<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 2000
REGISTRATION NO. 333-91825
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
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, LAWRENCE, MANN, CHIZEVER & PHILLIPS
9601 WILSHIRE BOULEVARD, PENTHOUSE SUITE
BEVERLY HILLS, CALIFORNIA 90210-5270
TELEPHONE NO.: (310) 274-8300
FACSIMILE NO.: (310) 274-2831
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement until such
time that all of the shares registered hereunder have been sold.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value.......... 9,897,500 $2.2495 $22,264,427 $5,878
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such indeterminate
number of shares as may become issuable as a result of stock splits, stock
dividends or similar events.
(2) Based upon the average of the bid and asked price of the Registrant's common
stock as reported on the Over-the-Counter Bulletin Board on November 26,
1999 and estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL, NOR DOES IT SEEK AN OFFER TO BUY, THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION. DATED [ ], 2000.
[LOGO]
ENTERTAINMENT BOULEVARD, INC.
BETWEEN 9,143,020 AND 9,745,180 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 55 and 56 of this
prospectus.
- This prospectus covers the resale of up to 9,745,180 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.................................. 13
ABOUT THIS PROSPECTUS....................................... 13
USE OF PROCEEDS............................................. 13
TRADING INFORMATION......................................... 14
DIVIDEND POLICY............................................. 15
SELECTED FINANCIAL DATA..................................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 16
RECENT DEVELOPMENTS......................................... 22
BUSINESS.................................................... 25
MANAGEMENT.................................................. 44
PRINCIPAL STOCKHOLDERS...................................... 48
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 49
DESCRIPTION OF OUR SECURITIES............................... 50
SHARES ELIGIBLE FOR FUTURE SALE............................. 53
SELLING STOCKHOLDERS........................................ 55
PLAN OF DISTRIBUTION........................................ 58
LEGAL MATTERS............................................... 58
EXPERTS..................................................... 59
WHERE YOU CAN FIND MORE INFORMATION......................... 59
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
ENTERTAINMENT BOULEVARD, INC.
We incorporated under the laws of the State of Nevada in December 1997 under
the name Sedmet Exploration Inc. In January 1999, we acquired International Net
Broadcasting, LLC, which was founded in April 1997 under the name All Media
Distribution LLC. 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
entertainmentblvd.com:
- ENTERTAINMENT BOULEVARD MUSIC--Music video programming, including music
videos from most genres, music news and reviews.
- ENTERTAINMENT BOULEVARD MOVIES--Movie trailers from upcoming films, new
releases and films on video, plus movie news and reviews.
- ENTERTAINMENT BOULEVARD SPORTS--Sports programming from across the country
and sports news.
- ENTERTAINMENT BOULEVARD NETFOMERCIALS--Video programming offering a broad
range of product infomercials.
---------------------
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
entertainmentblvd.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................................. Between 9,143,020 and 9,745,180 shares
Common stock outstanding after this offering......... Between 21,342,020 and 21,944,180
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 outstanding
warrants;
- Between 2,064,520 and 2,666,680 shares of common stock issuable upon the
conversion of our Series A preferred stock. These numbers are based on an
assumed minimum conversion rate of 516.13 shares of common stock for each
share of our 8% Mandatorily Convertible Series A preferred stock and an
assumed maximum conversion rate of 666.67 shares of common stock for each
share of Series A preferred stock and the issuance of an additional 2,000
shares of Series A preferred stock as described in "Recent Developments;"
and
- 450,000 shares of common stock issuable upon conversion of certain
outstanding promissory notes.
It does not include up to 1,350,000 shares of common stock that could be
issued upon the exercise of outstanding warrants and options.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------- -----------------------
1999 1998 1998 1997
--------------- -------------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues....................... $ 12,715 -- -- --
Costs and expenses............. 4,251,928 $ 905,095 $ 1,431,398 $ 649,626
---------- ----------- ---------
Operating loss................. (4,239,213) (905,095) (1,431,398) (649,626)
Interest expense............... (5,334,490) -- (3,755) --
Income taxes................... -- -- -- --
----------- ---------- ----------- ---------
Net loss....................... $(9,573,703) $ (905,095) $(1,435,153) $(649,626)
=========== ========== =========== =========
Net loss per share............. $ (0.82) $ (0.19) $ (0.30) $ (0.59)
=========== ========== =========== =========
Shares used in computing net
loss per share............... 11,687,086 4,750,000 4,814,286 1,109,124
=========== ========== =========== =========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets.................. $ 641,388 $ 200,072
Working capital deficiency...... (962,954) (432,609)
Total assets.................... 1,389,626 267,178
Total liabilities............... 1,604,342 1,484,949
Stockholders' deficiency........ (214,716) (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 year ended December 31, 1998 and for the
periods from April 1, 1997, the date of inception, through December 31, 1997 and
1998 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 $9,574,000 during the nine month period
ended September 30, 1999. As of September 30, 1999, our accumulated deficit was
approximately $11,658,000. 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."
WE MAY NOT BE ABLE TO MEET OUR CAPITAL NEEDS OR 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 obtain. We do not have a line of credit. At this time, we are in the process
of raising between
7
<PAGE>
$5 million and $7 million in a private placement of our securities. If
successful, that amount, plus cash reserves, proceeds from the 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.
IF WE DO NOT GENERATE SUFFICIENT ADVERTISING AND/OR SPONSORSHIP REVENUES, OUR
BUSINESS MAY NOT GROW OR SURVIVE.
Our revenues for the foreseeable future depend substantially on sales of
advertising and commercial sponsorships. Internet advertising rates are based on
the size of the audience at the Web site where the advertising is displayed. If
our audience at entertainmentblvd.com is smaller than that at other Web sites,
our advertising rates could be reduced. Because Web-based advertising is
relatively new, it is difficult to predict the extent of further growth, if any,
in Web advertising expenditures. Without this source of revenue, we may be
unable to achieve or maintain profitability.
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. This market
is new and rapidly evolving and it is not yet possible to compare the
effectiveness of Internet advertising to traditional media. As a result, demand
for Internet advertising is uncertain. In addition, the widespread use of
available software that limits or prevents advertising from being delivered to
an Internet user's computer could adversely affect our ability to sell Internet
advertising.
OUR REVENUES DEPEND ON A LIMITED NUMBER OF ADVERTISERS.
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.
8
<PAGE>
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.
OUR ABILITY TO SELL ADVERTISING AND INCREASE REVENUES DEPENDS ON INCREASING THE
SIZE OF OUR AUDIENCE.
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.
THE ABSENCE OR INSUFFICIENCY OF TRACKING AND MEASUREMENT STANDARDS FOR INTERNET
ADVERTISING COULD ADVERSELY IMPACT OUR ABILITY TO ATTRACT AND RETAIN
ADVERTISERS AND SPONSORS.
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 entertainmentblvd.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.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO BUILD BRAND AWARENESS.
We believe that brand recognition for entertainmentblvd.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.
9
<PAGE>
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. We depend on our good
relations with record labels and artists to obtain that content. Also, motion
picture companies do not charge us for our use of their movie trailers. However,
we do not have long-term contracts with any of the record labels or motion
picture companies and we cannot be sure that they will continue to make their
content available to us on reasonable terms or at all.
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 entertainmentblvd.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.
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 entertainmentblvd.com. The failure of those technologies to gain
widespread acceptance will negatively impact our business.
LIMITATIONS ON ACCESS TO OUR WEB SITE MAY HARM OUR BUSINESS.
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.
10
<PAGE>
SHARES OF OUR COMMON STOCK THAT ARE ELIGIBLE FOR FUTURE SALE COULD ADVERSELY
AFFECT OUR STOCK PRICE.
The price of our common stock is presently quoted on the over-the-counter
bulletin board. The market price of our common stock could decline as a result
of sales of substantial amounts of our common stock by existing stockholders in
the public market, or even the prospect that such sales could occur. You should
read the "Shares Eligible for Future Sale" section of this prospectus for a more
detailed discussion of when and how many additional shares of our common stock
may be sold after this offering.
THE MARKET PRICE OF OUR COMMON STOCK COULD BE ADVERSELY AFFECTED IF THERE IS A
DECREASE IN THE CONVERSION PRICE FOR THE SERIES A PREFERRED STOCK.
If the conversion price for the Series A preferred stock is less than $1.50
at the time of conversion, the maximum number of shares issued upon conversion
will increase. An increase in shares could materially reduce the market price of
our common stock. As of the date of this prospectus, the conversion price is
[$ ], resulting in a conversion rate of [ ] shares of common stock
for each share of Series A preferred stock. However, the conversion rate could
substantially increase, or decrease, due to one or more of the following:
- accumulation of unpaid dividends on the Series A preferred stock;
- increase or decrease in the per share market value of our common stock; or
- penalties for lapse of the Registration Statement.
If the Registration Statement of which this prospectus is a part lapses for a
period of more than 30 consecutive days, the conversion price then in effect
will be decreased by a specified percentage per day, with a maximum decrease of
no more than either $1.00 or 50% of the per share market value.
TRANSACTIONS IN OUR SECURITIES SUBJECT BROKER-DEALERS TO SALES PRACTICE AND
DISCLOSURE REQUIREMENTS THAT MAY DISCOURAGE TRADING OF OUR COMMON STOCK.
