permissions and consents in
and to the Licensed Videos to authorize the use by EBLD and Users hereunder.
No Licensed Videos furnished to EBLD hereunder or the use of them by EBLD, if
used in the manner authorized by Virgin hereunder and not in violation of any
of the restrictions or limitations identified by Virgin hereunder, will
violate any law or infringe upon any rights of any third party.
(h) EBLD shall use its best efforts to upgrade, change,
or supplement the Streaming server software (or its equivalent, whether now
known or hereafter developed) that is used to Stream the Licensed Videos in
accordance with the terms hereunder whenever (i) the vendor of such Streaming
server software has released any kind of upgrade, update, repair, patch, or
any similar device or method that provides any increased protection from
piracy or other unauthorized use by the Users of the Licensed Videos
(including but not limited to converting Streamed delivery into usable, fixed
files), (ii) industry standard copyright protection technologies (including
but not limited to SDMI) become available to protect Streamed Licensed Videos
from unauthorized use by the Users, or (iii) any third party software becomes
available that would provide materially superior protection to the Licensed
Videos from unauthorized use by the Users. Further, EBLD shall, in the event
such an upgrade, supplementation, or change is made as described in the
preceding sentence, immediately convert (or re-encode), as necessary at its
own cost, each Licensed Video in whatever new format is required in order to
use such upgraded, supplemented or changed Streaming server software and will
delete each copy of the Licensed Video coded in the old format from every
network server, mirror site, caching server or equivalent device where any
copy of a Licensed Video resides, certifying in writing to its deletion.
(i) EBLD shall promptly notify Virgin of what EBLD might
reasonably consider to be an infringement of the Licensed Videos, or any
performance embodied thereon or any copyrights or other rights in and to the
Licensed Videos by any third party (a "POTENTIAL INFRINGEMENT"). In the event
of any Potential Infringement, shall have the sole right to determine whether
a proceeding should be brought against any third parties. In the event that
Virgin decides to take action against any such third parties, EBLD shall
cooperate fully with Virgin to prosecute such action, at Virgin's expense.
EBLD shall not take any action without Virgin's consent with respect to a
Potential Infringement.
<PAGE>
13. OWNERSHIP.
(a) EBLD hereby acknowledges that all Licensed Videos
licensed hereunder, all performances embodied thereon and all copyrights and
other rights in and to the Licensed Videos (the "OWNED PROPERTY"), as between
Virgin (or its Affiliates) and EBLD, are the sole property of Virgin or its
Affiliate. EBLD shall not contest, or assist others in contesting, Virgin's
and/or its Affiliates' rights or interests in the Owned Property or the
validity of such ownership. EBLD shall include on the EBLD Web Sites, its
products and all other material produced and distributed publicly by EBLD,
such copyright, trademark and other notices and credits as Virgin may from
time to time require.
(b) EBLD represents, warrants and agrees that EBLD
will not, directly or indirectly, license, transfer, assign, sell or
otherwise dispose of, pledge, mortgage or in any way encumber any Licensed
Videos, Duplicate Videotapes, Digital Video Files or Digitized Videos and
EBLD shall similarly bind any parties dealing with such property.
(c) Upon the termination or expiration of the Term
hereunder or with respect to termination of a specific Licensed Video, EBLD
shall: (i) stop Streaming all Licensed Videos (or such specific Licensed
Video); (ii) return all Duplicate Videotapes, Digital Video Files, Digitized
Videos and any other media possessed by EBLD embodying the Licensed
Video(s); and (iii) EBLD shall immediately delete any computer files
embodying or created by EBLD from such Duplicate Videotapes, Digital Video
files, Digitized Videos and/or Licensed Video(s), whether residing on a
network server, mirror site, caching server, work station or equivalent
device or on any kind of backup removable media and certify to their deletion.
14. NOTICES. Except as otherwise specifically provided herein,
all notices hereunder shall be in writing and shall be given by registered or
certified mail or Federal Express or similar carrier (prepaid), at the
respective addresses hereinabove set forth, or such other address or addresses
as may be designated by either party. Such notices shall be deemed given when
mailed or delivered to a Federal Express office, except that notice of change
of address shall be effective only from the date of its receipt. A copy of
each notice sent to Virgin shall be sent simultaneously to Virgin Holdings,
Inc., c/o EMI Recorded Music, North America, 1750 North Vine Street,
Hollywood, California 90028 Attn: Robyn L. Glaser and Alasdair J. McMullan,
Esq., Sr. Dir. Legal Affairs, EMI Recorded Music, North America, 1290 Avenue
of the Americas, 38th Floor, New York, New York 10104. All statements and
payments from EBLD to Virgin shall be addressed to Alasdair J. McMullan,
Esq., at the address provided above or to such other person or at such other
address hereafter designated by Virgin.
15. ASSIGNMENT.
(a) Virgin may transfer or assign, in whole or in part,
this Agreement (or its rights, interests or obligations hereunder) to any
Affiliate, to any person becoming an Affiliate or to any person acquiring
fifty percent (50%) or more
<PAGE>
of its assets or any similar transaction, whether by stock sale, merger,
share exchange, asset sale, consolidation or otherwise, and the Agreement and
such rights may be assigned by any assignee thereof. Virgin may sell,
transfer and convey to any person some or all of the Shares and any rights
attaching to those Shares.
(b) EBLD shall not assign its rights hereunder in whole
or in part to any person or entity, including without limitation, to any
subsidiary, affiliated or controlling corporation, or to any person or entity
owning or acquiring a substantial portion of the stock or assets of EBLD
without the prior written approval of Virgin. Any such purported assignment
shall be null and void.
16. DEFAULT BY EBLD AND TERMINATION. The occurrence of the
following events shall be deemed material breaches and defaults by EBLD
hereunder:
(a) If EBLD breaches in any material way any
representation, warranty or agreement or any other obligation in this
Agreement unless such breach or failure is fully and immediately cured no
later than thirty (30) days from date of notice to EBLD; except that the
events described in clauses (b) through (g) of this Section 16, which are
incurable;
(b) In the event of EBLD's dissolution or the
liquidation of EBLD's assets, or the filing of a petition in bankruptcy or
insolvency or for an agreement or reorganization, by, for or against EBLD, or
in the event of the appointment of a receiver or a trustee for all or a
portion of its property, or in the event that EBLD shall make an assignment
for the benefit of creditors or commit any act for, or in, bankruptcy or
become insolvent;
(c) If EBLD attempts to sublicense or assign any rights
licensed hereunder without Virgin's prior written consent;
(d) If EBLD Streams all or any part of any Video that
has ceased to be a Licensed Video;
(e) If EBLD does not fully comply with Sections 3, 6(c),
7, 10 and 13 hereof;
(f) If technology becomes available that permits any
User to create a separate, complete and usable copy of a Licensed Video
delivered to such User's personal computer by Streaming from the EBLD Web
Site; and
(g) If EBLD sells all or substantially all of its
assets; whether by stock sale, merger, share exchange, asset sale,
consolidation or otherwise to any of Sony Music Entertainment, BMG
Entertainment, Universal Music Group and Warner Music or their respective
affiliates.
Upon any such event, in addition to such other rights and remedies which
Virgin may have at law or otherwise under this Agreement (including, without
limitation, the right to enforce performance hereof, including specific
performance). Virgin shall have the right to terminate this Agreement and all
rights granted
<PAGE>
hereunder shall forthwith revert to Virgin or its Affiliates, and EBLD may
not thereafter exhibit any Licensed Videos. Notwithstanding any such
termination, this Section 16 and Sections 12(b), 13(c), 17, 18 and 19(a)-(f)
shall remain in full force and effect.
17. CONFIDENTIALITY. This Agreement and its provisions are
confidential and shall not be disclosed (except to the extent such disclosure
is required by law to be disclosed or this Agreement becomes generally
available to the public other than as a result of a disclosure in violation
of this Agreement) either in whole or in part, to any third party. All
information about the development of the EBLD Web Sites disclosed in writing
to Virgin, its officers, directors, employees and/or agents shall be treated
as confidential.
18. RELEASE. Upon the timely payment by EBLD of the Release
Amount as set forth in Section 8(e), Virgin, and each of its current and
former respective officers, directors, shareholders, subsidiaries,
Affiliates, predecessors, and successors-in-interest shall automatically (and
without further action required by them) release, remise, and forever
discharge ("RELEASE") EBLD and each of its current or former officers,
directors, shareholders, subsidiaries, predecessors and
successors-in-interest from any claims by Virgin or any of its Affiliates
relating to EBLD's unauthorized use of Videos embodying sound recordings
owned or controlled by Virgin or any of its Affiliates prior to the Effective
Date of this Agreement. EBLD, and each of its current and former respective
officers, directors, shareholders, subsidiaries, affiliates, predecessors,
and successors-in-interest do hereby Release Virgin, its Affiliates and each
of their current or former officers, directors, shareholders, subsidiaries,
predecessors and successors-in-interest from any claim arising prior to the
Effective Date of the Agreement.
19. MISCELLANEOUS.
(a) This Agreement contains the entire understanding of
the parties hereto relating to the subject matter hereof and cannot be
changed or terminated except by an instrument signed by an officer of Virgin
and an officer of EBLD. A waiver by either party of any term or condition of
this Agreement in any instance shall not be deemed or construed as a waiver
of such term or condition for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement
of either party.
(b) This Agreement shall be deemed entered into the
State of New York, and the validity, interpretation and legal effect of this
Agreement shall be governed by the laws of the State of New York applicable
to contracts entered into and performed entirely within the State of New
York, with respect to the determination of any claim, dispute or disagreement
which may arise out of the interpretation, performance, or breach of this
Agreement. Any process in any action or proceeding commenced in the courts of
the State of New York or elsewhere arising out of any such claim, dispute or
disagreement, may among other methods, be served in the manner set forth in
Section 14 hereof, Any such delivery or mail service shall
<PAGE>
be deemed to have the same force and effect as personal service within the
State of New York or the jurisdiction in which such action or proceeding may
be commended.
(c) So long as this Agreement is in effect, except as
required by law, regulation or stock exchange requirements, the parties
hereto shall not, and shall cause their respective affiliates not to, issue
or cause the publication of any press release or other announcement with
respect to the transactions contemplated by this Agreement or the other
agreements contemplated hereby without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed, and without
consulting with the other parties as to the content of such press release or
other announcement.
(d) The parties hereto are sophisticated and have had
the opportunity to be represented by lawyers throughout the negotiation of
this Agreement. As a consequence, the parties do not believe that the
presumptions of any laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied in this case
and therefore waive their effects.
(e) This Agreement shall not become effective until
executed by the parties hereto.
(f) 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.
<PAGE>
ACCEPTED AND AGREED:
Entertainment Boulevard, Inc. Virgin Holdings, Inc.
By: /s/ [ILLEGIBLE] By:
------------------------------- --------------------------------
Title: CEO Title:
---------------------------- -----------------------------
<PAGE>
ACCEPTED AND AGREED:
Entertainment Boulevard, Inc. Virgin Holdings, Inc.
By: By: /s/ [ILLEGIBLE]
------------------------------- --------------------------------
Title: Title: Vice President
---------------------------- -----------------------------
<PAGE>
EXHIBIT A
LABEL AFFILIATES
Capitol Records
Virgin Records
Blue Note Records
Capitol Nashville
EMI Latin
EMI Christian Music Group
Metro Blue
Hemisphere
EMI Records
SBK Records
Liberty Records
The Right Stuff
Chrysalis Records
Angel Records
Narada
Higher Octave
<PAGE>
EXHIBIT B
ASSUMPTION AGREEMENT COVERING THE TRANSFER OF RIGHTS OF PRODUCTS COVERED
BY THE PHONOGRAPH RECORD LABOR AGREEMENT
1. GENERAL. The undersigned. Entertainment Boulevard, Inc.,
with its principal place of business located at 12910 Culver Boulevard, Suite
1, Los Angeles, California 90066, herein for convenience referred to as the
"Licensee", hereby agrees with Virgin Holdings, Inc., herein for convenience
referred to as the "Company", that each Licensed Video (as that term is
defined in the Agreement between the Licensee and that Company dated as of
January 1, 2000) (the "VIDEOS") are produced from master records containing
music performed or conducted by musicians covered under one or more
Phonograph Record Labor Agreements.
2. OBLIGATIONS OF THE LICENSEE UNDER THIS AGREEMENT. The Licensee
hereby assumes all of the Company's obligations under the Phonograph Record
Labor Agreement with respect to the Videos, as follows:
(a) With respect to the use of one or more Videos for any purpose
set forth in the Phonograph Record Labor Agreement, the Licensee will
comply with all of the payment, reporting, and audit requirements of the
applicable Phonograph Record Labor Agreement, the Phonograph Record
Manufacturers' Special Payment Fund Agreement and Phonograph Record Trust
Agreement.
(b) With respect to the use of one or more Videos for a purpose
not covered under the Phonograph Record Labor Agreement (also known as a
"new use"), the Licensee will pay to all musicians who rendered services
in the recording of the Phonograph Record an amount equal to all
payments (including, without limitation, pension contributions, but
excluding health and welfare contributions) that would be required under
the AFM agreement that would then apply if the recording were originally
made for the purpose set forth under that agreement.
The rights of the Licensee to use such Videos shall be subject to and
conditioned upon compliance with the terms and conditions of this paragraph
2, and the Federation (acting on behalf of any affected musician) and the
Funds shall be entitled to seek injunctive relief and damages against the
Licensee in the event the Licensee does not comply with the terms of this
paragraph 2.