Although trading in the over-the-counter bulletin board allows market makers
to enter quotes and trade securities that do not meet listing requirements of
The Nasdaq Stock Market or any regional exchange, sales of our common stock must
comply with the penny stock regulations issued by the SEC. These requirements
are burdensome and may discourage trading in our common stock. Although the SEC
regulations provide several exceptions to, or exemptions from, the penny stock
rules based on, for example, specified minimum revenues or asset-value,
Entertainment Boulevard does not fall within any of the stated exceptions at
this time.
The SEC's regulations generally define a penny stock as any equity security
that has a market price of less than $5.00 per share. Broker-dealers who sell
penny stocks to persons other than established customers and certain accredited
investors must
11
<PAGE>
make a special suitability determination for the purchaser, receive the
purchaser's written consent to the transaction prior to sale and deliver a
disclosure schedule prescribed by the SEC relating to the penny stock market.
Disclosure must also be made about all commissions and about current quotations
for the securities. Finally, monthly statements must be furnished disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
LESS THAN A MAJORITY OF OUR STOCKHOLDERS CAN APPROVE CERTAIN MATTERS.
Under our Articles of Incorporation, only one-third of the votes entitled to
be cast on any matter by a stockholder voting group are needed to constitute a
quorum for voting purposes. As a result, even if holders of up to two-thirds of
the shares entitled to vote on a matter decline to do so, that action may still
be approved if it is voted for by a majority of the remaining eligible votes
cast.
12
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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. Some, but not all, of the factors that may cause
these differences are included in those discussed in the "Risk Factors" section
beginning on page 7 of this prospectus. 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
entertainmentblvd.com as the registered domain name of our Web site and have
applied for registration of the marks "Entertainment Boulevard,"
"EntertainmentBlvd.com Music," "EntertainmentBlvd.com Movies,"
"EntertainmentBlvd.com Sports" and "EntertainmentBlvd.com NetFomercials" as our
service marks. All other tradenames and trademarks appearing in this prospectus
are the property of their respective holders.
USE OF PROCEEDS
The only proceeds we 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
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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.
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 January 14, 2000, the closing bid price for our common
stock was $3.8125. The 52-week low bid price was $1.00 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 January 21, 1999, there were 85 holders of record of our common stock.
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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. While any shares of our Series A preferred stock are outstanding, we are
prohibited from paying dividends on our common stock, other than dividends paid
in additional shares of common stock. 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.
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 periods
from April 1, 1997, the date of our inception, to December 31, 1997 and 1998,
and the balance sheet data at December 31, 1998, are derived from financial
statements of Entertainment Boulevard which have been audited by Singer Lewak
Greenbaum and Goldstein LLP, independent certified public accountants. The
selected financial data for the nine month periods ended September 30, 1998 and
1999 are derived from unaudited financial statements of Entertainment Boulevard
and, in the opinion of management, include all necessary adjustments to present
fairly the results of operations and financial position for those periods.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -----------------------
1999 1998 1998 1997
----------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues................................... $ 12,715 -- -- --
Costs and expenses......................... 4,251,928 $ 905,095 $ 1,431,398 $ 649,626
---------- ----------- ---------
Operating loss............................. (4,239,213) (905,095) (1,431,398) (649,626)
Interest expense........................... (5,334,490) -- (3,755) --
Income taxes............................... -- -- -- --
----------- ---------- ----------- ---------
Net loss................................... $(9,573,703) $ (905,095) $(1,435,153) $(649,626)
=========== ========== =========== =========
Net loss per share......................... $ (0.82) $ (0.19) $ (0.30) $ (0.59)
=========== ========== =========== =========
Shares used in computing net loss per
share.................................... 11,687,086 4,750,000 4,814,286 1,109,124
=========== ========== =========== =========
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets.......................... $ 641,388 $ 200,072
Working capital deficiency.............. (962,954) (432,609)
Total assets............................ 1,389,626 267,178
Total liabilities....................... 1,604,342 1,484,949
Stockholders' deficiency................ (214,716) (1,217,771)
</TABLE>
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<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. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO DIFFERENCES INCLUDE THOSE
DISCUSSED IN "RISK FACTORS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS. WE URGE PROSPECTIVE INVESTORS TO EXERCISE CAUTION AND NOT TO PLACE
UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS.
OVERVIEW. Entertainment Boulevard is a development stage company 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.entertainmentblvd.com.
We anticipate that our business will incur significant operating losses for
the foreseeable future. At this time, we believe that our survival and success
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
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advertising revenue depends largely on increasing the entertainmentblvd.com
audience. Revenues from Internet-generated transactions are recorded at the time
the vendor ships the product to the customer. Revenues from advertisements on
entertainmentblvd.com are recognized ratably in the period in which the
advertisement is displayed, provided that no significant Entertainment Boulevard
obligations remain.
Future advertising revenues may include barter revenues, which represent an
exchange of advertising space on our Web site for reciprocal advertising space
on third parties' Web sites or for rights under Internet distribution
agreements. Revenues from barter transactions are recorded as advertising
revenues at the lower of estimated fair value of the advertisements received or
delivered and are recognized upon publication of the advertisements on our Web
site. Barter expenses are also recorded at the lower of estimated fair value of
the advertisements received or delivered and are recognized when Entertainment
Boulevard's advertisements run on the reciprocal media property, which is
typically in the same period in which the advertisements run on our Web site.
We have recently started to derive revenues by encoding audio and video
media into a digital format that allows distribution of the encoded media over
the Internet. Revenues from encoding services are recognized upon delivery of
the encoded media, provided that we have no significant obligations remaining
and collection of the related receivable is deemed probable.
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 September 30, 1999 these transactions have not resulted in any
material affect on our operations. Therefore, 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 September 30, 1999, we had an accumulated
deficit of approximately $11,658,000. 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 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.
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RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
As described above, we are still in the early stages of development. As a
result, the following comparisons may not be meaningful.
REVENUE. Revenue increased to $12,715 for the nine months ended
September 30, 1999, from $0 for the same period in 1998. Such increase is due to
advertising revenues.
COMPENSATION EXPENSE. Compensation expense increased 314% to $2,201,000 for
the nine months ended September 30, 1999, from $531,000 for the same period in
1998. This increase was due primarily to non-cash charges related to stock-based
compensation of $1,884,000 and an increase in our staff to twenty employees at
September 30, 1999 from seven employees at September 30, 1998, partially offset
by the elimination of an officer's salary.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 422%
to approximately $39,700 for the nine months ended September 30, 1999, from
approximately $7,600 for the same period in 1998, primarily as a result of
increased capital expenditures.
CONSULTING EXPENSE. Consulting expense increased to approximately $196,000
for the nine months ended September 30, 1999, from $0 for the same period in
1998. This non-cash expense relates to stock option grants for services
rendered.
OTHER OPERATING EXPENSE. This category increased 396% to $1,814,000 for the
nine months ended September 30, 1999, from $366,000 for the same period in 1998
due to costs to support the growth of the business, including office supplies
and minor equipment, insurance, training and trade shows. In addition, we
incurred expenses for advisors, legal fees and auditors in connection with our
preparation of the Registration Statement of which this prospectus is a part.
INTEREST EXPENSE. Interest expense increased to approximately $38,000 for
the nine months ended September 30, 1999, from $0 for the same period in 1998.
This change was a result of increased short-term and long-term borrowings.
FINANCING COSTS. Financing costs increased to $5,297,000 for the nine
months ended September 30, 1999, from $0 for the same period in 1998. This
non-cash expense relates to the January 1999 conversion of long-term debt owed
by International Net Broadcasting into shares of our common stock at a below
market price.
RESULTS OF OPERATIONS--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
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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 $2,380,175 and private sales of our
equity securities totaling $3,621,025. As of September 30, 1999, we had on hand
approximately $554,000 in cash, cash equivalents and short-term investments. We
do not have access to a line of credit. However, we expect to raise $2,000,000
through the sale of additional shares of Series A preferred stock on or before
March 15, 2000 and between $5,000,000 and $7,000,000 through the sale of units
consisting of Series B convertible preferred stock and warrants to purchase
common stock. For the nine months ended September 30, 1999, we had revenues of
approximately $12,700 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. See "Recent
Developments--Sale of Series A preferred stock" and "--Sale of Series B
preferred stock."
For the nine months ended September 30, 1999, operating activities used net
cash of approximately $2,031,000, primarily from a net loss from operations of
approximately $9,574,000 which was partially offset by non-cash stock-based
compensation and financing charges of $7,377,000. In addition, financing
activities provided net cash of approximately $2,602,000, primarily from the
proceeds from the placement of short-term debt and the sale of equity securities
which totaled $3,801,000. This was partially offset by payments on the
short-term debt and offering costs which totaled approximately $1,199,000. For
the nine months ended September 30, 1999, our investing activities used net cash
of approximately $217,000, primarily to purchase equipment.