3. LIMITATION OF LICENSEE'S LIABILITY. The Licensee's obligations with
respect to the Videos set forth in paragraph 1 are limited to those
obligations set forth in paragraph 2, and in no event shall the Licensee be
deemed, solely as a result of having executed this assumption agreement, to
have any other obligation under and Federation agreement or to be a signatory
to any Federation agreement. In addition, the Licensee's obligations with
respect to the Videos are limited to those rights actually acquired by the
Licensee and only for so long as it holds such rights except to the extent
that it transfers those rights to another party in which case it shall retain
<PAGE>
liability unless it obtains an assumption agreement from such party in
substantially the same form as this assumption agreement.
<PAGE>
EXHIBIT C
LIST OF PRE-POSSESSED VIDEOS
<TABLE>
<CAPTION>
LABEL ARTIST TITLE
- ----- ------ -----
<S> <C> <C>
Capitol Nashville Trace Adkins (This Ain't) No Thinkin' Thing
Capitol Nashville John Berry Better than A Biscuit
Capitol Nashville The Ranch Clutterbilly
Capitol Nashville Deana Carter Count Me In
Capitol Nashville Deana Carter Did I Shave My Legs For This
Capitol Nashville River Road I Broke It, I'll Fix It
Capitol Nashville Tanya Tucker Little Things
Capitol Nashville Trace Adkins Lonely Won't Leave Me Alone
Capitol Nashville River Road Nickajack
Capitol Nashville Dean Miller Nowhere USA
Capitol Nashville Billy Dean Real Man
Capitol Nashville Emilio She Gives
Capitol Nashville Trace Adkins The Rest of Mine
Capitol Records Scream 2 Soundtrack 30 Second Spot
Capitol Records Scream 2 Soundtrack 30 Second Spot
Capitol Records Deana Carter Absence Of The Heart
Capitol Records Meredith Brooks Bitch
Capitol Records The Dandy Warhols Boys Better
Capitol Records Bran Van 3000 Drinking in L.A.
Capitol Records Duran Duran Behind The Scenes
Capitol Records Geri Halliwell Behind The Scenes
Capitol Records Everclear I will Bu You A New Life
Capitol Records The Delevanics I'm Your Man
Capitol Records Garth Brooks It's Your Song
Capitol Records Radiohead Karma Police
Capitol Records Geri Halliwell Look At Me
Capitol Records Radiohead Paranoid Android
Capitol Records Duran Duran Rio
<PAGE>
Capitol Records Marcy Playground Sex & Candy
Capitol Records Collective Soul She Said
Capitol Records Garth Brooks Tearin' It Up (And Burnin' It Down)
Capitol Records Chris Le Doux This Cowboys Hat
Capitol Records Lila McCann To Get Me To You
Capitol Records Steven Wariner Two Teardrops
Capitol Records The Ranch Walkin' The Country
Capitol Records Meredith Brooks What Would Happen
Capitol Records Deana Carter You Still Shake Me
Capitol Records Susan Ashton You're Luck I Love You
Capitol Records Tracie Spencer It's All About You (Not About Me)
Capitol Records Tracie Spencer Behind the Scenes
Capitol Records Stretch Princess Sorry (Teaching Mrs. Tingle Movie Version)
Capitol Records Megadeth Crush 'Em
Capitol Records Megadeth Behind The Scenes
Capitol Records Meredith Brooks Behind The Scenes
Capitol Records Meredith Brooks feat. Lay Down (Candles In The Rain)
Queen Latifah
Capitol Records Tracie Spencer Still In My Heart
Capitol Records Deana Carter Angels Working Overtime
Capitol Records Chris Ledoux feat. Jon Bang A Drum
Nashville Bon Jovi
Capitol Records Chris Ledoux Behind The Scenes
Nashville
Capitol Records Chris LeDoux Life Is A Highway
Nashville
Capitol Records Suzy Bogguss Nobody Love, Nobody Gets Hurt
Nashville
Chrysalis/EMI Sinead O'Connor This Is To Mother You
EMI Gospel Montreal Darrett Free
EMI Records Boogiemonsters Beginning Of The End
EMI Records Blessed Union of Souls I Wanna Be There
EMI Records Anne Murray Let There Be Love
EMI Records Anne Murray Behind The Scenes
<PAGE>
Virgin Records Janet Jackson Every Time
Virgin Records Gangstarr Full Clip
Virgin Records Ideal Get Gone
Virgin Records Shiro Good Love
Virgin Records Luther Vandross I Know
Virgin Records Luther Vandross I Know (remix)
Virgin Records Brigette McWilliams Morning
Virgin Records Rayvon Stallion Ride
Virgin Records Julie Reeves Trouble Is A Woman
Virgin Records Jerry Kilgore Love Trip
Virgin Records D'Angelo Left & Right
Virgin Records D'Angelo United (How Does It Feel)
Virgin Records Tina Turner When the Heartache Is Over
Virgin Records Scritti Politti Boodiedown to Tinseltown
Virgin Records Do or Die Playa Like Me and You
Virgin Records Do or Die Po Pimp
Virgin Records Gangstarr You Know My Steez
Virgin Records Gang Starr feat. Total Discipline
Virgin Records Brigette McWilliams Fire
Virgin Records Julie Reeves Its About Time
Nashville
</TABLE>
<PAGE>
EXHIBIT D
LIFT OF CO-BRANDED SITES
Alloy.com
Bolt.com
Checkout.com
Dimensionmusic.com
GO Broadcast
Road Runner
Scour.net
Sonique.com
Synge.com
Wall Of Sound
<PAGE>
Exhibit 10.45
AKOO.COM/ENTERTAINMENT BOULEVARD
AGREEMENT
This is an agreement dated as of January 10th, 2000, between
Entertainment Boulevard, Inc. a Nevada corporation located at 12910 Culver
Boulevard, Suite I, Los Angeles, CA 90066 ("EBLD"), and Akoo.com ("Akoo"), an
Illinois corporation, located 2500 N. Harlem Ave., Elmwood Park, IL 60707. 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 EBLD IDENTITIES ON AKOO SITE. EBLD hereby grants a
non-exclusive cost-free license (without the right of sublicense)
throughout the Term of this Agreement to Akoo to use the EBLD name and logo
and other proprietary identities of EBLD (collectively, "EBLD Mark(s)" in
connection with Akoo's website called "Akoo.com" ("Akoo.com") currently
located at http://www.Akoo.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
Akoo to use the certain content owned and/or controlled by EBLD, as described
on Exhibit A (collectively, "EBLD Content") in connection with Akoo, 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. 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.
3.2 ADVERTISING
<PAGE>
(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, set all packaging and pricing,
and retain all revenue generated for any advertising
thereon. 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, set all packaging and pricing, and retain
all revenue generated by any advertising on any Players
developed pursuant to this Agreement. Notwithstanding
the foregoing, the parties hereby acknowledge and agree
that Akoo shall have the exclusive right to transact
advertising and promotional programs related to, to
retain all advertising inventory, set all packaging
and pricing, and retain all revenue generated by any
advertising on any co-branded pages developed pursuant
to this Agreement.
(b) ADVERTISING REFERRALS. Each party may, from time to
time, refer leads to the other party for advertising
relating to the co-branded Player or co-branded pages
developed pursuant to this Agreement. All referrals
will be confirmed in writing (via e-mail to
[email protected] for EBLD or [email protected]
for Akoo or such other e-mail addresses as the parties
may designate) to the other party within 24 hours
following the referral. The parties agree that the
referring party will receive a payment of 50% of the
proceeds (less sales commissions) of any advertising
relating to the co-branded Player or co-branded pages
sold by the party to whom the lead was referred.
Payments will be remitted to the referring party within
30 days following receipt by the other party.
(c) CUSTOMER DATA. Akoo shall own and retain all right,
title and interest in all names, addresses and other
identifying information of users of Akoo, 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:
(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 reserves 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.
<PAGE>
(d) REFERRAL FEES. EBLD will pay Akoo referral fees on qualified
product sales to third parties. For a product sale to
generate a referral fee, the customer must follow a link
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%) 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 Akoo 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 Akoo 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
unitl 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.
(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 Akoo
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.
4.3 LINK TO AKOO.COM. EBLD agrees to include a link to Akoo.com
from the page on its Web site listing alliance partners.
<PAGE>
5. TERM
5.1 TERM. This Agreement shall be effective as of the date of this
Agreement, and will continue for one (1) year (the "Term"). 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 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 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 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 violates any intellectual property rights of any third party, any
allegation that any content on its website is defamatory or violates
any privacy or publicity rights of any third party, and/or any of its
other obligations under this Agreement.
<PAGE>
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 parties acknowledge that, in the course of their
dealings hereunder, each may acquire information about the other, its
business activities and operations, its technical information and its
trade secrets, all of which are proprietary and confidential (the
"Confidential Information"). Each party agrees that the terms of this
Agreement shall be deemed the Confidential Information of each party.
During the Term of this Agreement (including any Extension Terms) and
for a period of two (2) years after the expiration or termination of
last Extension Term, each party hereby agrees that: (i) all
Confidential Information shall remain the exclusive property of the
disclosing party; (ii) it shall maintain, and shall use prudent
methods to cause its employees, agents and its Affiliates to maintain,
the confidentiality and secrecy of the Confidential Information; (iii)
it shall use prudent methods to ensure that its employees, agents and
its Affiliates do not copy, publish, disclose to others or use (other
than pursuant to the terms hereof) the Confidential Information; and
(iv) it shall return or destroy all copies of Confidential Information
upon request of the other party. Notwithstanding the foregoing,
Confidential Information shall not include any information to the
extent that it: (i) is or becomes a part of the public domain through
no act or omission on the part of the receiving party; (ii) is
disclosed to third parties by the disclosing party without similar
restriction on such third parties; (iii) is in the receiving party's
possession without the receiving party's actual or constructive
knowledge of an obligation of confidentiality with respect thereto, at
or prior to the time of disclosure under this Agreement; (iv) is
disclosed to the receiving party by a third party having no obligation
of confidentiality with respect thereto; (v) is independently
developed by the receiving party without reference to the disclosing
party's Confidential Information; or (vi) is released from
confidential treatment by written consent of the disclosing party.
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.
<PAGE>
EXHIBIT A - DESCRIPTION OF LICENSED CONTENT
A. CO-BRANDED MUSIC VIDEO INDEX PAGE
a) This video index page will be hosted by Akoo and will be promoted from
the Akoo.com homepage. EBLD will provide indexing information for
selections of its music video library in digital format so that Akoo
can include the information in its database in a searchable format with
links to the co-branded Player.
b) Includes links to Akoo's top ten music videos, updated weekly or
bi-weekly.
c) Links open co-branded Entertainment Boulevard Music/Akoo Music Video
Player, with streaming content and Player pages served by EBLD.
d) Player shall include embedded music videos, navigation links, and an
advertisement as well as any additional content to be mutually agreed
upon. The Player shall contain both parties' logos. 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.
B. CO-BRANDED MOVIE TRAILER INDEX PAGE
a) This movie trailer index page will be hosted by Akoo and will be
promoted from the Akoo.com homepage. EBLD will provide indexing
information for its entire movie trailer library in digital format so
that Akoo can include the information in its database in a searchable
format with links to the co-branded Player.
b) Links open co-branded Entertainment Boulevard Movies/Akoo Movie
Trailer Player, with streaming content and Player pages served by EBLD.
c) Player shall include embedded movie trailers, navigation links, and an
advertisement as well as any additional content to be mutually agreed
upon. The Player will contain both parties' logos. The Content will be
available in 28k, 56k, 80k, and 300k transfer rates or through any
mutually agreed upon technology that becomes available during the Term.
d) Page and/or Player includes links to Entertainment Boulevard Movies'
subsections: Coming Soon, Now Playing, and On Video.
<PAGE>
EXHIBIT B
AKOO ADVERTISING GUIDELINES
EBLD shall not place any ads on the co-branded player from the following:
1) Web sites or companies promoting or selling sexually explicit
materials; or
2) The following competitors of Akoo.com:
a) Streamsearch
b) Scour.Net
c) Channelseek
d) Yack.com
e) Streambox
f) Global Streams
g) Warpradio.com
h) Sonicbox
i) Kerbango
Akoo.com reserves the right to update this list on a monthly basis.
<PAGE>
EXHIBIT C
COMPETITORS
1. Launch.com
2. JamTV.Com/Tunes.Com/RollingStone.com
3. Sonicnet.com/atm.com/mtv.com
4. Hollywood.com
5. Reel.com
<PAGE>
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. AKOO, INC.
By: /s/ Stephen Brown By: /s/ Tammi K. Franke
--------------------------------- ---------------------------------
Name: Stephen Brown Name: Tammi K. Franke
------------------------------- -------------------------------
Title: CEO Title: V.P. Business Development
------------------------------ ------------------------------
<PAGE>
CONTENT PROVIDER AGREEMENT (SPECIAL LAUNCH AGREEMENT)
This Content Provider Agreement ("Agreement") is made this 2nd day of
February, 2000, by and between Channelseek Inc., an Indiana corporation
("Channelseek") located at 8021 Knue Road, Suite 112, Indianapolis, Indiana
and Entertainment Boulevard, Inc., a Nevada corporation ("Content Provider")
located at 12910 Culver Boulevard, Suite 1, Los Angeles, California 90066.
RECITALS
1. Channelseek is a global Internet distribution company that offers a
comprehensive guide to web-delivered broadcast media by offering two targeted
websites, one designed for low bandwidth users and the other for high
bandwidth users (collectively called "Program Guide"). Content Provider
produces and/or distributes broadcast media for delivery over the Internet
(the "Content"). 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 in addition to text, information, data, images,
marks, graphics and media that are accessible through the Content Provider
website or websites.
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 agrees 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 ("Term") shall commence on the date
hereof and continue for a period of twelve months, with automatic annual
renewals thereafter. Either party may terminate this Agreement by giving 90
days prior written 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 and detailed in sections 3-a, 3-b, and 3-c below,
during the Term, it shall: (a) make its Content available to Channelseek; (b)
permit Channelseek to promote and exhibit the Content at other sites using
available technologies with advanced written permission by the content
provider; (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)
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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. With the
advanced written permission Channelseek may reproduce, distribute, display
and transmit the Content to promote and distribute the Content. Channelseek
may use Content Provider's Marks, (i) to identify Content Provider as the
source of Content as necessary; (ii) to identify and aid access to Content
Provider web site(s), content, links, streams, graphics, listing summaries,
including but not limited to all other marks if desired (iii) in a factual
manner in any promotional material, including but not limited to, press
releases, information guides and listings as well as any other medium for
promotion of said Content.
3. AGREEMENT OF CHANNELSEEK: During the Term, Channelseek and Content
Provider's relationship shall be as initialed below:
3-a PLATINUM CHANNEL SPONSORSHIP
Platinum Channel Partners: (a) will receive the most prominent placement and
treatment throughout the Channelseek.com websites, and the "Channelseek
Guide" when compared to the other categories; (b) receive a non-exclusive,
non-assignable, license to use Channelseek's Event Notification Service
("Remind Me") service; and (c) must offer rich media Content throughout the
Term.
Platinum Channel Partners will receive the following non-exclusive benefits:
Magazine Benefits:
a. Logo featured on the front cover of the "Channelseek Guide" for the
Term.
b. Full-page ad in each issue of the "Channelseek Guide" at a minimum
circulation of 200,000 or 25% of the total, whichever is greater.
c. Platinum Channel Partners will be profiled once in the editorial
of the "Channelseek Guide" within the first 6 months of signing this
Agreement. The feature will include a graphic representation of the
Platinum Channel Partner such as a photo, screen capture, or logo.
d. Selected daily programs will be listed in the weekly webcasting guide
in boldface and with the Platinum Channel Partner's logo.
Website Benefits:
a. Platinum Channel Partners' logos will appear on the Channelseek
splash page.
b. Top navigational channel treatment on one associated main channel
category and each of the subchannels beneath that channel.
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c. Each description associated with the Platinum Channel Partner
will include a small graphic logo within the text to further
brand the Platinum Channel Partner's channel.
d. Platinum Channel Partners will have a "Channel Profile" page that
is exclusive to their content and events. This "Channel Profile"
page will also include an editorial overview of the Platinum
Channel Partner complete with its logo or other graphic. Logos
within descriptions will also link to this "Channel Profile" page.
e. Channelseek will use its reasonable efforts to provide Channel
Partner 50,000 impressions per month.
f. Platinum Channel Partners will be given access to online traffic
and click-through statistics on all their content in the
database. Platinum Channel Partners will be able to change and
modify their descriptions or keywords based on user patterns.
Additional considerations:
a. Platinum Channel Partners will have a cross-promotional link on
their website and will utilize their best efforts to use the
"Remind Me" system whenever possible.
b. Platinum Channel Partners agree to provide timely, accurate
content information. To facilitate this, Platinum Channel
Partners agree to use their best efforts to incorporate the
automated system whereby a text file is spidered on their
server(s) that updates the Channelseek database in a timely
fashion and grants to Channelseek sole access to harvest data
files directly or indirectly created by this automated system.
c. Platinum Channel Partners agree to provide Channelseek at least
one direct link to a video clip to be highlighted in their
respective channel with a screen capture promoting their content.
Platinum Channel Partners agree to prominently display a Channelseek button
on their initial or splash page.
Platinum Channel Sponsorship Costs:
The cost for the Platinum Channel Sponsorship package is $12,000 per month.
Pricing and terms are subject to change by Channelseek with 90 days prior
written notice. Discounts are detailed below:
a. 15% gross discount--If an automated system is in place that
grants Channelseek access to spider and update Channelseek's
database.
b. 5% gross discount--If the Platinum Channel Partner uses the
Channelseek "Remind Me" system.
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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 for any loss, damage, expense or damage of 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, WITHOUT LIMITATION, WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE AND MERCHANTABILITY).
5. INDEMNIFICATION.
(a) BY CHANNELSEEK. Channelseek (referred to in this Section as the
"indemnifying party") agrees to indemnify, hold harmless, reimburse and
defend Content Partner and Content Partner's officers and directors (each
being referred to in this Section as the "indemnified party"), from and
against any claim, suit, action, or other proceeding brought against the
indemnified party arising out of or in connection with (i) the indemnifying
party's breach of any representation, warranty, covenant or obligation in this
Agreement; (ii) any grossly negligent or wrongful act or omission of the
indemnifying party with respect to the subject matter of this Agreement; or
(iii) a claim that any material, product, information or data or service
produced, distributed, offered or provided by the indemnifying party
(including, without limitation, any material presented on any site on the
Internet, produced, maintained or published by the indemnifying party, but
excluding Hypertext Links to sites on the Internet produced, maintained or
published by a third party) infringes in any manner, any copyright, patent,
trademark, trade secret or any intellectual property right of any third
party. The indemnifying party will pay any and all Damages awarded against or
otherwise incurred by the indemnified party in connection with or arising
from any such claim, suit, action or other proceeding;
(b) BY CONTENT PARTNER. Content Partner (referred to in this
Section as the "indemnifying party") agrees to indemnify, hold harmless,
reimburse and defend Channelseek, and Channelseek's officers and directors
(each being referred to in this Section as the "indemnified party"), from and
against any claim, suit, action, or other proceeding brought against the
indemnified party arising out of or in connection with (i) the indemnifying
party's breach of any representation, warranty, covenant or obligation in
this Agreement; (ii) any grossly negligent or wrongful act or omission of the
indemnifying party with respect to the subject matter of this Agreement; or
(iii) a claim that any material, product, information or data or service
produced, distributed, offered or provided by the indemnifying party
(including, without limitation, any material presented on any site on the
Internet, produced, maintained or published by the indemnifying party, but
excluding Hypertext Links to sites on the Internet produced, maintained or
published by a third party) infringes in any manner, any copyright, patent,
trademark, trade secret or any intellectual property right of any third
party. The indemnifying party will pay any and all Damages awarded against
or otherwise incurred
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<PAGE>
by the indemnified party in connection with or arising from any such claim,
suit, action or other proceeding;
6. SCOPE OF AGREEMENT AND DISCLAIMER OF WARRANTIES/LIMITATION OF
LIABILITY. NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, WHETHER STATUTORY,
WRITTEN, ORAL, EXPRESSED OR IMPLIED (INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, ALL OF
WHICH ARE HEREBY EXPRESSLY DISCLAIMED). NOTHING IN THIS AGREEMENT SHALL BE
CONSTRUED AS PROHIBITING CHANNELSEEK FROM PROVIDING CONTENT TO ANY OTHER
PERSON VISITING THE CHANNELSEEK WEBSITE.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR ANY OTHER AGREEMENT TO
THE CONTRARY, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ANY THIRD PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL, OR EXEMPLARY DAMAGES RESULTING FROM ANY ACTIONS OR OMISSIONS,
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS, USE, DATA OR
OTHER INTANGIBLE RIGHTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. NEITHER PARTY SHALL BE LIABLE FOR ANY DAMAGES
ARISING FROM INTERRUPTION, SUSPENSION OR TERMINATION OF ACCESS TO ANY
WEBSITE, INCLUDING, BUT NOT LIMITED TO, DIRECT, INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER SUCH INTERRUPTION,
SUSPENSION OR TERMINATION WAS JUSTIFIED OR NOT, NEGLIGENT OR INTENTIONAL,
INADVERTENT OR ADVERTENT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THE
PROVISIONS OF THE AGREEMENT ARE INTENDED TO REFLECT AN INFORMED, VOLUNTARY
ALLOCATION BETWEEN THE PARTIES OF ALL RISKS (BOTH KNOWN AND UNKNOWN)
CONTEMPLATED BY THIS AGREEMENT. EXCEPT FOR MONEY DUE UPON AN OPEN ACCOUNT, NO
ACTION SHALL BE BROUGHT FOR ANY BREACH OF THIS AGREEMENT MORE THAN ONE (1)
YEAR AFTER THE ACCRUAL OF SUCH CAUSE OF ACTION.
7. INTELLECTUAL PROPERTY OWNERSHIP: Both parties shall retain
ownership and control use of their respective marks, copyrights, logos and
other proprietary materials and Content.
8. 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.
9. NOTICES: All notices to be provided under this Agreement shall be
sent to:
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IF TO CHANNELSEEK: IF TO CONTENT PROVIDER
Director of Channel Partnerships Stephen Brown, CEO
Channelseek, Inc. Entertainment Boulevard, Inc.
8021 Knuc Road, Suite 112 12910 Culver Boulevard, Suite I
Indianapolis, IN 46250 Los Angeles, CA 90066
Phone: 317-585-6111 x-_____ Phone: (310) 578-5404
Fax: 317-585-6112 Fax: (310) 578-6304
10. 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 other 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. The headings of the sections are for
convenience of reference only and will not affect the meaning or operation of
this Agreement. The terms and conditions of this Agreement are subject to all
applicable laws and regulations which are currently in effect or which may
become effective during the term of this Agreement. If any provision of this
Agreement is considered void, voidable, illegal, or invalid for any reason,
such provision will be of no force and effect only to the extent that it is
so declared void, voidable, illegal, or invalid. All of the provisions of
this Agreement not specifically found to be so deficient will remain in full
force and effect. NON-EXCLUSIVITY. Each party acknowledges that the
arrangements contemplated by this Agreement are non-exclusive and that each
party may enter into arrangements with third parties that are similar or
identical to those contemplated in this Agreement that are not in direct
conflict this Agreement. Any amendment or other modification of this Agreement
will be effective only if in writing and signed by both parties. No term or
provision of this Agreement may be waived except by a written instrument duly
executed by the party against whom such or waiver is sought to be enforced.
11. TERMINATION/SURVIVAL. Either party may terminate this Agreement
immediately and without obligation or liability to the other party upon the
occurrence of a breach of any provision or term of this Agreement. The terms
of Paragraph 7 of this Agreement shall survive the termination or expiration
of this Agreement.
12. FORCE MAJEURE. Neither party will be liable for any failure to
perform any obligation hereunder, or from any delay in the performance
thereof, due to causes beyond its reasonable control, including, without
limitation, industrial disputes of whatever nature, acts of God, public
enemy, acts of government, failure of telecommunications, fire or other
casualty. In the event that Channelseek is unable to provide Content Provider
all required banner ads during any month, Channelseek will provide Content
Provider a make good in additional banner advertisements or based
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upon the CPM value of advertising in the guide times the number of guides
with Content Partner's advertising in excess of 200,000 copies.
13. CONFIDENTIAL INFORMATION. As a condition to receiving any
information which either party or any of its employees, representatives or
agents (the "Disclosing Party") may furnish to the other (the "Receiving
Party") or to which the Receiving Party is afforded access, directly or
indirectly, the Receiving Party covenants to hold and treat the Information
in strictest confidence and shall not, without the prior written consent of
the Disclosing Party, use or disclose the Information or any part thereof
except as necessary for the purpose of facilitating the business relationship
and undertakings of the parties described herein. Information shall not,
without the prior written consent of the Disclosing Party, be disclosed to
any Person other than employees or agents of Receiving Party who need to know
the Information and in those instances only to the extent justifiable by that
need. In further consideration of the disclosure to be made by the Disclosing
Party, Receiving Party agrees to promptly redeliver to the Disclosing Party
upon request and without relieving Receiving Party of any obligation of
confidentiality all written material containing or reflecting any Information
(including all copies, extracts or other reproductions) and further agrees
that the Disclosing Party shall have no liability to Receiving Party resulting
from use of the Information.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
CHANNELSEEK, INC. ENTERTAINMENT BOULEVARD, INC.
By: /s/ Donald A. Kent By: /s/ Stephen Brown
--------------------------- -----------------------------
Printed: Donald A. Kent Printed: Stephen Brown
---------------------- ------------------------
Title: President Title: CEO
------------------------ --------------------------
("Channelseek") ("Content Provider")
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ATTACHMENT A (LAUNCH ONLY)
Notwithstanding the foregoing and on a one-time basis in recognition of
Content Provider's participation during the launch of this program, payment
by Content Provider in Section 3 is will be satisfied by the following:
- Exclusive (486 x 60) banner advertisement in the Wall of
Sound/EntertainmentBlvd.com pop-up player and will use reasonable
efforts to provide up to 250,000 impressions per month.
- 120 x 60 Sponsor Button rotation on EntertainmentBlvd.com splash page
and use reasonable efforts to provide 100,000 impressions per month.
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MUSIC VIDEO LICENSE
Agreement made as of February 29, 2000 between VIDNET, a Division of
Entertainment Boulevard Inc., a Nevada corporation, with offices at 12910
Culver Blvd., Suite I, Los Angeles, CA 90066 (hereinafter "Vidnet" or "you")
(formerly known as Entertainment Boulevard) and Sony Music, a Group of Sony
Music Entertainment Inc., a Delaware corporation, with offices at 550 Madison
Avenue, New York, New York 10022-3211 (hereinafter "Sony").
WHEREAS, Vidnet is, among other things, in the business of exhibiting
music videos via the Internet;
WHEREAS, Sony owns and/or controls various Music Videos embodying
Recordings produced in the United States and recorded in the English language
by various Sony recording artists (each, a "Sony Artist"), and the
intellectual property rights therein; and
WHEREAS, Vidnet desires to obtain from Sony and Sony desires to grant to
Vidnet a limited, non-exclusive license, pursuant to the terms hereof, to
exhibit certain Music Videos as part of a single genre-specific,
non-interactive, non-subscription music video webcasting service to be
offered as that part of the service that is accessible over the World Wide
Web on the Web Site located solely at the URL www.Vidnet.com, and
specifically excluding that part of the Service which is accessible through
any affiliated or related network of Web Sites (the "Vidnet Website) and as
further described in Exhibit A attached hereto (the "Service").