For the period from inception to December 31, 1998, operating activities
used net cash of approximately $1,888,000, primarily from a net loss from
operations of approximately $2,085,000 which was partially offset by an increase
in accounts payable
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<PAGE>
and accrued liabilities of approximately $174,000. In addition, financing
activities provided net cash of approximately $2,178,000, primarily from the
proceeds from the placement of debt and the sale of equity securities which
totaled $2,201,000. This was partially offset by offering costs of approximately
$23,000. For the period from inception to December 31, 1998, our investing
activities used net cash of approximately $90,000, 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
$200,000 per month, we expect that our present cash balance, plus net proceeds
from the anticipated sale of additional shares of Series A preferred stock, the
sale of units consisting of Series B convertible preferred stock and warrants to
purchase common stock 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 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. 981, "Software for
Internal Use," which provides guidance on accounting for the cost of computer
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<PAGE>
software developed or obtained for internal use. Statement of Position No. 981
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. 981 will have a material impact on Entertainment Boulevard's
financial statements.
In April 1998, the AICPA issued Statement of Position No. 985, "Reporting on
the Costs of Startup Activities." Statement of Position No. 985, which is
effective for fiscal years beginning after December 15, 1998, provides guidance
on the financial reporting of start-up costs and organization costs. It requires
costs of start-up activities and organization costs to be expensed as incurred.
As Entertainment Boulevard has expensed those costs historically, the adoption
of that standard will not have a significant impact on its financial statements.
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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 (1) the immediate sale of 2,000 shares of
Series A preferred stock to those entities for $2 million and (2) the sale of
another 2,000 shares of Series A preferred stock to those entities for an
additional $2 million. The second transaction is expected to close on or before
March 15, 2000. We expect that all 4,000 shares of Series A preferred stock will
be converted into 2,666,680 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, (1) register any of our securities for resale or (2) issue or sell
any of our equity or equity-equivalent securities.
The shares of Series A preferred stock have the rights, preferences and
privileges described in "Description of Our Securities--Preferred stock,"
including the right to convert into shares of common stock at a specified
conversion rate which is subject to adjustment if we fail to meet certain
conditions as to the registration of their underlying common stock.
In connection with the sale of the Series A preferred stock, we entered into
a Placement Agency Agreement with Robb Peck for placement agent services as well
as investment-banking services. For acting as placement agent with respect to
the Series A preferred stock, Robb Peck 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, plus warrants for
an additional 250,000 shares upon the same terms upon completion of the sale of
the additional shares of Series A preferred stock. If Robb Peck provides us with
investment banking services, it will be paid additional fees as specified in the
agreement. The shares
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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 1,500,000 shares obtainable by him through
the exercise of warrants. See "Shares Eligible for Future Sale" and "Certain
Transactions and Relationships."
SHORT-TERM LOANS. On November 12, 1999, H.A.A. Inc. and Beestons Investment
Ltd. loaned us a total of $500,000. The loan bears interest at 10% per year and
was originally payable in full on or before February 15, 2000. The due date has
been extended until the sale of the additional shares of Series A preferred
stock closes. We expect to repay the loan out of the proceeds we receive from
that sale. The loan is secured by all of our assets and, prior to repayment, is
convertible into 250,000 shares of our common stock at the lenders' election. In
connection with the loan, we also issued a total of 140,000 shares of our common
stock to the lenders and granted such shares certain stock registration rights.
The shares issued to the lenders and the shares obtainable upon conversion of
the loan are included in the shares being registered for H.A.A. Inc. and
Beestons Investment Ltd. as selling stockholders in this prospectus. In
addition, Robb Peck and some of its key employees were granted warrants to
purchase an additional 500,000 shares of common stock in connection with this
loan. Those shares are included in the shares being registered for Robb Peck and
its key employees as selling stockholders in this prospectus.
On January 14, 2000, H.A.A. Inc. and Forest Equities, Ltd. loaned us a total
of $200,000. As with the $500,000 loan described above, this loan also bears
interest at 10% per year and is secured by all of our assets. The loan is
convertible into 200,000 shares of our common stock at the lenders' election
and, 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 obtainable 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. Originally, this loan was also payable in full on or before
February 15, 2000. That deadline was also extended, with payment now due at such
time as the sale of the additional shares of Series A preferred stock closes.
SALE OF UNITS. On December 28, 1999, we entered into an agreement with an
investment banking firm to act as placement agent for 7.5 units of our
securities. 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. We
expect to repay the loans out of the proceeds we receive from the sale of the
additional shares of Series A preferred stock or the sale of a new series of
preferred stock, as described below.
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SALE OF SERIES B PREFERRED STOCK. On January 14, 2000, we signed a term
sheet with an investment banking firm for the private placement of Series B
convertible preferred stock and warrants to purchase common stock. The terms of
the agreement will provide for a minimum offering of $5 million and a maximum
offering of $7 million for up to 140 units. Each unit consists of 2,500 shares
of Series B convertible preferred stock with a $20 liquidation preference and
warrants to purchase 10,000 shares of common stock at $4 per share. The
placement is expected to close on or before March 15, 2000. We intend to use the
proceeds from the offering for working capital and general corporate purposes.
Initially, each share of Series B preferred stock will be convertible at any
time into 10 shares of common stock, subject to certain anti-dilution
provisions. Shares will automatically convert into common stock upon the earlier
of the effective date of a registration statement registering the common stock
issuable upon conversion of the Series B preferred stock or two years from the
closing date. We expect that the purchasers of the Series B preferred stock will
be granted certain registration rights with respect to the shares of common
stock issuable upon conversion of their Series B preferred stock. In addition,
they will have the right to appoint one member of the board of directors for one
year. Holders of the Series B preferred stock will also have the right to vote
with the holders of the common stock on all matters in which holders of the
common stock have the right to vote, as well as veto rights as to certain
transactions involving Entertainment Boulevard or the Series B preferred stock.
The Series B preferred stock will rank PARI PASSU with respect to dividend
rights and liquidation preference to any other shares of our preferred stock and
senior to the common stock.
TERMINATION AGREEMENT. In connection with our agreements with the
investment banking firm that placed 7.5 units of our securities in December
1999, 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 provides that if
the investment banking firm raises at least $5 million on or before March 15,
2000 , Robb Peck will 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 will be one
share of common stock for each $1.50 of stated value of Series A preferred
stock. This will result in the issuance of 2,666,680 shares of 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 entertainmentblvd.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. Before launching the entertainmentblvd.com Web
site in 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 value of $11.4 billion in 1998. The Recording
Industry Association reported sales of
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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.
The Internet has emerged as a significant mass medium by providing features
and functions that are unavailable in traditional media. For example, consumers
can
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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.
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 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
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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>
Rock/Metal Reggae
Pop/Dance Christian
Urban Jazz/Swing
Country 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.
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
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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 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.
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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.
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 entertainmentblvd.com acts as a
promotional incentive to purchase CDs, DVDs and videos.
OUR OBJECTIVE AND STRATEGY
Our objective is to establish Entertainment Boulevard as the premier
destination for streaming video entertainment and information. 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
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studios to keep the entertainmentblvd.com site up to date with the latest music
videos and movie trailers. Our strategy is to engage core groups of editors,
artists, video producers and other content creators on a full time basis.
However, we have no long-term contracts with any record labels or motion picture
studios and 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 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 entertainmentblvd.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
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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 entertainmentblvd.com. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own Web site,
thus providing the advertiser the opportunity to directly interact with an
interested customer. Advertisers 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 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
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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.
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 entertainmentblvd.com and on the pop-up video players that it
licenses to third parties. CheckOut.com is responsible for all aspects of order
processing and 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.
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
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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 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.
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 expires in February
2000 and will continue for additional one-year terms unless either party cancels
the agreement thirty days prior to the end of the term then in effect.
In February 1999, Entertainment Boulevard also entered into an agreement
with Scour, Inc., 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.
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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 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
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Entertainment Boulevard a commission on sales that originate from
entertainmentblvd.com, as well as a referral fee for each new customer who
originated from our Web site. 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 expires 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 entertainmentblvd.com. Under the agreement, Entertainment Boulevard and
IFILM will split equally any advertising revenue derived from IFILM's presence
at entertainmentblvd.com. The agreement has an initial term of one year. IFILM
maintains a Web site at www.ifilm.com which features, among other things, a
community for the viewing and discussion of films.
TECHNOLOGY AGREEMENTS. Entertainment Boulevard houses its Web page servers
in a data facility at Level 3 Communications, Inc., and all of Entertainment
Boulevard's
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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 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 entertainmentblvd.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.
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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.
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 entertainmentblvd.com
production servers at the Los Angeles data center of Level 3. Entertainment
Boulevard's operations are dependent upon Level 3's ability to protect its
systems against damage from fire, storms, power loss, telecommunications
failure, break-ins and other events. Level 3 provides comprehensive facilities
management services, including human and technical monitoring of all production
servers 24 hours 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,
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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.
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;
- 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;
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- 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 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 entertainmentblvd.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
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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 entertainmentblvd.com are copyrighted works of third parties,
including record labels, movie studios, artists and songwriters. Each piece of
music or music video may have multiple copyright owners, some with rights in the
sound recording 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.
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.
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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 entertainmentblvd.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
entertainmentblvd.com. Despite this policy, however, if third persons are able
to penetrate our network security or otherwise misappropriate our users'
personal data, we could be subject to liability. Those liabilities could include
claims for impersonation or other similar fraud claims. They could also include
claims for other misuses of personal information, such as for unauthorized
marketing purposes. In addition, the Federal Trade Commission and certain state
and local authorities have been investigating certain Internet companies
regarding their use of personal information. We could incur additional expenses
if new regulations regarding the use of personal information are introduced or
if those authorities choose to investigate our privacy practices.