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. TERM AND TERRITORY
1.01. The term of this license agreement ("Term") will begin as of the
date hereof, and will continue, unless sooner terminated pursuant to Article
9, for a period ending on the date that is the sooner to occur of (i) twelve
(12) months after the date on which you exhibit the first Music Video
licensed hereunder on the Service, and (ii) the date which is thirteen (13)
months after the date hereof.
1.02. The territory of the License (as defined in Section 2.01 below)
is the World ("Territory"). Notwithstanding the foregoing, you shall not
market the Service in any manner directed to, or designed to attract,
visitors to the Service from countries outside of the United States. You
shall use your best efforts to prevent other Web Sites outside of the United
States from creating hyptertext links from such Web Sites to the Service.
2. GRANT OF RIGHTS; MUSIC VIDEOS; UPLOAD RESTRICTIONS AND PROCEDURES
2.01. Only in respect of the rights Sony owns or controls in and to
the Music Videos, and subject to all of the terms and conditions of this
Agreement, including,
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without limitation, Exhibit A attached hereto, Sony grants to you a
non-exclusive, limited license, without the right to sublicense, during the
Term and throughout the Territory (but only to the extent of Sony's rights)
to perform, display publicly and, solely to the extent necessary to
accomplish the foregoing, reproduce on its own servers, the Music Videos
released by Sony from and after the date hereof, delivered to you by Sony
pursuant to Section 2.02, solely for purposes of exhibiting such Music Videos
on the Service to viewers of the Service (the "License"). For the avoidance
of doubt, you shall not be entitled to exhibit such Music Videos to any
Person other than viewers of the Service, and solely in the manner prescribed
in this Agreement. Although you may advertise the Music Videos on other Web
Sites in connection with the Service only, you shall not be permitted to
exhibit the Music Videos, or any portion thereof, for any form of
advertising, including, without limitation, advertising of the Service, for
any other programming, or for any other purposes. Furthermore, you shall not
be permitted to "syndicate" or "frame" the Music Videos (e.g., allow or cause
a Web Site other than the Vidnet Web Site to continuously display or exhibit
the Music Videos while the viewer visits such other Web Site) or to permit
Web Sites other than the Vidnet Web Site to "deep link" to the Music Videos.
The License shall only be valid with respect to the Service which may only
exhibit music videos in a non-downloadable manner, via "streaming"
technology, in a non-interactive, linear, pre-programmed rotation as further
described in Exhibit A.
2.02. From time to time Sony shall deliver to you analogue format
copies of the promotional Music Videos that it makes generally available to
other third parties for exhibition (each delivery, a "Delivery") only at such
times as Sony makes such Music Videos generally available to such other third
parties for such exhibition. Vidnet shall reimburse Sony for all costs of
copying and delivering such Music Videos contained in each Delivery promptly
following such Delivery. Notwithstanding any provision in this Agreement to
the contrary, Sony shall be free to enter into exclusive arrangements with
other music video exhibitors, whether or not Internet-based, with respect to
any Music Video and shall also be free to exhibit any Music Video exclusively
via Web Sites owned or controlled by Sony or managed or operated, in whole or
in part, by Sony. You acknowledge and agree that Sony shall not deliver to
you, and you shall have no rights to exhibit, any such Music Videos during
the applicable exclusivity periods.
2.03. You will deliver to Sony at the end of each week the "playlist"
of all music videos exhibit on the Service during such week.
3. OTHER LIMITATION OF RIGHTS
3.01. (a) The License is limited to the use of the Music Videos
solely in the manner set forth in Article 2 above, this Article 3 and in
accordance with Exhibit A. Any and all other rights in connection with the
Music Videos are specifically reserved by Sony. Nothing herein shall be
construed as permitting you to (i) use the Music Videos, or any portion
thereof, on any Web Site owned or operated by you, or on any third party Web
Site (including, without limitation, any Web Site operated by you on a
"private label" basis; or (ii) otherwise exploit the Music Videos, except as
expressly set forth herein. Nothing herein shall be construed as permitting
you to strip the audio portion of any Music Video from the video portion
thereof, which, for the avoidance of doubt, is expressly prohibited. This
License shall be immediately terminated in the event that viewers of content
delivered via "streaming" technology have the capacity to download such
content.
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(b) You covenant and agree that, except as expressly set forth
herein (i) the Music Videos will not be edited, modified or otherwise
altered, (ii) you will not include the Music Videos in computer files other
than those computer files created for use as part of the Service, and (iii)
you shall be solely responsible for any and all costs, fees, expenses or
other charges in connection with the uses of the Music Videos permitted
hereunder and the maintenance of the Music Videos and computer files
embodying Music Videos (including, without limitation, any royalties, taxes,
re-use payments or other third party fees that may be required in connection
with your use of the Music Videos, pursuant to paragraph 3.03 or otherwise).
(c) Notwithstanding anything to the contrary in this Agreement,
in the event that Sony receives a notice from a third party asserting any
challenge to Sony's rights with respect to the exhibition of any Music Video
on the Service, Sony shall have the right, without incurring any liability to
you, at any time, to exclude such Music Video from the Music Videos licensed
hereunder, provided that Sony furnishes you with notice of Sony's election to
exclude any such Music Video. Without limiting the foregoing, you agree that
you shall, immediately following Sony's demand to remove the designated Music
Videos but in no event later than two (2) business days from the date of such
demand remove from the Service any Music Videos referenced in Sony's demand.
You shall promptly notify Sony in writing of your compliance with the terms
of this subparagraph 3.01(b), which notice shall be accompanied by all
copies of such Music Videos then in your possession.
3.02. You will not sublicense, assign or convey in any manner any
rights under this Agreement, including, but not limited to, the right to use
the Music Videos in conjunction with the Service.
3.03. As conditions precedent to the exercise by you of any rights
granted to you hereunder, you shall be solely responsible for obtaining any
and all applicable consents, licenses and permissions from Persons other
than Sony which are necessary for your uses of the Music Videos in connection
with the Service (e.g., currently effective performance and mechanical
copyright licenses for use of the musical compositions embodied in the Music
Videos), and, if applicable, you shall become a party to the American
Federation of Musicians (AFM) and American Federation of Television and Radio
Artists (AFTRA) collective bargaining agreements covering the creation and
exploitation of the Service, and any other applicable collective bargaining
agreements, and you shall fully comply with the terms and conditions of all
such agreements. Your failure to so obtain any such applicable consents,
permissions or licenses or to become a signatory to any applicable collective
bargaining agreement in respect of any of the Music Videos shall result in
the License being void with respect to all the Music Videos so affected and
you specifically agree that you shall have no right to use such Music Videos.
3.04. You shall include on the Service simultaneously with the
exhibiting of each Music Video: (i) the title of the musical composition
embodied in the Music Video concerned and the name of the Sony Artist
performing such composition and the name of the Sony record label for whom
such Sony Artist records, (ii) the appropriate copyright (P) and (c) notices
applicable to each of the Music Videos used on the Service, in close
juxtaposition to the title(s) of the Recordings concerned, and (iii) the
legend: "WARNING: All rights reserved. Unauthorized duplication is a
violation of applicable laws." The items prescribed in clauses (i) and (ii)
will be included on the Service in an
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easily legible manner and in the same size, prominence and type style, as
similar items relating to the underlying musical compositions and Recordings
licensed to you by third parties.
3.05. You will place hypertext links in proximity to Music Videos
simultaneously with the exhibition of such Music Videos on the Service
linking the Service to a page or pages selected by Sony within the
"sonymusic.com" Web Site or such other Sony promotional Web Site of Sony's
selection.
3.06. You shall use your best efforts to prevent any third party from
hypertext linking to the Service in any manner which results in the Service
appearing within a "frame" on such third party Web Site.
3.07. As between you and Sony, the Music Videos, all performances
embodied thereon, and all copyrights and other rights in and to the Music
Videos are the sole property of Sony and shall remain the sole and exclusive
property of Sony. You warrant, represent and agree that you will not,
directly or indirectly, sell or otherwise dispose of, pledge, mortgage or in
any way encumber the Music Videos or any other related materials licensed to
or created by you with respect thereto.
3.08. In preparation for your creation and maintenance of the Service,
you shall consult with Sony regarding the proposed use of the Music Videos to
be used on the Service. Sony shall have the right to reject any specific
proposed use by you of any particular element of the Music Videos in its sole
and reasonable discretion. Sony shall not be deemed unreasonable in rejecting
any proposed use of the Music Videos which Sony deems patently offensive or
denigrating to Sony and/or any Sony Artist or which, in the judgment of its
attorneys, might subject Sony, any Sony Artist or any of Sony's licensees to
unfavorable regulatory action, violate any law, infringe the rights of any
Person, or subject Sony, any Sony Artist or any of Sony's licensees to
liability for any reason.
3.09. Upon termination of the License, or at the termination or expiration
of the Term, or if any Music Videos cease for any reason to be subject to the
License, all rights herein granted to you to include the Music Videos
concerned on the Service shall forthwith terminate. You shall thereafter have
no right to include such Music Videos on the Service. You shall immediately
cease to use any computer files embodying or constituting Music Videos, and
shall promptly thereafter furnish Sony with a sworn affidavit confirming that
you have returned or destroyed all copies of such materials.
3.10. Except as expressly provided for herein, you may not, without
Sony's prior written consent in each instance, which consent Sony may withhold
in its unrestricted discretion, use the Music Videos for any original
programming, products or marketing campaigns of any type or nature, including
but not limited to use in any games or trivia contests, nor may you exploit
the Music Videos in any commercial on-line services, interactive on-line
services, interactive television, telephone, cable or other technology or
format, or in any other medium, whether now known or hereafter created.
4. FEES, ADDITIONAL CONSIDERATION
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4.01 In consideration of the rights granted to you hereunder, you
shall pay Sony a fee (the "License Fee") in an amount equal to Sony's Pro
Rata Share of the Gross Receipts derived from the Service as provided in
Section 6.01.
4.02 As further consideration for the rights granted to you
hereunder, upon execution of this Agreement you shall:
(i) pay Sony, by wire transfer or certified check, in
immediately available funds, the sum of One Hundred Twenty-Five Thousand
Dollars ($125,000), which sum shall constitute a non-refundable advance
recoupable against the License Fee payable to Sony pursuant to Section 4.01
hereof; and
(ii) grant to sony Thirty Thousand (30,000) free banner
impressions per month to promote Sony Artists on the Service on specific
Vidnet Web Site pages as determined by Sony in its sole discretion, which
banners will be 468x60 pixels and will conform to your standard and
reasonable banner advertising policies applicable to all advertisers on the
Service.
4.03 As further consideration for the release granted to you
pursuant to paragraph 1 of the Release and Stock Grant Agreement (as defined
in paragraph 6.02 below), upon execution of this Agreement you shall pay
Sony, by wire transfer or certified check, in immediately available funds,
the sum of One Hundred Thousand Dollars ($100,000), which sum shall
constitute a non-refundable advance recoupable against the License Fee
payable to Sony pursuant to Section 4.01 hereof
5. TRADEMARKS, TRADE NAMES, NAMES, LIKENESSES, CREDITS AND
MARKETING LIMITATIONS
5.01 You may advertise the Music Videos in connection with the
Service only under such trade names or marks as are owned by or licensed to
you. You agree that you will not use Sony's trademarks or logotypes, or
Sony's name, directly or indirectly, except as provided in Section 3.04 above
and Section 5.02 below, in conjunction with the License granted herein.
5.02 You agree to comply with all formalities necessary to ensure
the full protection of Sony's or its licensor's copyrights in the Music
Videos and Sony's trademarks.
5.03 You shall deliver to Sony sample copies and any other copies
requested by Sony of artworks, packaging, containers, labels, printed
programs, advertising copy and promotional material in connection with the
Service, and lists of artists, musical compositions and record companies used
as part of the Service. You agree, with respect to Sony Artists whose
performances are embodied on Music Videos, that the credits for such artist
on the Service, and the artist credits in any advertising for the Service,
shall appear in the same size, prominence and type style as the size,
prominence, and type style used in connection with credits and advertising
for other artists whose work is embodied on the Service.
5.04 If you become aware of any unauthorized manufacture,
advertising, distribution, lease or sale by any third party of the Music
Videos, you shall immediately
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notify Sony thereof and shall cooperate with Sony (at Sony's sole expense) in
the event that Sony commences any action or proceeding against such third
party.
6. PAYMENTS AND ACCOUNTINGS, MOST FAVORED NATION, NON-DISCLOSURE
6.01 You shall, within thirty (30) days following the end of each
calendar quarter, pay Sony the License Fee, and all other monies, accrued in
such calendar quarter. All payments shall be accompanied by a quarterly
accounting statement signed by you, setting forth a description and
calculation of the applicable payments in detail sufficient to support the
calculations of the amounts paid (including, without limitation, a
"playlist" of music video exhibited and a statement of gross revenues for the
pertinent accounting period). Such description shall include, without
limitation, the source and amount of any License income for the quarter
concerned and the Music Videos concerned. Sony shall be entitled to audit
your records, and the records of any of your subsidiaries, affiliates and
licensees, relating to amounts owed to Sony, at Sony's own expense, upon
fifteen (15) days' prior written notice to you.
6.02 You represent and warrant that, as of the date hereof, you have
not granted to any third party any right, title or interest or any other
terms, conditions, benefits, privileges or other rights (e.g., equity grants
and registration rights therein or related thereto) pursuant to any license,
settlement or other agreement between you and such third party (a "Third
Party Agreement") more favorable to such third party than the rights granted
to Sony in this Agreement or in the release and stock grant agreement (the
"Release and Stock Grant Agreement") between you and Sony, dated as of
February __, 2000 [SMU 00- ], including, without limitation, more favorable
than the three percent (3%) equity stake you have granted to Sony under the
Release and Stock Grant Agreement (collectively, the "MFN Rights"). In the
event that you grant any MFN Right to any third party in connection with a
Third Party Agreement, you will promptly notify Sony of the right granted,
and this Agreement shall be deemed to automatically and unconditionally
include such MFN Right.
6.03 Neither party to this Agreement will disclose to third parties
any of the Agreement's terms, except as required by law or by the party's
certified public accountant. Without limiting the preceding sentence, neither
party shall issue any press release) or otherwise make any public statement
or announcement or distribute to any third party any materials) relating to
the substance of this Agreement without the other party's prior written
consent, provided that any party may make any disclosure required to be made
by it under applicable law if it determines in good faith that it is required
to do so and gives prior notice to the other party; provided further that you
will provide Sony with a reasonable opportunity to review and comment on any
disclosure in any of your filings under the United States securities laws
regarding this Agreement and the transactions contemplated hereunder and, if
you are required to file this Agreement under applicable securities laws, you
will use best efforts to obtain confidential treatment for those portions of
this Agreement that Sony designates.
6A. SUBSCRIBER ACQUISITION
6A.01. Promptly following the commencement of the Term, and for a
period of twelve (12) months thereafter (the "InfoBeat Offer Term"), you
shall include an offer
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promoting the InfoBeat Service (the "InfoBeat Offer") in the following manner
on the Service:
(a) The InfoBeat Offer shall consist of a so-called "two-step opt-in
box" (i.e., an icon or graphic which enables an end-user to who has
registered on the Service to subscribe to the InfoBeat Service by selecting
from between six (6) and eight (8) so-called "check boxes" (i.e. graphics or
icons describing an information product available on the InfoBeat Service) as
InfoBeat shall select in its sole discretion (e.g. "Sports", "Music",
"Movies", "Fun", "Entertainment" or "TV Tonite").
(b) You shall integrate the InfoBeat Offer on (i) the main
registration page of the Vidnet Web Site, if any (i.e., the primary page used
by end-users to register for or subscribe to products or services offered by
you, as the same may be updated from time to time, or any successor or
equivalent page); and (ii) the main page of each "genre" section of the
Vidnet Web Site (e.g., music, movies, sports and infomercials).
6A.02 During the InfoBeat Offer Team, you shall include offerings
promoting the InfoBeat Offer in your newsletters promoting registration. The
frequency, size, type and placement of such promotion shall be determined by
you in your reasonable discretion.
6A.03 During the InfoBeat Offer Term, you shall provide to InfoBeat,
promptly following the end of each business day, a file containing the
following information in respect of each Subscriber (as that term is defined
below):
(a) Subscriber's name;
(b) the Subscriber's electronic mail address;
(c) Subscriber's gender;
(d) Subscriber's date of birth;
(e) Subscriber's zip code and
(f) Whether the Subscriber has selected to receive electronic mail
in so-called "text-based" or "HTML-enabled" formats.
6A.04. During the InfoBeat Offer Term, in respect of your so-called
"launch partners" and/or "partners" collectively "Partners") which initially
become affiliated with you after the commencement of the InfoBeat Offer Term,
you shall use reasonable efforts to cause such Partners to include the
InfoBeat Offer as the exclusive customized electronic mail service available
to prospective subscribers on such Partner's Web Sites, as part of the
registration process for such Web Sites. In respect of all Partners's Web
Sites with which you are currently affiliated, you shall use reasonable
efforts to cause the InfoBeat Offer to be offered as the exclusive customized
electronic mail service available to prospective subscribers on such
Partners' Web Sites, as part of the registration process for such Partners'
Web Sites. You hereby agree that InfoBeat shall receive prominent placement
in any press releases or public announcements concerning your Partners.
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6A.05. The InfoBeat Offer, as it appears on the Vidnet Web Site, shall
be no less prominent than the service offers for any other third-party
appearing on the Vidnet Web Site.
6A.06 During the InfoBeat Offer Term, InfoBeat shall provide the
InfoBeat Service to each person who has subscribed to the InfoBeat Service
(each, a "Subscriber") in accordance with InfoBeat's then-existing terms and
conditions. You and InfoBeat each acknowledge and agree that all information
concerning Subscribers delivered to InfoBeat by you hereunder is and shall at
all times remain the sole property of InfoBeat.
7. ADDITIONAL REPRESENTATIONS, WARRANTIES AND INDEMNITIES
7.01. You warrant and represent that:
(a) You have the right and power to enter into and fully perform
this Agreement and to make the commitments you make herein, and have obtained
or will obtain all necessary licenses, permissions and consents.
(b) Sony shall not be subject to any costs, fees or other
charges (including, without limitation, any royalties) in respect of the
creation or exhibition of any Music Videos or in respect of the Service.
(c) You own, and will own at all times during the Term, all
right, title and interest in and to the Service, and all copyrights and other
rights therein (other than the underlying rights in the content included
therein), throughout the Territory, free and clear of any and all claims or
encumbrances whatsoever. The Service, and the operation and use thereof for
the purposes described herein, do not, and at no time shall during the Term,
violate any law (including, without limitation, any federal law or
regulation) or infringe upon or violate the rights of any person or entity.
(d) The Service currently complies, and shall at all times
during the Term comply, with the description of the Service set forth in
Exhibit A.
(e) You have obtained from third parties all licenses and other
rights necessary in order to create and operate the Service as contemplated
therein and shall make all necessary payments required in connection with the
exhibition of the Music Videos hereunder.
(f) You are a corporation duly organized and in good standing
under the laws of the state of Nevada.
7.02. You will at all times indemnify and hold harmless the Sony
Parties and any licensor of a Sony Party from and against any and all claims,
damages, liabilities, costs and expenses (including legal expenses and
counsel fees) arising out of (a) your or any other Person's use (including but
not limited to unauthorized use or duplication), in connection with the
Service, of any Music Videos; or (b) any breach or alleged breach by you of
any representation, warranty or agreement made by you herein, including,
without limitation, your representation, warranty and agreement to secure and
pay for all third-party licenses, permissions and consents. You will
reimburse the Sony Parties and/or their licensors on demand for any payment
made at any time after the date hereof
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in respect of any liability or claim in respect of which a Sony Party or its
licensors are entitled to be indemnified. Pending the resolution of any
claim in respect of which the Sony Parties are entitled to be indemnified
under this Agreement, the applicable Sony Party may withhold monies due to
you under any other agreement between a Sony party and you, or any of your
affiliates, in an amount not exceeding your potential liability to a Sony
Party hereunder.
8. DEFINITIONS
8.01. "ADJUSTED GROSS ADVERTISING RECEIPTS"--all monies derived from the
sale of advertising and sponsorships on the Service after deducting any
advertising sales agency commissions actually paid to third party advertising
sales agents, provided that such commissions shall not exceed forty percent
(40%) of fees paid by an advertiser for advertising on the Sevices after
deducting agency with respect to such advertising.
8.02. "BOUNTIES"--all monies derived from directing any visitor from
the Service to another Web Site or other service.
8.03. "GROSS MARGIN"--all monies derived from the sale by you (whether
or not such sales are consummated on-line or on the Service) of any products
(other than Phonograph Records distributed by Sony in the United States which
are purchased by you for resale) or services via the Service after deducting
any and all taxes other than taxes on your net income and an amount equal to
the price actually paid by you for any such products or services.
8.04 "GROSS RECEIPTS"--the aggregate amount of all Adjusted Gross
Advertising Receipts, Bounties and Gross Margin, provided that if you receive
any Adjusted Gross Advertising Receipts, Bounties or Gross Margin in the form
of advertising inventory or other services or products, the fair market value
of such inventory, products or services shall be included in the calculation
of Gross Receipts.
8.05. "INFOBEAT SERVICE"--the customized electronic information delivery
services offered by InfoBeat consisting, inter alia, of a variety of
personalized news and information services or products delivered
electronically to subscribers, including, without limitation, via so-called
"text-based" electronic mail and other forms of electronic distribution now
known or hereafter developed.
8.06. "MUSIC VIDEO"--English language Recordings of Sony Artists
produced in the United States coupled with visual images by means of films,
videotape or other audiovisual media designed to be used in conjunction with
an apparatus that causes a visual image to be seen on a television screen or
computer monitor and released by Sony from and after the date hereof.
8.07. "PERSON"--any natural person, legal entity, or other organized
group of persons or entities. (All pronouns, whether personal or impersonal,
which refer to Persons include natural persons and other Persons.)
8.08. "PRO RATA SHARE"--Sony's pro rata share of a pool constituting
twenty-five percent (25%) of Gross Receipts which share shall correspond to
the quotient obtained by dividing the number of Impressions on the Service
resulting in the performance of
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Music Videos on the Service during the applicable calendar quarter by the
total number of impressions on the Service resulting in the performance of
all music videos on the Service during the same calendar quarter.
8.09 "RECORDINGS"--every recording of sound, whether or not coupled with
a visual image, by any method and on any substance or material, or in any other
form or format, whether now or hereafter known, which is used or useful in
the recording, production and/or manufacture of Records or for any other
commercial exploitation.
8.10. "RECORDS"--all forms of reproductions, transmissions or
communications of Recordings now or hereafter known, manufactured,
distributed, transmitted or communicated primarily for home use, school use,
juke box use or use in means of transportation, including, without limitation,
Records embodying or reproducing sound alone and audiovisual Records. A
"PHONOGRAPHIC RECORD" is a Record as embodied by the manufactured and/or
distributor in a physical, non-interactive Record configuration (e.g., vinyl
LP's, cassettes, compact discs, videocassettes) prior to its distribution to
the consumer, as opposed to the transmission or communication of a Record to
the consumer prior to being embodied in a physical Record configuration,
whether or not it may at some point be embodied in a physical Record
configuration, by the consumer or under the consumer's direction or control.
8.11. "WEB SITE"--any specific or unique physical or logical address on
that portion of the publicy available network of computer networks commonly
referred to as the Internet known as the "World Wide Web" (generally referred
to as a 'uniform resource locator' or 'URL').
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9.01. (a) If you fail to timely make payments and render statements to
Sony and/or to make payments to third parties; or
(b) In the event of any breach or alleged breach by you or any of
your representations, warranties or obligations hereunder, or in the event
that you fail to fulfill any of your obligations hereunder; or
(c) In the event of your dissolution or the liquidation of your
assets, or the filing of a petition in bankruptcy or insolvency or for an
arrangement or reorganization by, for or against you, or in the event of the
appointment of a receiver or a trustee for all or a portion of your property,
or in the event that you shall make an assignment for the benefit of
creditors or become bankrupt or insolvent;
then, you shall be deemed in material breach and default hereof and, in
addition to such other rights and rememdies which Sony has at law or
otherwise under this Agreement, (i) in the event of any occurrence described
in Section 9.01(c), this Agreement, the License and the Term shall
immediately terminate and (ii) in the event of any occurrence described in
either Section 9.01(a) or 9.01(b), Sony may, upon notice to you, immediately
terminate this Agreement, the License and the Term.
10. DISCLAIMER OF WARRANTIES
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10.01 EXCEPT AS OTHERWISE SET FORTH HEREIN, NEITHER PARTY MAKES
ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED WITH
RESPECT TO THE MUSIC VIDEOS, OR THE SERVICE, RESPECTIVELY, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR
A PARTICULAR PURPOSE.
10.02 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INCIDENTAL
CONSEQUENTIAL, EXEMPLARY, MULTIPLE, SPECIAL OR INDIRECT DAMAGES IN CONNECTION
WITH THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO LOST BUSINESS PROFITS) EVEN
IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF THE SAME.
11. NOTICES
11.01 All notices under this agreement shall be in writing and shall be
in writing and shall be given by courier or other personal delivery or by
registered or certified mail at the appropriate address below or at a
substitute address designated by notice by the party concerned.
TO YOU: The address shown above.
TO SONY: 550 Madison Avenue
New York, New York 10022-3211
Each notice to Sony shall be addressed for the attention of Sony's Senior
Vice President, Business Affairs & Administration, and a copy of each notice
to Sony shall be sent simultaneously to the Sony Music Entertainment Inc. Law
Department for the attention of Sony's Senior Vice President and General
Counsel.
12. MISCELLANEOUS
12.01 This Agreement and Exhibit A attached hereto contains every
obligation and understanding between the parties relating to the subject
matter hereof and merge all prior discussions, negotiations and agreements,
if any, between them, and none of the parties shall be bound by any
representations, warranties, covenants, or other understandings, other than
as expressly provided or referred to herein (including as provided in
Section 12.06).
12.02 All recitals hereinabove set forth are incorporated herein and
deemed a part hereof.
12.03 Any representation, warranty, covenant, term or condition of this
Agreement which may legally be waived, may be waived, or the time of
performance thereof extended, at any time by the party hereto entitled to the
benefit thereof, and any term, condition or covenant hereof may be amended by
the parties hereto at any time. Any such waiver, extension or amendment shall
be evidenced by an instrument in writing executed on behalf of the
appropriate party by a person who has been authorized by such party to
execute waivers, extensions or amendments on its behalf. No waiver by any
party hereto, whether express or implied, of its rights under any provision
of this Agreement shall constitute a waiver of such party's rights under
such provisions at any
11
<PAGE>
other time or a waiver of such party's rights under any other provision of
this Agreement. No failure by any party hereto to take any action against any
breach of this Agreement or default by another party shall constitute a
waiver of the former party's right to enforce any provision of this Agreement
or to take action against such breach or default or any subsequent breach or
default by such other party.
12.04 Nothing expressed or implied in this Agreement is intended, or
shall be construed, to confer upon or give any Person other than the parties
hereto and their respective successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
12.05 In the event that any one or more of the provisions contained
in this Agreement shall be declared invalid, void or unenforceable, the
remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be
interpreted as closely as possible to the manner in which it was written.