PERSONNEL
As of September 30, 1999, we had 23 full-time employees, of which 15 were
engaged in technical activities, four in general administration and executive
activities and four in business development. From time to time, we also engage
independent contractors to support our research and development, marketing,
sales and administrative activities. We are not a party to any collective
bargaining agreement and consider our relationships with our personnel to be
good.
FACILITIES
We lease our approximately 12,000 square foot headquarters in Los Angeles,
California, for a monthly base rent of $26,700 plus annual 3.5% escalations and
our share of building operating expenses. The lease expires on December 31, 2004
and
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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: (1) made payments in the amount of $300,000 against the outstanding loan and
$10,000 in attorneys' fees and costs; (2) 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
(3) agreed that Stephen Brown, our president and chief executive officer, would
not be a signatory on any of our bank accounts until the remaining principal and
interest is repaid in full. Stephen Brown also agreed to personally guarantee
repayment of the remaining principal and interest. No judgment will be entered
with the court unless the remaining principal amount and interest are not repaid
by January 31, 2000. As of the date of this prospectus, there is an outstanding
balance of $156,000.
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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
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 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.
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.
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 September 30, 1999. In addition, although Colin Leech-Porter
resigned as Entertainment Boulevard's chief executive officer on January 13,
1999, he held that position on December 31, 1998. As a result, the table also
provides summary information as to the compensation paid to him for services
rendered in all capacities during fiscal 1998. We had no executive officer whose
total cash compensation exceeded $100,000 for fiscal 1998, and, other than
Stephen Brown, none of our present executive officers have compensation at that
level.
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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
Colin Leech-Porter,
Chief executive officer....... 1998 -0- -0- -0- -0-
</TABLE>
The following table provides information through September 30, 1999
concerning stock options granted to Mr. Brown and Dr. Leech-Porter during the
years indicated.
OPTION GRANTS
<TABLE>
<CAPTION>
% OF
TOTAL OPTIONS
NUMBER OF GRANTED TO
FISCAL SECURITIES UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION
YEAR OPTIONS GRANTED FISCAL YEAR PER SHARE DATE
-------- --------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Stephen Brown ....... 1999 50,000 11.2% $1.00 March 26, 2004
Colin Leech-Porter... 1998 -0- N/A N/A N/A
</TABLE>
No options have ever been exercised by Dr. Leech-Porter or Mr. Brown. As to
each of them, the following table sets forth the number and value of vested and
unvested options held as of September 30, 1999.
OPTION VALUE AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT SEPTEMBER 30 OPTIONS AT SEPTEMBER 30
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen Brown........................ 50,000 -0- $ 53,124 N/A
Colin Leech-Porter................... -0- -0- N/A N/A
</TABLE>
DIRECTOR COMPENSATION. At this time, we do not contemplate paying fees to
our directors for their services as directors, although they are eligible for
options under our stock option plan. See "Stock Option Plan" below. It is,
however, our policy to reimburse directors for reasonable travel and lodging
expenses incurred in attending meetings of the board of directors.
STOCK OPTION PLAN. 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
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option plan is to provide participants with an incentive to become stockholders
in Entertainment Boulevard and share in its success.
The option plan is currently administered by our board of directors. Options
granted under the option plan are priced at no less than 85% of the fair market
value of Entertainment Boulevard's common stock on the date of grant.
As of September 30, 1999, there were 447,000 options outstanding under the
option plan at a weighted average price of $1.14 per share.
EMPLOYMENT ARRANGEMENTS. Stephen Brown is our only officer or director with
an employment agreement. On November 1, 1999, we entered into a two-year
employment agreement with Mr. Brown. Mr. Brown receives annual compensation of
$240,000 for the first year, with a minimum annual increase of 15% for the
second year. Mr. Brown is also eligible to receive a discretionary bonus as
determined by our board of directors, based on his performance or Entertainment
Boulevard's profitability. He also receives a $1,500 per month car allowance and
payment of automobile operating expenses. In addition, at the end of each
twelve-month period of employment, Mr. Brown is granted an option to purchase a
minimum of 50,000 shares of common stock under our option plan. 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 (1) acts or
omissions that involve intentional misconduct, fraud or a knowing violation of
law or (2) 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 the case of a derivative action, except that indemnification only extends to
expenses, including attorneys' fees, actually and reasonably incurred in
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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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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our outstanding common stock and Series A preferred stock as of
January 21, 2000, after giving effect to the anticipated sale of another 2,000
shares of Series A preferred stock as described in "Recent Developments." The
table sets forth such information as to:
- each person or entity known by us to be the beneficial owner of more than
5% of our common stock or Series A preferred stock;
- each of our directors;
- 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: (1) that a
stockholder has the power to vote or transfer, (2) issuable upon the exercise of
outstanding warrants or stock options that are exercisable within 60 days of the
date of this prospectus, (3) issuable upon conversion of Series A preferred
stock and certain outstanding promissory notes. "Percentage of Class" is based
on 12,451,500 outstanding shares of common stock and 4,000 outstanding shares of
Series A preferred stock and assumes conversion of Series A preferred stock and
promissory notes and 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 2,050,000 14.6%
c/o Entertainment Boulevard, Inc.,
12910 Culver Boulevard, Suite I,
Los Angeles, California 90066
Arthur P. Brown........................... Common 187,500(1) 1.5%
c/o Entertainment Boulevard, Inc.,
12910 Culver Boulevard, Suite I,
Los Angeles, California 90066
Wilfred L. Von der Ahe, Jr................ Common 802,000 6.4%
2964 Triangle Road,
Mariposa, California 95338
H.A.A. Inc.(2)............................ Common 1,042,582 7.8%
1601 42nd St., Brooklyn, NY 11204 Series A 1,400 35%
Lowen Holdings(3) ........................ Common 309,678 2.4%
West Street 51, Zurich, Switzerland Series A 600 15%
Beestons Investment Ltd.(4)............... Common 1,302,260 9.6%
P. O. Box 65, Duke Street, Gretton Series A 2,000 50%
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, Arthur Brown and
Debra Gilson)............................ Common 2,150,000 15.2%
</TABLE>
- ------------------------
(1) The shares are obtainable upon exercise of warrants held by 531287 BC Ltd.
of which Mr. Brown is principal.
(2) The principal of this entity is Aaron Langsam.
(3) The principal of this entity is Susan Gold.
(4) The principal of this entity is C.B. Williams.
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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 entered into an employment agreement with Entertainment
Boulevard, as described under "Management--Employment Arrangements." 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, (1) Arthur Brown and Akbar Alikhan made an unsecured loan of $400,000 to
Entertainment Boulevard at 8.0% annual interest, (2) Entertainment Boulevard
loaned $400,000 to Stephen Brown for five years, payable without interest,
(3) Entertainment Boulevard issued to Stephen Brown and the former debtholders
of International Net Broadcasting
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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
(4) 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, as
described in "Entertainment Boulevard's Business--Legal Proceedings." 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 in a transaction described in "Recent Developments--Sale of 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. On January 14, 2000, H.A.A.
Inc. and Forest Equities, Ltd. loaned an aggregate of $200,000 to Entertainment
Boulevard. Each transaction is described in "Recent Developments--Short term
loans."
DESCRIPTION OF OUR SECURITIES
The following description is a summary of our securities and selected
provisions of our Articles of Incorporation and Bylaws and is qualified in its
entirety by reference to such documents and Nevada law.
COMMON STOCK. Our Articles of Incorporation authorize the issuance of up to
50,000,000 shares of common stock, $0.001 par value per share. As of the date of
this prospectus, 12,451,500 shares of our common stock are issued and
outstanding. On all matters submitted to a vote of the stockholders, each holder
of common stock which was designated at issuance as having voting rights has the
right to one vote for each share held of record. Except for dividend preferences
applicable to our Series A preferred stock or 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.
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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 authorized the issuance of up to 10,000 shares of Series A preferred
stock, of which 2,000 shares are presently issued and outstanding and 2,000 more
are expected to be issued in the near future. See "Recent Developments."
Each share of Series A preferred stock bears cumulative annual dividends
equal to 8.0% of its stated value payable on the last day of February and August
of each year, beginning on February 29, 2000. Dividends are payable in cash or
by a specified increase in the stated value. Each share of Series A preferred
stock also has a liquidation preference equal to its stated value and ranks
senior to our common stock with respect to dividend and liquidation payments. We
are restricted in the payment of dividends on our common stock so long as any
Series A preferred stock is outstanding.
Each share of Series A preferred stock has a stated value, which is
presently $1,000 per share, and is convertible into our common stock at a
conversion ratio which is (1) the sum of the stated value plus any accumulated
but unpaid Series A preferred stock dividends (2) divided by the conversion
price then in effect. At the present time, the conversion price for each share
of Series A preferred stock is the lesser of (1) $2.00 or (2) an amount equal to
the average per share market value for the three trading days having the lowest
per share market value during the 30 trading days immediately before the
conversion rate is determined.
Except as otherwise required by Nevada law, holders of Series A preferred
stock have the right to vote with the common stock on all matters in which
holders of common stock have the right to vote. In addition, approval of 66 2/3%
of the outstanding Series A preferred stock is required before we can take
certain actions which could affect the Series A preferred stock.