12.06 Article titles and headings to sections herein are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. Exhibit A referred to
herein shall be construed with and as an integral part of this Agreement to
the same extent as if it was set forth verbatim herein.
12.07 Those provisions of any applicable collective bargaining
agreement between Sony and any labor organization which are required, by the
terms of such agreement, to be included in this Agreement shall be deemed
incorporated herein.
12.08 You may not assign any of your rights under this Agreement.
Sony may not assign its rights under this Agreement in whole or in part
without your consent except to an affiliate thereof.
12.09 If either party breaches any of its obligations hereunder, such
party shall be permitted a reasonable time to remedy such breach, and the
non-breaching party shall not be entitled to recover damages or terminate the
Term by reason of such breach until such reasonable time has passed.
12.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
12.11 This Agreement has been entered into and shall be construed and
enforced in accordance with the laws of the State of New York without
reference to the choice of law principles thereof. The New York courts (state
and federal) shall have sole jurisdiction of any controversies regarding this
agreement; any action or other proceeding which involves such a controversy
shall be brought in those courts in New York County and not elsewhere. The
parties waive any and all objections to venue in those courts and hereby
submit to the jurisdiction of those courts. Service of process in any such
action or proceeding brought against a party may be made by registered mail,
addressed to such party at the address set forth in Section 11.01 herein.
Such delivery shall be deemed to have the same force and effect as personal
service within the State of New York.
12
<PAGE>
12.12 This License agreement shall not become effective until executed
by all proposed parties hereto.
SONY MUSIC, a Group of SONY MUSIC
ENTERTAINMENT INC.
By: /s/ Ron Wilcox
-----------------------------------
Ron Wilcox
Senior Vice President
Business Affairs and Administration
VIDNET, a Division of ENTERTAINMENT
BOULEVARD INC.
By: /s/ Stephen Brown
------------------------------------
STEPHEN BROWN
Title: Chief Executive Officer
13
<PAGE>
EXHIBIT A
The Service shall be, and the License shall only be valid with respect
to, a single non-interactive, free, non-subscription service, which may
include genre-specific channels (i.e. pop, alternative rock, R&B, hip-hop,
rock, country, etc.), owned and operated by Vidnet solely as part of the
Service accessible only over the Worldwide Web on a single Web Site located
at the URL www.Vidnet.com (or a single successor site thereto), whereby music
videos are exhibited via "streaming technology" only to viewers from such Web
Site within the Territory as part of a linear, pre-programmed rotation
without any capability to exhibit music videos to such viewers "on demand" or
to allow viewers to download such music videos.
The Service shall have the following attributes:
1. NON-INTERACTIVE The Service must be "non-interactive". To
qualify as "non-interactive", the Service CANNOT, directly or indirectly:
(a) transmit a program specifically created for the recipient
(e.g., "narrow-casting" or " personalization");
(b) transmit a particular music video selected by or on
behalf of a recipient (e.g., "video-on-demand"); or
(c) include "fast-forward", "re-wind", "pause" or "stop"
features.
2. PERFORMANCE COMPLEMENT Programming on a particular channel in
any consecutive 3-hour period which exceeds any of the following limitations
(the "performance complement") is prohibited. (The transmitting entity is
further prohibited from circumventing the performance complement by
automatically or intentionally causing the switching from one program channel
to another.)
(a) music videos (whether licensed by Sony or a third party)
embodying more than 3 tracks from a particular album, OR more than 2 such
tracks in succession; or
(b) music videos embodying more than 4 tracks by the same
recording artist (whether such artist is a Sony Artist or a third party
recording artist) compilation/boxed set, OR more than 3 such tracks in
succession.
3. ROTATION
Each channel of the Service shall have a play rotation of no less than
50 music videos. No Music Video may be exhibited on any channel of the
Service more than one time in any three-hour period.
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<PAGE>
4. PROHIBITION AGAINST PUBLISHED PLAY-LISTS AND PRE-ANNOUNCING
The transmitting entity cannot, directly or indirectly, publish (or
induce or facilitate publication through affiliated entities or other third
parties) an advance program schedule, nor can it "pre-announce" the titles of
specific music videos. In addition, a music video by a particular artist
cannot be pre-announced for broadcast at a specific time (e.g., "Tune into
Mariah Carey @ 4:10 p.m."), although the names of featured recording artists
may be used for illustrative purposes. The Service shall be permitted to
pre-announce up to 2 particular artists (of Sony and/or third parties) in a
single announcement and to make up to 3 such announcements within a 1-hour
time period, provided the announcement does not communicate the particular
time in which the artist's recordings will be played.
5. RESTRICTIONS ON PROGRAM FORMATS The following restrictions apply
in respect of the types of programming available for the Service:
(a) CONTINUOUS "LOOPED" PROGRAMS A continuous "looped"
program must be at least 3 hours in duration. A continuous "looped" program
may include music videos licensed by third parties.
(b) ARCHIVED PROGRAMS An archived program must be at least 5
hours in duration and cannot be made available for a period exceeding 2 weeks.
(c) REPEAT PROGRAMS Programs (other than a "looped" or
archived program) which are performed at scheduled times cannot be repeated
more than 3 times within the 2-week period following the program's initial
broadcast. An additional 2-week period for repeating the program is
permitted after 1 month has elapsed since the expiration of the initial
2-week broadcast run.
6. SIMULTANEOUS IDENTIFICATION OF SONG, ALBUM AND ARTIST
The Service shall be required to identify the song title, album title
and featured recording artist of each music video during its transmission
(but not before -- see paragraph 4 above) as a means of promoting the music
video concerned.
7. PREVENTION OF UNAUTHORIZED COPYING AND DOWNLOADS
The Service cannot take affirmative steps to enable, cause or induce the
recipient to make a copy of the music video being exhibited and must take
15
<PAGE>
reasonable steps (to the extent within its control) to ensure that the
recipient cannot make an illegal digital copy of the transmission.
8. PREVENTION AGAINST "SCANNING" AND "INTELLIGENT AGENT"
The Service must cooperate (to the extent feasible without the
imposition of substantial burdens or costs) to prevent its transmissions from
being "scanned" by the recipient or a third party in such manner that would
enable the recipient to select a particular music video on demand
(effectively converting the format into an interactive service).
9. COMPLIANCE WITH INDUSTRY COPYRIGHT PROTECTION MEASURES
The Service must accommodate and cannot interfere with copyright
protection measures (e.g., watermarking and copyright flags) adopted by the
record industry to protect against piracy.
16
<PAGE>
RELEASE AND STOCK GRANT AGREEMENT
This agreement (the "Agreement") is made as of February 29, 2000 (the
"Effective Date") between Vidnet, a division of Entertainment Boulevard,
Inc., a Nevada corporation (the "Company"), and Sony Music, a Group of Sony
Music Entertainment Inc. ("Sony"). Capitalized terms used and not otherwise
defined herein shall have the meanings given to them in the music video
license dated as of February 29, 2000 between the Company and Sony (the
"Music Video License").
1. RELEASE. In consideration of the mutual promises contained in this
Agreement and subject to the provisions of Section 2 and 5 below and to the
accuracy of the representations and warranties contained in Section 3 below,
Sony hereby forever releases and discharges you from any and all claims,
demands, actions, causes of action, suits, sums of money, accounts,
covenants, agreements, contracts, and promises in law or in equity, which
Sony now has against you by reason of the unauthorized uses in and throughout
the United States (the "Unauthorized Uses"), as such Unauthorized Uses are
limited to those described in Exhibit A attached hereto, on the Service,
prior to the date of this Agreement, of the Music Videos and the intellectual
property rights therein (collectively referred to herein as the "Sony
Materials"). (The release described in this paragraph 1 is hereinafter
referred to as a "Release.")
2. TRANSFER OF STOCK. In consideration for the Release, the Company
hereby awards, transfers, and assigns to Sony 678, 685 shares (the "Shares")
of the Company's common stock, par value $0.01 per share (the "Common Stock")
representing three percent (3%) of the total number of shares of capital
stock of Company outstanding on the date hereof on a fully-diluted basis,
after giving effect to the issuance of the Shares hereunder, the conversion,
exercise or exchange of all securities of Company convertible into or
exercisable or exchangeable for shares of Common Stock or other capital stock
of Company, but not including the shares of common stock underlying options
and warrants issued to employees of Company and investors introduced by
Cruttenden Roth. Upon receipt by the Company of the fully executed Music
Video License, this Agreement and any other agreement related thereto, the
Company shall issue a duly executed certified evidencing the Shares in the
name of Sony.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company hereby represents
and warrants to Sony as follows:
(a) the authorized capital stock of Company consists of 50,000,000
shares of Common Stock, of which 12,451,500 shares are issued and outstanding
as of the date hereof, and 1,000,000 shares of preferred stock, of which
10,000 shares are designated Series A preferred stock, of which 2,000 shares
are issued and outstanding as of the date hereof, and to date, the Company
has issued non-employee options and warrants representing the right to
purchase up to 9,497,310 shares of the Common Stock;
<PAGE>
(b) the Shares are validly issued, fully paid and non-assessable
and are being issued to Sony in compliance with the registration and
qualification requirements of all applicable federal and state securities
laws;
(c) no form of general solicitation or general advertising was
used by Company or its representatives in connection with the offer or sale
of the Shares and, assuming the accuracy of the representation and warranty
made by Sony in Section 4 below, no registration of the Shares pursuant to
the Act or any state securities of "blue sky" laws will be required by the
offer, sale or issuance of the Shares;
(d) the Company is not a party to any agreement which is currently
in effect, or by which Company is currently bound, granting any rights to
any Person which are inconsistent with the rights granted by Company in this
Agreement;
(e) no consents, approvals or authorizations of any Person are
required in connection with the execution, delivery and performance or this
Agreement other than those consents, approvals, and/or authorizations already
obtained by Company, copies of which have been provided to Sony; and
(f) other than the Unauthorized Uses, Sony Materials have not been
used for any other unauthorized uses by the Company.
4. REPRESENTATION AND WARRANTIES OF SONY. Sony hereby represents and
warrants to Company that as of the date hereof, Sony is an "accredited
investor" as defined in Rule 501 promulgated as part of Regulation D under
the Securities Act of 1933, as amended (the "Act"). Sony is not acquiring the
Shares with a view to a distribution or resale of any such securities in
violation of any applicable securities laws.
5. REGISTRATION RIGHTS. With respect to all Shares and any other shares
of Common Stock issued to or acquired by Sony or any affiliate of Sony, after
the date of this Agreement, Sony and its affiliates are hereby granted the
following registration rights:
(a) If during the next two (2) years Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than Sony (the "Selling Shareholders")), but excluding a
Form S-8 or Form S-4 registration statement, any of its stock under the Act in
connection with the public offering of such securities for cash, the Company
shall, at such time, promptly give Sony written notice of such registration.
Upon the written request of Sony given within twenty (20) days after mailing
of such notice by the Company in accordance with subparagraph 7(b), the
Company shall, subject to the provisions of subparagraph 5(c) below, cause
to be registered under the Act all the Shares that Sony has requested to be
registered.
(b) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required
under subparagraph 5(a) to include any of the Shares in such underwriting
unless the holders of the Shares accept the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by
other
<PAGE>
persons entitled to select the underwriters), and then only in such quantity
as the underwriters determine in their sole discretion will not jeopardize
the success of the offering by the Company. If the total amount of
securities, including the Shares, requested by the Selling Shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the Selling Shareholders according
to the total amount of securities requested to be included therein by each
Selling Shareholder or in such other proportions as shall mutually be agreed
to by such Selling Shareholders).
(c) Without limiting the foregoing, if after the date
hereof Company grants registration rights to any Person that are more
favorable in any material respect to the rights granted to Sony and its
affiliates, Sony and its affiliates shall be entitled to such more favorable
rights.
6. Miscellaneous.
(a) GOVERNING LAW. This Agreement shall be governed and
construed by the laws of the State of New York as applied to agreements made
and performed in New York by residents of the State of New York.
(b) NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery (including by express courier) or three (3) business days after
deposit in the United States Post Office, by First Class mail with postage
and fees prepaid, addressed to Sony at the address indicated beneath Sony's
signature below and to the Company at the address indicated beneath Company's
signature below or at such other address as such party may designate by ten
(10) days' advance written notice to the other party.
(c) WAIVER. Either party's failure to enforce any
provision or provisions of this Agreement shall not in any way be construed
as a waiver of any such provision or provisions, nor prevent that party
thereafter from enforcing each and every other provision of this Agreement.
The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
(d) ENTIRE AGREEMENT. This Agreement represents the
entire agreement between the parties with respect to the Release and the
transfer of Common Stock to Sony, may be modified or amended only in writing
signed by both parties, and satisfies all of the Company's obligations to
Sony with regard to the issuance or sale of securities.
(e) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
together shall constitute one instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
VIDENT, A DIVISION OF
ENTERTAINMENT BOULEVARD, INC.
By: /s/ [ILLEGIBLE]
---------------------------------------
Name:
Title:
Address: 12910 Culver Boulevard, Suite I
Los Angeles, CA 90066
SONY MUSIC, A GROUP OF SONY
MUSIC ENTERTAINMENT INC.
By: /s/ Ron Wilcox
---------------------------------------
Name: Ron Wilcox
Senior Vice President
Title: Business Affairs and Administration
Address: 550 Madison Avenue
New York, NY 10022
4
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
LABEL ARTIST(s) TITLE
<S> <C> <C>
Columbia Ricochet Blink Of An Eye
Columbia Nashville Deryl Dodd Behind The Scenes
Columbia Records Deryl Dodd A Bitter End
Columbia/DKC Wade Hayes Tore From the Floor Up
Loud Records Funkmaster Flex (feat. Steve Ivory) Relax & Party
Loud Records Big Punisher f. Fat Joe Twinz (Deep Cover 98)
Loud Records Funkmaster Flex f. Raekwon, Method American Cream Team
Man, Inspekta Deck, Kiullah Sin &
Harlem Hoods
Loud Records Funkmaster Flex f. Khadejia, Product Here We Go
& Wyclef
Loud Records Xzibit What U See Is What U Get
Loud Records Wu All-Stars Soul In The Hole
Loud Records Pete Rock feat. Loose Ends Take Your Time
Loud Records/Interscopes Records Mobb Deep (feat. Big Noyd & Hoodlum
Rakim)
Loud Records/Interscopes records Davina (feat. Raekwon) So Good
Loud Records/RCA Yvette Michelle Crazy
Loud Records/RCA Yvette Michelle DJ Keep Playing
Loud Records/RCA Delinquent Habits Here Comes The Horns
Loud Records/RCA The Alkoholiks Hip Hop Drunkies
Loud Records/RCA Big Punisher I'm Not A Player
Loud Records/RCA Wu-Tang Clan It's Yourz
Loud Records/RCA Adriana Evans Love Is All Around
Loud Records/RCA Dead Prez These Are The Times
Loud Records/RCA Wu-Tang Clan Triumph
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
Loud Records/RCA Cocoa Brovaz Won On Won
Loud Records/RCA Davina Come Over To My Place
Loud Records/RCA Big Punisher (feat. Joe) Still Not A Player
Loud Records/RCA Wu-Tang Clan C.R.E.A.M.
Loud Records/RCA Wu-Tang Clan Can It Be All So Simple
Loud Records/RCA Raekwon Criminology
Loud Records/RCA Wu-Tang Clan Da Mystery of Chessboxin'
Loud Records/RCA Raekwon Glaciers of Ice
Loud Records/RCA Raekwon (feat. Ghost Face Killer) Heaven and Hell
Loud Records/RCA Raekwon Ice Cream
Loud Records/RCA Raekwon Incarcerated Scarface
Loud Records/RCA Wu-Tang Clan Method Man
Loud Records/RCA Wu-Tang Clan Protect Ya Neck
Loud Records/RCA Wu-Tang Clan Reunited
Loud Records/RCA Wu-Tang Clan Wu-Tang Clan Ain't Nuthin' To F**k
Wit
Relativity Records Crime Boss Please Stop
Relativity Records Beatnuts Do You Believe
Relativity Records Tela Tired of Bawlin'
Relativity Records Bone Thugs-n-Harmony Look Into My Eyes
Relativity Records II True Ballers Flossin'
Relativity Records Common Reminding Me
Relativity Records No I.D. Sky's The Limit
Relativity Records Common Invocation/Hungry
Relativity Records M.O.P. Handle UR Bizness
Relativity Records Three 6 Mafia Tear The Club Up '97
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
Relativity Records Tom Skeemask 2 Wild For The World
Relativity Records Fatal Everyday
Relativity Records Three 6 Mafia Late Nite Tip
Relativity Records Naughty By Nature Work
Relativity Records Mo Thugs Feat. Felicia & Krayzie All Good
Bone
Relativity Records H-Town Natural Woman
Relativity Records Link feat. Delite Whatcha Gone Do
Relativity Records M.O.P. Feat. Jay-Z 4 Alarm Blaze
Relativity Records M.O.P. Feat. Gangsta Boo Remember Me Ballin'
Relativity Records Indo G Feat. Mos' Def Travellin' Man
Relativity Records Mo Thugs feat. Bone Thugs- Ghetto Cowboy
NHarmony
Relativity Records Three 6 Mafia Hit 'Em
Relativity Records Gangsta Boo Where Dem Dollaz At
Relativity Records Link I really Wanna Sex Your Body
Relativity Records Bizzy Bone Thugz Cry
Relativity Records MAG feat. Gangsta Boo How You Like It
Relativity Records Bizzy Bone Nobody Can Stop Me
Relativity Records Infamous Syndicate Here I Go
Relativity Records Tear Da Club Up Thugs Push 'Em Off
Relativity Records Bootleg feat. MC Breed No Future
Relativity Records Krayzie Bone Thug Mentality
Relativity Records Tear Da Club Up Thugs Hypnotized/Cash Money
Relativity Records Link I Don't Wanna See
Relativity Records The Beatnuts Off The Books
Relativity Records The Beatnuts Watch Out Now
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Relativity Records DJ Honda On The Mic
Relativity Records Poetic Hustlaz Day & Night
Relativity Records Kid Frost What's Your Name
Sony Classical/Columbia Marc Anthony and Tina Arena I Want To Spend My Lifetime Loving
You
Sony Records The Kinleys Somebody's Out There Watching
</TABLE>
8
<PAGE>
REALNETWORKS, INC.
REALCHANNELS AGREEMENT
This Agreement is made as of March 1, 2000 ("Effective Date")
between RealNetworks, Inc., a Washington corporation located at 2601 Elliott
Ave., Suite 1000, Seattle, Washington 98121 ("RN"), and Entertainment
Boulevard, Inc., d.b.a. Vidnet ("Participant"), with an address as set forth on
Exhibit A.
This Agreement sets forth the terms and conditions under which RN
agrees to promote and distribute links to Participant's RealMedia content
(RealAudio, RealVideo, and other RN media types) and content headlines
described on Exhibit A (collectively "Content") as part of RN's RealChannels
program. In consideration for the mutual promises and covenants contained
herein, the parties agree as follows:
1. DESCRIPTION OF REALCHANNELS PROGRAM
1.1 REALCHANNELS ON THE REALPLAYER. Current versions of RN's RealPlayer
G2 software include buttons that link directly to live or simulated live
streaming media content delivered via the Internet ("RealChannels"). In this
Agreement, "RealPlayer" means all versions of RN's proprietary RealPlayer G2
software or subsequent versions that RN may introduce and distribute during
the Term, and includes both free and pay versions. RN may, in its discretion,
name, re-name, or change the branding or trademarks associated with the
RealChannels program (including releasing a version of the RealPlayer that
does not include the RealChannels program), or any other aspect of the
RealPlayer, at any time without notice.
1.2 CONTENT DELIVERY CHANNELS. The RealChannels drive pointers to the
Content into Web sites and "push" applications delivering information
directly to PC desktops via the publicly accessible Internet and into
proprietary online services and other specialized services (collectively,
"Content Delivery Channels").
2. RN OBLIGATIONS
2.1 INCLUSION ON CUSTOMIZATION PAGE. RN's Customization Page
("Customization Page") is a publicly accessible Web site that includes a list
of RealChannels from various RN content partners. Currently, the
Customization Page can be found at
http://208.147.89.194//customizerxml?GU=9330211032a02&PV=6.0.3.143&os=Win95%
204.0.50240&category=0&tier=0&id=0&I=en&lid=0. RN may change the location of
the Customization Page at any time. End-users of the RealPlayer can customize
the RealChannels of the RealPlayer by selecting content providers from the
RealChannels Customization Page. RN will include Participant's RealChannel
on the Customization Page during the Term.
2.2 SOFT DEFAULT REALCHANNEL. A version of the RealPlayer in the
language set forth on Exhibit A, (the "Local Language" RealPlayer) is
distributed to end users with certain pre-installed "soft default"
RealChannels. A soft default RealChannel is a RealChannel that is
automatically installed on an end users RealPlayer when the end user selects
a particular category of interests. For example, a soft default sports
RealChannel will be automatically installed in an end user's RealPlayer when
the end user, during the RealPlayer installation process or otherwise,
selects sports as a category of interest. RN agrees to include Participant as
a soft default RealChannel, in the category identified on Exhibit A, in the
Local Language RealPlayers distributed by RN during the Term, subject to the
limitations herein. Participant's RealChannel will be available as a soft
default in all standard, non-custom Local Language RealPlayers downloaded
directly from RN Web sites to end users in the United States, or sold in
non-bundled and non-customized versions through retail distribution in the
United States; in addition to the foregoing, RN may also, in its discretion,
offer Participant's RealChannel as a soft default in any or all other
RealPlayers or to end users outside the United States. Participant
acknowledges that RealChannels may be customized by individual end-users and
that any RealChannel, including soft default RealChannels, may be removed or
repositioned by end-users.
2.3 DISTRIBUTION OF CONTENT HEADLINES AND POINTERS. RN may use and/or
distribute the Content Headlines or pointers to Participant's Content, but is
under no obligation to do so.
1
<PAGE>
3. PARTICIPANT OBLIGATIONS
3.1 CONTENT HEADLINE SPECIFICATIONS. Participant shall, on a daily
basis, provide Content Headlines and information about the foregoing to RN
in compliance with RN's Technical Specifications, currently available at
http://presets6.real.com/channelspartners/index.html, which RN may revise
from time to time.
3.2 NATURE OF CONTENT. Participant will provide Content for its
RealChannel in compliance with RN's Technical Specifications. Without
limiting the foregoing, the Content must be: (i) newsworthy, informational,
educational or produced for entertainment purposes, and not merely promotional
in nature; (ii) updated at least daily by Participant; and (iii) encoded in
the specified RN media formats available during the Term. Participant shall,
within thirty (30) days after the Agreement has been executed, provide RN
with at least three (3) clips of Content that are each at least ten (10)
minutes in length. Thereafter, Participant shall always ensure that at least
three ten-minute clips of Content are available at any given time. The
Content can be hosted by Participant or hosted by RN pursuant to the terms of
RN's standard Real Broadcast Network Services Agreement, if Participant has
signed such an agreement.
3.3 CONTENT QUALITY. RN reserves the right, in its sole discretion, to
terminate this Agreement if the quality of the Content does not meet RN's
standards concerning the RealChannels program in any way. In the event of
termination under this Section 3.3, RN will offer Participant a pro-rata
refund based on the Participation Fee as set forth in Section 5.1 and the
number of weeks left in the Term.
3.4 DOWNLOAD REALPLAYER BUTTON. Throughout the Term, Participant will
prominently display, on those pages of Participant's World Wide Web site
located at the URL set forth on Exhibit A ("Participant's Site") which
contain streaming media Content in RealMedia formats, an RN-approved standard
"Download RealPlayer" button, in the form provided by RN, the current form of
which is shown on Exhibit B. Such button will link to the download area of
RN's Web page from which end users may download free and/or pay (or "plus")
versions of the RealPlayer, in the Local Language version. Such button shall
be displayed either above the fold or at least as high and as prominently as
the most prominent streaming media link on each such page containing Content.
As used in this Section 3.4, "above the fold" means placement on a Web page
in a manner such that an end user viewing the page in a browser window of
640x480 pixels can view the entire button without scrolling.
3.5 REALGUIDE BUTTON. During the Term of this Agreement, Participant
will prominently display on Participant's Site, on those pages containing
content in RealMedia formats, an RN approved standard "RealGuide" button that
will directly link to RN's RealGuide. The current version of such button is
shown on Exhibit B.
3.6 USE OF REALMEDIA FORMATS ON PARTCIPANT'S WEB SITES. Participant
agrees that any media (including audio, video, animation or other content)
made available in streaming media formats on Participant's Site during the
Term will be made available in RealMedia formats (e.g., RealAudio, RealVideo,
or other RN proprietary media formats); such media may also be made available
in other streaming formats, provided that streaming media in non-RealMedia
formats shall not be made available on pages containing RealMedia Content.
Notwithstanding the foregoing, Participant may offer media in non-RealMedia
formats without offering such media in RealMedia formats if: (a) such media
was available on Participant's Site only in non-RealMedia formats prior to
the Effective Date; or (b) Participant is expressly precluded by written
agreement with a third party provider of such media from offering such media
in RealMedia formats. Participant will not promote any other streaming media
format on any page of Participant's Site containing RealMedia Content.
Participant shall link to its RealChannel from a relevant, prominent location
on Participant's Site. If Participant chooses to provide a link from its
RealChannel to Partcipant's Site, such link must be to a Web page containing
only RealMedia formatted content, if Participant includes streaming media
content on that Web page.
3.7 EXCLUSIVITY. Participant will not promote any other streaming media
player on any page of Participant's Site containing RealMedia Content. If
Participant chooses to provide a link from its RealChannel to Participant's
Site, or to any Web site, such link must be to a Web page that does not
provide the opportunity to download any software media player other than the
RealPlayer.
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3.8 MAINTENANCE OF CONTENT. As between RN and Participant, and except as
expressly provided herein, Participant is solely responsible and liable for
the Content, and RN assumes no responsibility for editing, reviewing,
controlling or any other activities with distributing any
of the Content and shall not be liable to any third party in connection with
such activities, whether or not RN undertakes such responsibilities.
Participant shall be solely responsible for all costs and activities
associated with the creation, maintenance, licensing, use and correction of
the Content.
4. LICENSE
4.1 CONTENT HEADLINES AND POINTERS. Participant hereby grants RN a
non-transferable, worldwide, royalty-free license to: (i) link to the Content
from the Content Headlines and Participant's RealChannel button through the
Local Language RealPlayer; and (ii) use, transmit, distribute and redistribute
Content pointers and other Participant links and descriptions of Content or
Participant's RealChannel(s) to Content Delivery Channels in order to make
Participant's Content accessible to Content Delivery Channel's end-users. RN
shall have the right to include links to Participant's Content from all
versions of RN's RealGuide, including syndicated versions, however named
or distributed.
4.2 TRADEMARK LICENSE. Participant grants RN a non-exclusive,
nontransferable, worldwide, royalty-free license to use Participant's
trademarks and logos in connection with this Agreement, in the style and
manner currently used by Participant and as communicated to RN. Subject to
such style and manner restrictions, RN may use Participant's name,
trademarks, logo, and RealChannel graphics in RN's marketing and advertising
materials. Except as expressly provided herein, RN shall not be deemed by
anything contained in this Agreement to acquire any right, title or interest
in any trademark of Participant, and shall do nothing to prejudice the value
or validity of Participant's rights therein or ownership thereof.