All shares of Series A preferred stock are convertible, at the holder's
option, into shares of common stock at a specified conversion price, which would
yield 516.13 shares of common stock for each share of Series A preferred stock
as of the
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date of this prospectus. In addition, beginning September 3, 2002, or earlier if
the Series A preferred stock maintains a value of $6.00 per share or greater for
a specified time period, we have the right to cause all outstanding shares of
Series A preferred stock to be converted at the conversion price then in effect.
The maximum number of shares of common stock offered by this prospectus has
been determined by assuming a Series A preferred stock conversion price of $1.50
and no accumulated but unpaid Series A preferred stock dividends. See "Recent
Developments -- Termination Agreement." While we believe that such assumptions
accurately state the number of shares issuable upon conversion of the Series A
preferred stock, it is impossible to predict the conversion price which will be
in effect at the time that some or all of the Series A preferred stock is
converted into common stock.
If the effectiveness of the Registration Statement filed in connection with
this prospectus is not maintained as agreed upon, the applicable conversion
price for each share of Series A preferred stock is subject to decrease pursuant
to an agreed upon formula, up to a specified limit.
All of the outstanding shares of Series A preferred stock are fully paid and
non-assessable and the shares of common stock to be issued upon conversion of
the Series A preferred stock will be fully paid and non-assessable when issued.
All of the shares of common stock into which the outstanding shares of Series A
preferred stock are convertible are being registered pursuant to the
Registration Statement filed in connection with this prospectus.
Except as described in "Recent Developments," we currently have no plans to
issue any additional shares of preferred stock. The board of directors does,
however, have the authority, without action by the stockholders, to issue all or
any portion of the authorized but unissued preferred stock in one or more series
and to determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series. Such preferred stock, if and
when issued, may carry rights superior to those of the common stock.
We consider it desirable to have preferred stock available to provide
increased flexibility in structuring possible future financings and in meeting
corporate needs 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.
53
<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 6,675,000 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 300,000 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 holders of
outstanding warrants, options and shares of Series A preferred stock and certain
convertible promissory notes have various registration rights with respect to
the underlying common stock. The selling stockholders are participating in this
offering as a result of those registration rights.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for our
common stock is American Securities Transfer & Trust, Inc., located in Denver,
Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
If the maximum number of shares offered under this prospectus are issued,
21,944,180 shares of our common stock will be outstanding. Of that number, all
but 2,600,000 shares will be freely tradable without restriction or further
registration under the Securities Act, unless purchased or held by our
affiliates, as defined in Rule 144 of the Securities Act.
54
<PAGE>
As of the date of this prospectus, we had outstanding 12,451,500 shares of
common stock. That number does not take into account shares of common stock
issuable upon conversion of Series A preferred stock or certain outstanding
promissory notes or the exercise of outstanding warrants or options. Of our
outstanding shares of common stock, 9,851,500 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 and conversion of our Series A preferred
stock and certain promissory notes, additional shares of common stock are
issuable in an amount that is not yet determinable. Of those shares, up to
9,745,180 are covered by this prospectus and will be freely tradeable, with the
exception of 1,500,000 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: (1) one percent of the number of
shares of common stock then outstanding, which is approximately 124,000 shares
as of the date of this prospectus; or (2) 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.
55
<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)........ 1,500,000(3) 2,050,000(3) 14.6% 550,000 3.9%
Farida Alikhan(4)....... 312,500(3) 312,500 2.4% -0- N/A
Rochford Young.......... 50,000(3) 110,000 (5) 60,000 (5)
Rohail Alikhan.......... 312,500(3) 325,000 2.5% 12,500 (5)
Loretta Harty........... 312,500(3) 325,000 2.5% 12,500 (5)
Ray Longstaff........... 312,500(3) 312,500 2.4% -0- N/A
531287 BC Ltd.(6)....... 187,500(3) 187,500 1.5% -0- N/A
RAK Enterprises(7)...... 187,500(3) 187,500 1.5% -0- N/A
Oughton York
Holdings(6)............ 312,500(3) 312,500 2.4% -0- N/A
Brunswick Ltd.(8)....... 312,500(3) 312,500 2.4% -0- N/A
Ray Alikhan............. 312,500(3) 380,000 3.0% 67,500 (5)
Raaheen Alikhan......... 312,500(3) 325,000 2.5% 12,500 (5)
Latymer Investments
Limited(9)............. 146,640(3) 581,978 4.6% 435,338 3.5%
Simon Ford.............. 50,000(3) 166,059 1.3% 116,059 (5)
Elizabeth Bradley....... 69,610(3) 259,610 2.1% 190,000 1.5%
Marionette
Limited(10)............ 34,000(3) 296,529 2.4% 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)
R.A.M. Williams......... 1,500(3) 18,704 (5) 17,204 (5)
William Mills........... 1,500(3) 11,387 (5) 9,887 (5)
</TABLE>
56
<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>
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(3) 265,000 2.1% 250,000 2.0%
John McKeag............. 7,500(3) 7,500 (5) -0- N/A
Dominick Gullemot....... 7,500(3) 7,500 (5) -0- N/A
Richard Sandfer......... 7,500(3) 7,500 (5) -0- N/A
Robb Peck McCooey
Clearing
Corporation(14)........ 568,000(3) 568,000 3.8% -0- N/A
Richard Rosenblum(14)... 325,000(3) 325,000 2.1% -0- N/A
David Stefansky(14)..... 325,000(3) 325,000 2.1% -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)(16)(17)....... 1,253,338 1,253,338 9.2% -0- N/A
Lowen
Holdings(15)(17)....... 400,002 400,002 3.1% -0- N/A
Beestons Investment
Ltd.(4)(15)(16)(17).... 1,603,340 1,603,340 11.5% -0- N/A
Forest Equities,
Ltd.(16)(18)........... 125,000 125,000 (5) -0- N/A
</TABLE>
- ---------------------
(1) Calculated for each selling stockholder based on 12,451,500 shares of common
stock presently outstanding plus the shares specified for that person in
footnotes (3), (9) and (10).
(2) Mr. Brown is an officer, director and major stockholder of Entertainment
Boulevard. See "Management," "Principal Stockholders" and "Certain
Transactions and Relationships."
(3) All of the shares being offered are issuable upon the exercise of warrants.
The amounts shown for each of Robb Peck and Messrs. Rosenblum, Stefansky,
57
<PAGE>
Freifeld, Calicchia and Soich assume the closing of the sale of the
additional shares of Series A preferred stock.
(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. See "Recent Developments--Sale
of Series A preferred stock" and "--Termination Agreement."
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. See "Recent
Developments," "Principal Stockholders" and "Certain Transactions and
Relationships."
(16) Includes the following as to the person specified: H.A.A. Inc.--conversion
of promissory notes for 225,000 shares; Beestons Investment Ltd.--conversion
of promissory note for 125,000 shares; and Forest Equities, Ltd.--conversion
of promissory note for 100,000 shares.
(17) Amounts shown assume the following: (i) sale of an additional 2,000 shares
of Series A preferred stock, allocated 700 shares to H.A.A. Inc., 300 shares
to Lowen Holdings and 1,000 shares to Beestons Investment Ltd., (ii)
conversion of 1,400 shares of Series A preferred stock held by H.A.A. Inc.
into a maximum of 933,338 shares, (iii) conversion of 600 shares of
Series A preferred stock held by Lowen Holdings into a maximum of
400,002 shares and (iv) conversion of 2,000 shares of Series A preferred
stock held by Beestons Investment Ltd. into a maximum of 1,333,340 shares.
See "Description of Our Securities--Preferred stock."
(18) The principal of this entity is Joseph Franck.
58
<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.
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.
59
<PAGE>
EXPERTS
Our consolidated financial statements for the year ended December 31, 1998
and the periods from April 1, 1997, inception, to December 31, 1997 and 1998,
which appear in this prospectus beginning at page F-1, have been audited by
Singer Lewak Greenbaum & Goldstein LLP, independent certified public
accountants, as set forth in their report thereon appearing at page F-2 of this
prospectus. 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.
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Deficit.......... F-5
Consolidated Statements of Cash Flows..................... F-6 - F-8
Notes to Consolidated Financial Statements................ F-9 - F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Entertainment Boulevard, Inc.