5. PAYMENTS
5.1 PAYMENT TO RN. Participant shall pay to RN the Participation Fee set
forth on Exhibit A for participation throughout the initial Term as a soft
default RealChannel within the Local Language RealPlayer. The full payment
is due and payable in U.S. dollars within ten (10) days of execution of this
Agreement, and is non-refundable, except as set forth in Section 3.3.
5.2 EXCLUSIVE OF TAXES. All payments due hereunder are exclusive of any
applicable taxes. Participant shall be responsible for all applicable
national, state, and local taxes, value added or sales taxes, tariffs,
exchange, interest, banking, collection, and other charges and levies and
assessments pertaining to payments other than U.S. taxes based on RN's income.
5.3 NO WITHHOLDING. All payments by Participant to RN pursuant to this
Agreement shall be made without any withholding or deduction of any
withholding tax or other tax or mandatory payment to government agencies. If
Participant is legally required to make any such withholding or deduction
from any payment to RN under this Agreement, the sum payable by Participant
upon which such withholding or deduction is based shall be increased to the
extent necessary to ensure that, after such withholding or deduction, RN
receives and retains, fee from liability for such withholding or deduction, a
net amount equal to the amount RN would have received and retained in the
absence of such required withholding or deduction.
5.4 PROVIDE RECEIPTS. In order to assist RN in obtaining tax credits or
deductions, Participant shall provide to RN, in form acceptable to
RN, original or certified copies of all tax payment receipts or other
evidence of payment of taxes by Participant with respect to transactions or
payments under this Agreement.
6. ADVERTISING
6.1 INTRA-STREAM ADS. Participants shall retain one hundred percent (100%)
of the revenue from its sale of audio, video, multimedia, banner, or other
advertising embedded in the Content by Participant ("Intra-Stream Ads").
Participant shall at all times clearly differentiate advertising from Content.
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6.2 OTHER ADS. Participant agrees that RN may insert pointers to RN's own
media-based advertisements prior to pointers to the Content clips that RN
distributes to Content Delivery Channels. RN shall at all times clearly
differentiate advertising from Content. RN will retain one hundred percent
(100%) of the revenue from its sale of any non-Intra-Stream Ads.
6.3 NO "AMBUSH" ADVERTISING. Participant shall not run Intra-Stream Ads or
non-Intra-Stream Ads in Participant's Live Station for streaming media
technology, streaming media players or streaming media websites owned or
operated by Microsoft Corporation or Apple Computer.
7. PROPRIETARY RIGHTS
7.1 OWNERSHIP OF CONTENT. As between RN and Participant, Participant
remains the owner of all right, title and interest in and to the Content and
any Content Headlines, and all copyrights, trademarks, and other intellectual
property rights therein. Notwithstanding the foregoing, RN will retain all
right, title, and interest in and to any Content Headlines authored by RN if
Participant fails to provide a headline for Content as specified in the
Technical Specifications.
7.2 RN'S OWNERSHIP. Except as provided in Section 7.1, RN shall be the sole
owner of all right, title and interest in and to any content made, created,
developed or used by RN in connection with the Content on RN's Web sites, the
RealChannels, and all copyrights, trademarks, patents and other intellectual
property rights therein. Participant represents and warrants that it has not
and shall not acquire any right or interest in any trademark or trade name
owned or used by RN, and that under no circumstances will it use, register
or attempt to register any trademark, service mark, trade name, domain name
or similar indicia containing the word "Real," or any other mark or domain
name used by or confusingly similar to a mark used by RN, regardless of
spelling or translation thereof.
8. WARRANTIES/INDEMNIFICATIONS
8.1 PARTICIPANT WARRANTIES. Participant warrants and represents that: (i)
the Content does not in any way violate any existing law, infringe upon or
misappropriate any copyright, patent, trademark, trade secret, right of
publicity, right of privacy or other proprietary rights of any third party,
either in whole or in part; (ii) the Content contains no matter which, if
published, will be libelous or defamatory; (iii) Participant has the
necessary rights to grant RN the rights granted hereunder; (iv) the Content
complies with all laws applicable to the transmission or use of the Content
as specified in this Agreement for each country is which the Content is
intended to be delivered; and (v) it is solely responsible for, and has
paid or will pay, all amounts due any person or entity that has a right
to receive any royalty or other payment as a result of RN's authorized
use of the Content pursuant to this Agreement. Participant acknowledges
that RN and its affiliates are the owners and/or licensees of the
trademarks, service marks, commercial symbols and trade names used by RN.
8.2 PARTICIPANT INDEMNITY. Participant hereby agrees to indemnify, hold
harmless and defend RN from all claims, damages, costs and expenses,
including reasonable attorneys' fees and litigation expenses, arising out of
or as a result of Participant's breach of the above warranties and
representations or this Agreement. Notwithstanding the foregoing,
Participant shall not be liable for any material not contained in or a part
of the Content Headlines and inserted in the Content Headlines by RN, whether
with or without the permission of Participant. Participant, at its own
expense, shall have the right to employ separate counsel and participate
in the defense thereof.
9. TERM AND TERMINATION
9.1 TERM. Unless sooner terminated as provided herein, the initial Term of
this Agreement shall commence as of the Effective Date and expire one year
thereafter. This Agreement will renew automatically for additional one year
periods, unless either party notifies the other party in writing of its
intent not to renew at least thirty (30) days prior to the end of the initial
Term or any subsequent renewal Term. As used herein, "Term" means the
initial Term and any renewal Term.
9.2 TERMINATION FOR BREACH. If either party materially breaches any
provision of this Agreement and such breach has not been cured within
fifteen (15) days after the other party has given written notice of such
breach, the non-breaching
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party may terminate this Agreement upon fifteen (15) days' written notice to
the breaching party. RN may terminate this Agreement immediately without
further notice if payment is not received in accordance with this Agreement.
9.3 TERMINATION FOR INSOLVENCY. RN may, at its option and upon written
notice, terminate this Agreement, effective immediately, should Participant:
(i) admit in writing its inability to pay its debts generally as they become
due; (ii) make a general assignment for the benefit of its creditors; (iii)
institute proceedings to be adjudicated a voluntary bankrupt, or consent to
the filing of a petition of bankruptcy against it; (iv) seek reorganization
under any bankruptcy act, or consent to the filing of a petition seeking such
reorganization; or (v) have 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, provided such decree is not dismissed within
forty-five (45) days.
9.4 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement for any reason, all licenses granted herein shall terminate except
that RN shall have five (5) business days to remove Participant's RealChannel
and Content Headlines from Content Delivery Channels. Sections 5, 6, 7, 8,
9.4, and 10.4 shall survive the expiration or termination of this Agreement
for any reason.
10. MISCELLANEOUS
10.1 EXCLUSION OF CERTAIN DAMAGES. EXCEPT WITH RESPECT TO PARTICIPANT'S
OBLIGATIONS UNDER SECTION 8.2, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY IN TORT, CONTRACT OR UNDER ANY OTHER LEGAL THEORY FOR ANY CONSEQUENTIAL,
INCIDENTAL, PUNITIVE OR SPECIAL LOSS OR DAMAGES ARISING OUT OF THIS
AGREEMENT, EVEN IF APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
10.2 NOTICES AND CONTACT INFORMATION. Any notice or payment to be made
or given to either party shall be sufficiently made or given on the date of
mailing if addressed to RN as set forth below or to Participant as set forth
on Exhibit A and (i) sent to such party by facsimile, the receipt of which is
confirmed by return facsimile specifically acknowledging receipt; (ii) if
delivered personally with receipt acknowledged; or (iii) sent by DHL
Worldwide Express or comparable international courier service for the soonest
possible delivery. Either party may change its notice and contact information
by providing notice, in the manner set forth above, to the other party.
RN:
Shelley Morrison
Vice President, Media & Distribution
RealNetworks, Inc.
2601 Elliott Ave.
Seattle, Washington 98121
U.S.A.
Fax: (206) 448-0427
With a copy to:
Kelly Jo MacArthur, VP & General Counsel
at the same address
Fax: (206) 674-2695
10.3 NON-ASSIGNMENT. This Agreement is personal to Participant.
Participant may not sublicense, assign, or otherwise transfer any of its
rights in this Agreement, without the express written consent of RN. If
Participant is acquired by or merges with a third party, or all or
substantially all of Participant's assets, or Participant's assets relating
to this Agreement, are acquired by a third party, RN may terminate this
Agreement, effective immediately upon written notice.
10.4 GOVERNING LAW AND DISPUTE RESOLUTION. This Agreement shall be
governed by the laws of the State of Washington, United States of America,
without regard to conflicts of law provisions, and Participant consents to the
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exclusive jurisdiction and venue of the state and federal courts sitting in
the State of Washington. This Agreement shall not be governed by the United
Nations Convention of Contracts for the International Sale of Goods, the
application of which is hereby expressly excluded. Upon request by RN,
Participant shall execute any document or instrument, undertake any action, or
refrain from any action if such execution or action is reasonably necessary
to make the foregoing choice of law and choice of forum effective and
enforceable.
10.5 PRESS RELEASES. Neither party shall issue any press releases
relating to this Agreement or the relationship between the parties without the
other party's review of and written consent to the press release.
10.6 GENERAL. No waiver, amendment or modification of any provision of
this Agreement shall be effective unless it is in a document that expressly
refers to this Agreement and is signed by both parties. Except as
specifically provided herein, failure or delay by either party in exercising
any rights or remedy under this Agreement shall not operate as a waiver of
any such right or remedy. The parties are separate and independent legal
entities, and the relationship between the parties shall be that of
independent contractors. It is expressly understood that the parties do not
by this Agreement intend to form, nor shall this Agreement be construed to
constitute, a partnership or joint venture between them. If any provision of
this Agreement shall be held by a court of competent jurisdiction to be
illegal, invalid or unenforceable, the legality, validity and enforceability
of the remaining provisions shall not, in any way, be affected or impaired
thereby. This Agreement and the attached Exhibits, which are incorporated
herein by this reference, constitute the complete and entire agreement
between the parties, and supersede and cancel all prior negotiations,
understandings, correspondence and agreements, oral and written, express or
implied, between the parties relating to the subject matter hereof, and shall
be binding only when executed by both parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives.
REALNETWORKS, INC. PARTICIPANT
-----------------------------------
By: By: /s/ Stephen Brown
---------------------------------- --------------------------------
Name: Name: Stephen Brown
-------------------------------- ------------------------------
Title: Title: CEO
------------------------------- -----------------------------
Date: Date: 3-9-00
-------------------------------- -----------------------------
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EXHIBIT A
DESCRIPTION OF CONTENT
PARTICIPANT CONTACT INFORMATION:
FULL CORPORATE NAME: Entertainment Boulevard, Inc. d.b.a.
Vidnet
------------------------------------
Address: 12910 Culver Blvd. Suite I
------------------------------------
------------------------------------
City, State/Country, Los Angeles, CA
Postal Code (if any) 90066
------------------------------------
CONTACT PERSON: Adam Clampitt
------------------------------------
Title: VP Business Development
------------------------------------
Phone: 310-578-5404 x. 206
------------------------------------
Fax: 310-578-6304
------------------------------------
Email [email protected]
------------------------------------
------------------------------------
WITH COPY TO: Stephen Brown
------------------------------------
Title: President / CEO
------------------------------------
Phone: 310-578-5404
------------------------------------
Fax: 310-578-6304
------------------------------------
Email: [email protected]
------------------------------------
------------------------------------
PARTICIPANT'S CONTENT:
Participant's Content will consist of the following: (insert short
description): Streaming Entertainment-related media including Vidnet Music,
Vidnet Movies, Vidnet Sports
Participant's RealChannel Category: "Entertainment" Soft Default
Content to be hosted in the following datatypes (E.G., RealAudio, RealVideo,
RealPix): RealAudio, RealVideo
Local Language Version: English
Participant's URL: www.vidnet.com
Participation Fee: $175,000 "slotting" fee, $25,000 Creative and Launch Fee
+$0.10 per access, after a total number of 860,045
accesses to Vidnets' channel, capped at a maximum
additional charge to Vidnet of $100,000.
Payment of $95,000 Slotting Fee and $25,000 creative
and launch fee will be paid upon execution of contract,
remaining "slotting" fee shall be paid in two equal
payments of $40,000 each on June 1, 2000 and
September 1, 2000. After RN's
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minimum guarantee of $60,045 total accesses, Vidnet's
additional per access charges shall be billed monthly
EXHIBIT B
SPECIFICATIONS OF REALPLAYER BUTTON
RN GRAPHIC FOR RN SEARCH = 88 X 33-bitmap
[GRAPHIC]
SPECIFICATIONS OF REALGUIDE BUTTON
RN GRAPHIC FOR RN SEARCH = 128 X 67-bitmap
[GRAPHIC]
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Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 29, 2000, 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
March 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 429,408 200,072
<SECURITIES> 0 0
<RECEIVABLES> 222,324 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 660,228 200,072
<PP&E> 478,653 79,960
<DEPRECIATION> (59,104) (21,510)
<TOTAL-ASSETS> 3,352,060 767,178
<CURRENT-LIABILITIES> 3,709,737 632,681
<BONDS> 0 0
0 0
20 0
<COMMON> 12,478 7,675
<OTHER-SE> (370,175) (1,225,446)
<TOTAL-LIABILITY-AND-EQUITY> 3,352,060 267,178
<SALES> 268,039 0
<TOTAL-REVENUES> 268,039 0
<CGS> 0 0
<TOTAL-COSTS> 7,030,323 1,431,398
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,169,676 3,755
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (12,931,960) (1,435,153)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,931,960) (1,435,135)
<EPS-BASIC> (1.09) (0.30)
<EPS-DILUTED> (1.09) (0.30)
</TABLE>