We have audited the accompanying consolidated balance sheet of Entertainment
Boulevard, Inc. and subsidiary (a development stage company) as of December 31,
1998, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the year then ended, and for the periods from
April 1, 1997 (inception) to December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Entertainment Boulevard, Inc. and subsidiary as of December 31, 1998, and the
results of its operations and its cash flows for the year then ended, and for
the periods from April 1, 1997 (inception) to December 31, 1998 and 1997 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the year
ended December 31, 1998 and the period from April 1, 1997 (inception) to
December 31, 1997, the Company incurred net losses of $1,435,153 and $649,626,
respectively. In addition, the Company's net cash used in operating activities
was $1,300,205 and $587,591, respectively, for the year ended December 31, 1998
and the period from April 1, 1997 (inception) to December 31, 1997, and the
Company's accumulated deficit was $2,084,779 as of December 31, 1998. Recovery
of the Company's assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's transition,
ultimately, to the attainment of profitable operations is dependent upon
obtaining adequate financing to fulfill its development activities and achieving
a level of sales adequate to support the Company's cost structure. These
factors, among others, as discussed in Note 2 to the consolidated financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
July 16, 1999
F-2
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 553,673 $200,072
Accounts receivable....................................... 12,715 --
Prepaid expenses.......................................... 75,000 --
---------- --------
Total current assets.................................. 641,388 200,072
NOTE RECEIVABLE--RELATED PARTY.............................. 400,000 --
FURNITURE AND EQUIPMENT, NET................................ 244,860 58,450
INTANGIBLE ASSET, net of accumulated amortization of
$10,000 (unaudited) and $1,344............................ -- 8,656
DEPOSITS.................................................... 103,378 --
---------- --------
TOTAL ASSETS.................................. $1,389,626 $267,178
========== ========
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt........................................... $ 712,907 $ 458,552
Note payable--related party............................... 400,000 --
Accounts payable.......................................... 261,980 46,103
Accrued liabilities....................................... 229,455 128,026
------------ -----------
Total current liabilities............................... 1,604,342 632,681
LONG-TERM DEBT.............................................. -- 852,268
------------ -----------
Total liabilities..................................... 1,604,342 1,484,949
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Series A preferred stock, $0.01 par value
1,000,000 shares authorized
2,000 (unaudited) shares issued and outstanding......... 20 --
Common stock, $0.001 par value
50,000,000 shares authorized
12,312,500 (unaudited) and 7,675,000 shares issued and
outstanding............................................. 12,313 7,675
Deferred compensation..................................... (27,025) --
Additional paid-in capital................................ 11,458,458 859,333
Deficit accumulated during the development stage.......... (11,658,482) (2,084,779)
------------ -----------
Total stockholders' deficit........................... (214,716) (1,217,771)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT......... $ 1,389,626 $ 267,178
============ ===========
</TABLE>
F-3
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE FOR THE PERIOD FROM PERIOD FROM
NINE NINE APRIL 1, APRIL 1,
MONTHS MONTHS FOR THE 1997 1997
ENDED ENDED YEAR ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE........................ $ 12,715 $ -- $ -- $ -- $ --
----------- ---------- ----------- ---------- -----------
OPERATING EXPENSES
Compensation expense......... 2,201,026 531,108 708,145 415,385 1,123,530
Consulting expense........... 196,250 -- -- -- --
Depreciation and
amortization............... 39,694 7,573 20,089 2,765 22,854
Other operating expense...... 1,814,958 366,414 703,164 231,476 934,640
----------- ---------- ----------- ---------- -----------
Total operating expenses....... 4,251,928 905,095 1,431,398 649,626 2,081,024
----------- ---------- ----------- ---------- -----------
LOSS FROM OPERATIONS........... (4,239,213) (905,095) (1,431,398) (649,626) (2,081,024)
----------- ---------- ----------- ---------- -----------
OTHER EXPENSE
Interest expense............. (37,690) -- (3,755) -- (3,755)
Financing costs.............. (5,296,800) -- -- -- --
----------- ---------- ----------- ---------- -----------
Total other expense........ (5,334,490) -- (3,755) -- (3,755)
----------- ---------- ----------- ---------- -----------
NET LOSS....................... $(9,573,703) $ (905,095) $(1,435,153) $ (649,626) $(2,084,779)
=========== ========== =========== ========== ===========
BASIC AND DILUTED LOSS PER
SHARE........................ $ (0.82) $ (0.19) $ (0.30) $ (0.59) $ (0.65)
=========== ========== =========== ========== ===========
WEIGHTED-AVERAGE SHARES
OUTSTANDING.................. 11,687,086 4,750,000 4,814,286 1,109,124 3,225,430
=========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
------------------- ---------------------- DEFERRED PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT COMPENSATION CAPITAL STAGE
-------- -------- ----------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1997
(INCEPTION)................. -- $ -- -- $ -- $ -- $ -- $ --
CAPITALIZATION OF
INTERNATIONAL NET
BROADCASTING, LLC........... 1,000,000 1,000 (900)
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 3,700,000 3,700 30,475
STOCK ISSUED IN CONNECTION
WITH MINERAL RIGHTS......... 50,000 50 (50)
CAPITAL CONTRIBUTIONS......... 88,500
NET LOSS...................... (649,626)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, DECEMBER 31, 1997.... -- -- 4,750,000 4,750 -- 118,025 (649,626)
CAPITAL CONTRIBUTIONS......... 533,000
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 2,925,000 2,925 208,308
NET LOSS...................... (1,435,153)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, DECEMBER 31, 1998.... -- -- 7,675,000 7,675 -- 859,333 (2,084,779)
WARRANTS
EXERCISED(unaudited)........ 2,925,000 2,925 728,325
STOCK OPTIONS ISSUED TO
VENDORS (unaudited)......... 196,250
STOCK OPTIONS ISSUED AS
COMPENSATION (unaudited).... $ $ $(27,025) $ 130,732 $
CONVERSION OF LONG-TERM DEBT
(unaudited)................. 1,600,000 1,600 850,668
WARRANTS ISSUED TO EXECUTIVE
FOR
COMPENSATION(unaudited)..... 1,780,500
WARRANTS ISSUED TO DEBT
HOLDERS (unaudited)......... 474,800
FINANCING COSTS ON CONVERSION
OF LONG-TERM DEBT
(unaudited)................. 4,597,000
STOCK-BASED INTEREST ON BRIDGE
FINANCING(unaudited)........ 112,500 113 224,887
PREFERRED STOCK SALE
(unaudited)................. 2,000 20 1,999,980
OFFERING COSTS ON PLACEMENTS
AND WARRANTS (unaudited).... (384,017)
NET LOSS (unaudited).......... (9,573,703)
----- ---- ----------- ------- -------- ----------- ------------
BALANCE, SEPTEMBER 30,
1999(unaudited)............. 2,000 $ 20 $12,312,500 $12,313 $(27,025) $11,458,458 $(11,658,482)
===== ==== =========== ======= ======== =========== ============
<CAPTION>
TOTAL
-----------
<S> <C>
BALANCE, APRIL 1, 1997
(INCEPTION)................. $ --
CAPITALIZATION OF
INTERNATIONAL NET
BROADCASTING, LLC........... 100
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 34,175
STOCK ISSUED IN CONNECTION
WITH MINERAL RIGHTS......... --
CAPITAL CONTRIBUTIONS......... 88,500
NET LOSS...................... (649,626)
-----------
BALANCE, DECEMBER 31, 1997.... (526,851)
CAPITAL CONTRIBUTIONS......... 533,000
COMMON STOCK ISSUED IN PRIVATE
PLACEMENT................... 211,233
NET LOSS...................... (1,435,153)
-----------
BALANCE, DECEMBER 31, 1998.... (1,217,771)
WARRANTS
EXERCISED(unaudited)........ 731,250
STOCK OPTIONS ISSUED TO
VENDORS (unaudited)......... 196,250
STOCK OPTIONS ISSUED AS
COMPENSATION (unaudited).... $ 103,707
CONVERSION OF LONG-TERM DEBT
(unaudited)................. 852,268
WARRANTS ISSUED TO EXECUTIVE
FOR
COMPENSATION(unaudited)..... 1,780,500
WARRANTS ISSUED TO DEBT
HOLDERS (unaudited)......... 474,800
FINANCING COSTS ON CONVERSION
OF LONG-TERM DEBT
(unaudited)................. 4,597,000
STOCK-BASED INTEREST ON BRIDGE
FINANCING(unaudited)........ 225,000
PREFERRED STOCK SALE
(unaudited)................. 2,000,000
OFFERING COSTS ON PLACEMENTS
AND WARRANTS (unaudited).... (384,017)
NET LOSS (unaudited).......... (9,573,703)
-----------
BALANCE, SEPTEMBER 30,
1999(unaudited)............. $ (214,716)
===========
</TABLE>
F-5
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE NINE FOR THE NINE PERIOD FROM PERIOD FROM
MONTHS MONTHS FOR THE YEAR APRIL 1, 1997 APRIL 1, 1997
ENDED ENDED ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss....................... $(9,573,703) $(905,095) $(1,435,153) $(649,626) $(2,084,779)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation and
amortization............... 39,694 7,573 20,089 2,765 22,854
Non-cash compensation........ 1,884,207 -- -- -- --
Financing charges............ 5,296,800 -- -- -- --
Stock options issued to
vendors.................... 196,250 -- -- -- --
Increase in
Accounts receivable.......... (12,715) -- -- -- --
Prepaid expenses............. (75,000) -- -- -- --
Deposits..................... (103,378) -- -- -- --
Increase (decrease) in
Accounts payable............. 215,877 (2,842) 25,558 20,545 46,103
Accrued liabilities.......... 101,429 50,125 89,301 38,725 128,026
----------- --------- ----------- --------- -----------
Net cash used in operating
activities................... (2,030,539) (850,239) (1,300,205) (587,591) (1,887,796)
----------- --------- ----------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of furniture and
equipment.................. $ (217,448) $ (32,060) $ (64,410) $ (15,550) $ (79,960)
Purchase of mineral rights... -- -- -- (10,000) (10,000)
----------- --------- ----------- --------- -----------
Net cash used in investing
activities................... (217,448) (32,060) (64,410) (25,550) (89,960)
----------- --------- ----------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from short-term
debt....................... 1,069,355 66,750 432,302 -- 432,302
Payments on short-term
debt....................... (815,000) -- -- -- --
Long-term debt............... -- 363,744 389,994 488,524 878,518
Capital contributions........ -- 459,000 533,000 88,600 621,600
Proceeds from private
placement.................. 2,000,000 -- 234,000 34,175 268,175
</TABLE>
F-6
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE NINE FOR THE NINE PERIOD FROM PERIOD FROM
MONTHS MONTHS FOR THE YEAR APRIL 1, 1997 APRIL 1, 1997
ENDED ENDED ENDED (INCEPTION) TO (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1998
------------- ------------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Proceeds from execution of
warrants................... 731,250 -- -- -- --
Offering costs............... (384,017) -- (22,767) -- (22,767)
----------- --------- ----------- --------- -----------
Net cash provided by financing
activities................... 2,601,588 889,494 1,566,529 611,299 2,177,828
----------- --------- ----------- --------- -----------
Net increase (decrease) in
cash......................... $ 353,601 $ 7,195 $ 201,914 $ (1,842) $ 200,072
CASH (BOOK OVERDRAFT),
BEGINNING OF PERIOD.......... 200,072 -- (1,842) -- --
----------- --------- ----------- --------- -----------
CASH (BOOK OVERDRAFT), END OF
PERIOD....................... $ 553,673 $ 7,195 $ 200,072 $ (1,842) $ 200,072
=========== ========= =========== ========= ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
INTEREST PAID................ $ 4,166 $ -- $ -- $ -- $ --
=========== ========= =========== ========= ===========
INCOME TAXES PAID.............. $ -- $ -- $ -- $ -- $ --
=========== ========= =========== ========= ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the period from April 1, 1997 (inception) to December 31, 1997, the
Company issued 50,000 shares of common stock in exchange for mineral rights.
On January 15, 1999, the Company converted long-term debt of $852,268
(unaudited) to 1,600,000 (unaudited) shares of common stock. In connection with
the conversion, the Company recognized financing costs of $4,597,000 (unaudited)
related to beneficial conversion rates.
During the nine months ended September 30, 1999, the Company issued options
to purchase 250,000 (unaudited) shares of common stock to vendors. The options
were valued at $196,250 (unaudited).
During the nine months ended September 30, 1999, the Company issued stock
options to employees as compensation. Related to these options, the Company has
F-7
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1997, AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
capitalized deferred compensation of $27,025 (unaudited) and recognized
compensation expense of $103,707(unaudited).
During the nine months ended September 30, 1999, the Company issued 112,500
(unaudited) shares of common stock as interest expense on bridge loans. In
connection with the shares of common stock, the Company recognized financing
charges of $225,000 (unaudited).
On July 14, 1999, the Company issued warrants to purchase 1,500,000
(unaudited) shares of the Company's common stock to its Chief Executive Officer.
In connection with the warrants, the Company recognized compensation expense of
$1,780,500 (unaudited).
On July 14, 1999, the Company issued warrants to purchase 400,000
(unaudited) shares of the Company's common stock to certain debt holders. In
connection with the warrants, the Company recognized financing charges of
$474,800 (unaudited).
F-8
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 1--ORGANIZATION AND LINE OF BUSINESS
International Net Broadcasting was originally founded on April 1, 1997 as a
proprietorship and began to solicit funds from investors in order to establish
an on-line marketplace for entertainment-related products and services. On
September 18, 1998, the proprietorship formed International Net Broadcasting,
LLC ("INB"), a limited liability company and continued operations as such. On
January 15, 1999, 100% of INB was acquired by Sedmet Explorations, Inc.
("Sedmet"), a public shell with substantially no assets (see Note 4). Subsequent
to the acquisition, Sedmet changed its name to Entertainment Boulevard, Inc. The
acquisition has been accounted for as a pooling of interests transaction.
Subsequent to and in connection with the acquisition, certain of INB's debt
was converted to common stock of Entertainment Boulevard, Inc.
Entertainment Boulevard, Inc. remains in the business of providing Internet
distribution of entertainment products and services, as well as the distribution
of certain other infomercial-related merchandise and sports-related information
services. To date, Entertainment Boulevard, Inc. has continued to expend its
resources in the development of its web-based business and has not begun to
generate sales or revenues of a material nature.
NOTE 2--GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 1998, the period from April 1,
1997 (inception) to December 31, 1998, and the nine months ended September 30,
1999 and 1998, the Company incurred losses of $1,435,153, $649,626, $9,573,703
(unaudited), and $905,095 (unaudited), respectively. In addition, the Company's
cash flow requirements have been met by the generation of capital through
private placements of the Company's preferred and common stock and placement of
unsecured debt to investors. No assurance can be given that this source of
financing will continue to be available to the Company and demand for the
Company's equity instruments will be sufficient to meet its capital needs. If
the Company is unable to generate profits and unable to
F-9
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 2--GOING CONCERN MATTERS (CONTINUED)
continue to obtain financing for its working capital requirements, it may have
to cease business altogether.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to retain its current financing,
to obtain additional financing, and ultimately to attain profitability.
To meet these objectives, the Company expects to complete an additional
$2,000,000 private placement of preferred equity in early 2000, contingent on
the filing and effectiveness of a Registration Statement, which management
expects will provide sufficient funding to continue the Company's present
operations and support future marketing and development activities.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Entertainment
Boulevard, Inc. and its wholly-owned subsidiary, INB (collectively, the
"Company"). All significant intercompany accounts have been eliminated.
DEVELOPMENT STAGE ENTERPRISE
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially all of its
present efforts to establish a new business, and its planned principal
operations have not yet commenced. All losses accumulated since inception have
been considered as part of the Company's development stage activities.
INTERIM UNAUDITED FINANCIAL INFORMATION
The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management,
F-10
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are necessary to fairly state the Company's financial position, the results of
operations, and cash flows for the periods presented. The results of operations
for the nine months ended September 30, 1999 are not necessarily indicative of
results for the entire fiscal year ending December 31, 1999.
CASH
Cash consists primarily of cash in banks. Deposits at the banks are insured
by the Federal Deposit Insurance Corporation up to $100,000. As of December 31,
1998 and September 30, 1999, uninsured portions of the balance totaled
approximately $102,000 and $450,700 (unaudited), respectively.
INTANGIBLE ASSET
Intangible asset represents the rights to certain mining and related leases
(see Note 9) and has been accounted for at cost. As of September 30, 1999, the
rights were fully amortized (unaudited).
INCOME TAXES
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. The provision for income taxes
represents the tax payable for the period and the change during the period in
deferred tax assets and liabilities.
F-11
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
From time to time, the Company enters into non-cash barter arrangements with
other Internet service providers. These contracts are considered immaterial and
as such, have not been recorded on the Company's financial statements.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported
primary and fully diluted loss per share with basic and diluted loss per share.
Unlike primary loss per share, basic loss per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted loss per share
is very similar to the previously reported fully diluted loss per share. Basic
loss per share is computed using the weighted-average number of common shares
outstanding during the period. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive. As such, basic and diluted loss
per share are the same.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash, accounts payable, and accrued liabilities, the
carrying amounts approximate fair value due to their short maturities.
ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
COMPREHENSIVE INCOME
For the period from April 1, 1997 (inception) to December 31, 1998, the
Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement
F-12
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
F-13
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." The Company does not expect adoption of
SFAS No. 137 to have a material impact, if any, on its financial position or
results of operations.
NOTE 4--ACQUISITION OF INTERNATIONAL NET BROADCASTING, LLC ("INB")
On January 15, 1999, the Company exchanged 1,000,000 shares of the Company's
common stock for a 100% interest in INB. INB primarily operates as an Internet
content provider of entertainment-related products.
This transaction has been accounted for as a pooling of interests.
Accordingly, the financial statements for all periods presented have been
restated to include the accounts and operations of INB. The combined entities'
separate operating results for the period from April 1, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Net revenues
The Company......................... $ -- $ --
INB................................. -- --
----------- ---------
COMBINED........................ $ -- $ --
=========== =========
Net loss
The Company......................... $ -- $ (24,175)
INB................................. (1,435,153) (625,451)
----------- ---------
COMBINED........................ $(1,435,153) $(649,626)
=========== =========
Net loss per common share
PRIOR TO ACQUISITION................ $ -- $ (0.17)
----------- ---------
AS RESTATED......................... $ (0.30) $ (0.59)
=========== =========
</TABLE>
F-14
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 5--FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Computer equipment...................... $284,712 $72,960
Furniture............................... 12,696 7,000
-------- -------
297,408 79,960
Less accumulated depreciation........... 52,548 21,510
-------- -------
TOTAL................................. $244,860 $58,450
======== =======
</TABLE>
NOTE 6--SHORT-TERM DEBT
During the year ended December 31, 1998, the Company received advances from
various investors through short-term, unsecured debt instruments. The advances
bear interest at 8% and are generally due within one year of the original
advance date. Balances on these short-term advances aggregated to $458,552 and
$712,907 (unaudited) at December 31, 1998 and September 30, 1999, respectively,
and accrued interest was $3,755 and $33,524 (unaudited), respectively.
From time to time, the Company has borrowed unsecured amounts for working
capital requirements. During the nine months ended September 30, 1999, advances
and repayments of these bridge financings aggregated to $500,000 (unaudited),
none of which were outstanding at September 30, 1999. Associated with these
bridge financings, the Company issued 112,500 (unaudited) shares of its common
stock as interest and recorded $225,000 (unaudited) of interest expense related
to the stock.
NOTE 7--LONG-TERM DEBT
During the development stage, the Company has been funded in part through
the use of long-term advances from various investors located overseas. These
advances, totaling $852,268 at December 31, 1998, bear no interest and have no
stated maturity date. On January 15, 1999, in connection with the acquisition of
the Company by Sedmet, these advances were converted into 1,600,000 shares of
the Company's $0.001 par value common stock. Due to the advances being converted
at a rate below-market
F-15
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 7--LONG-TERM DEBT (CONTINUED)
to the debt holders, the Company incurred a charge to earnings for financing
costs of $4,597,000 (unaudited). Certain long-term debt holders were granted
400,000 (unaudited) warrants subsequent and related to the conversion (see
Note 11).
NOTE 8--RELATED PARTY TRANSACTIONS
The Company incurred expenses in the amounts of approximately $520,000 and
$360,000 related to compensation for officers of the Company during the year
ended December 31, 1998 and the period from April 1, 1997 (inception) to
December 31, 1997, respectively. Included in these amounts are consulting fees
and expenses paid on behalf of the officers.
On August 20, 1999 (unaudited), the Company settled a dispute with a major
stockholder by issuing a note payable for $400,000. The note is due on
November 30, 1999 and bears interest at 8% per annum. Related to this
settlement, an officer of the Company signed a non-interest-bearing note
promising to pay $400,000 to the Company. The note receivable is due in
5 years, and management believes it is fully collectible.
NOTE 9--COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its facilities under a non-cancelable lease, which
commenced on September 1, 1999 and expired on August 31, 1999. The lease
requires monthly payments of $3,139 and is renewable at the Company's option.
Rent expense was $36,585, $23,568, $54,932 (unaudited), and $27,167
(unaudited) for the year ended December 31, 1998, the period from April 1, 1997
(inception) to December 31, 1997, and the nine months ended September 30, 1999
and 1998, respectively.
MINING RIGHTS
Prior to the acquisition of INB, the Company entered into an agreement,
whereby the Company assumed all terms and obligations of a twenty-year lease
relating to mining claims in Utah. Under the agreement, the Company is required
to
F-16
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
pay a 1% net smelter returns royalty upon commencement of commercial production.
In exchange for the rights, the Company paid $10,000 and issued 50,000 shares of
common stock.
Under the lease, the Company is granted the exclusive and irrevocable right
and option to purchase the mining project at any time for $1,000,000, less all
amounts previously paid to the owner and all annual advance minimum royalty
payments, under certain conditions.
Until the lease is terminated or the project purchased, the Company must
complete certain improvements and pay advance minimum royalties in the amount of
$3,000 on or before January 11, 1999, $6,000 on or before January 11, 2000,
$9,000 on or before January 11, 2001, and $12,000 on or before January 11, 2002
and succeeding years. In addition, the Company must pay a 3% net smelter return
starting on the date of commencement of commercial production.
AGREEMENTS
On February 2, 1999 (unaudited), the Company entered into a "Web Access"
service agreement with a worldwide web access provider. The agreement requires
the Company to pay minimum monthly payments through March 2001. Minimum annual
payments required under the agreement are as follows:
<TABLE>
<CAPTION>
YEAR ENDING,
DECEMBER 31,
- ------------
<S> <C>
1999................................ $31,890
2000................................ 37,428
2001................................ 9,357
-------
TOTAL............................. $78,675
=======
</TABLE>
On July 31, 1999 (unaudited), the Company executed an agreement with an
investor relations firm. The agreement calls for monthly payments in the amount
of $5,000 (unaudited) and an option to purchase 50,000 (unaudited) shares of the
Company's common stock (see Note 12).
F-17
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
NOTE 10--INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
for federal income taxes consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- ------------
<S> <C> <C>
Deferred tax assets
Operating losses...................... $1,836,000 $13,000
Temporary differences from stock
options............................. 102,000 --
Valuation allowance..................... (1,938,000) (13,000)
---------- -------
NET DEFERRED TAX ASSET.............. $ -- $ --
========== =======
</TABLE>
Deferred tax assets consisted of net operating loss carryforwards and
temporary differences arising from the issuance of stock options. The operating
losses at September 30, 1999 were approximately $4,600,000 (unaudited) and were
generated during an interim period and as such, may be impacted as a result of
the Company's operations for the remainder of the tax year.
NOTE 11--STOCKHOLDERS' DEFICIT
SERIES A PREFERRED STOCK
On September 3, 1999, the Company sold 2,000 (unaudited) shares of its
Series A $0.01 par value convertible preferred stock for $1,000 (unaudited) per
share. The sale provided for an additional 2,000 (unaudited) shares to be
purchased within 10 days after the effective date of a Registration Statement to
be filed within 60 business days from the initial purchase of securities.
Offering costs associated with the purchase were $277,842 (unaudited), which
consisted of lawyers' fees and placement agent fees.
F-18
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 11--STOCKHOLDERS' DEFICIT (CONTINUED)
In addition, a warrant for the purchase of 250,000 (unaudited) shares of the
Company's common stock was issued to the placement agent in connection with the
offering. The warrant is exercisable immediately at $2 per share and expires on
September 3, 2004.
The Company's Series A $0.01 par value convertible preferred stock bears an
8% cumulative dividend and is convertible at the option of the holder, 50% after
the 31st day after its original issue and the remaining after the 91st day after
the original issue. The stock is convertible to the Company's common stock at
the stated value ($1,000 per share), plus accumulated, unpaid dividends, divided
by the lesser of (i) $2 per share or (ii) an amount equal to the average per
share market value for the three trading days having the lowest per share market
value during the 30 trading days immediately before the conversion date, subject
to certain adjustments. The conversion price at the date of issue approximated
the fair market value of the Company's common stock. At September 30, 1999, none
of the convertible shares were exercisable. 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 and the period from April 1, 1997
(inception) to December 31, 1997, an officer of the Company contributed $533,000
and $88,500, respectively, to the Company.
On December 23, 1997, the Company issued 3,700,000 shares of common stock in
a private placement for $34,175.
F-19
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 11--STOCKHOLDERS' DEFICIT (CONTINUED)
During the period from April 1, 1997 (inception) to December 31, 1997, the
Company issued 50,000 shares of common stock in connection with the purchase of
certain mineral rights (see Note 9).
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED)
STOCK PURCHASE WARRANTS
In connection with a private placement of its $0.001 par value common stock,
the Company issued warrants to purchase 2,925,000 shares of common stock at
$0.25 per share (see Note 11). Subsequent to December 31, 1998, all of these
warrants were exercised for $731,250 with associated costs of $106,175. In
addition, the Company issued warrants to purchase 2,925,000 shares of common
stock at $1 per share. The warrants are exercisable for a period of one year
from the effective date of the Registration Statement. As of December 31, 1998,
none of these warrants were exercised.
On July 14, 1999, the Company issued warrants to purchase 1,500,000 shares
of the Company's common stock to its Chief Executive Officer. The warrants are
exercisable at $1 per share and expire on August 1, 2004. In connection with the
warrants, the Company recognized $1,780,500 in compensation expense.
On July 14, 1999, the Company issued warrants to purchase 400,000 shares of
the Company's common stock to certain debt holders. The warrants are exercisable
at $1 per share and expire on August 1, 2004. In connection with the warrants,
the Company recognized financing charges of $474,800.
STOCK OPTION PLAN
The Company adopted the 1999 Stock Option Plan (the "1999 Plan") in 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
F-20
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED) (CONTINUED)
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 110% of
the fair market value of the Company's common stock.
STOCK OPTIONS
Stock options were granted during the nine months ended September 30, 1999,
which under certain agreements, allow employees to purchase shares of common
stock, which were issued under the provisions of the 1999 Plan. These options
expire upon certain events and were issued at exercise prices below the trading
value of the Company's underlying common stock. In accordance with generally
accepted accounting principles, the Company has recognized deferred compensation
to the extent of the fair market value the underlying securities over the
exercise price of the stock options. The deferred compensation is being
amortized over the vesting period of the options.
Related to these options, the Company has capitalized deferred compensation
in the amount of $27,025 and recognized compensation expense of $103,707 during
the nine months ended September 30, 1999.
On July 31, 1999, the Company granted an option to purchase 50,000 shares of
the Company's common stock at $6 per share. The option is exercisable
immediately and expires on August 2, 2002. In connection with the option, the
Company charged $5,000 to operations.
On March 26, 1999, the Company issued 25,000 options to purchase common
stock for $1.50 per share to a consultant for services. The options expire in
five years and were immediately vested. In connection with these options, the
Company recognized expense of $38,250.
On March 26, 1999, the Company issued 100,000 options to purchase common
stock at $1.50 per share to a consultant for services. The options expire in
five years
F-21
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 12--STOCK OPTIONS AND WARRANTS (UNAUDITED) (CONTINUED)
and were immediately vested. In connection with these options, the Company
recognized expense of $153,000.
The following summarizes the Company's stock option transactions:
<TABLE>
<CAPTION>
ALL OPTIONS EMPLOYEE PLAN OTHER OPTIONS
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
OUT- EXERCISE OUT- EXERCISE OUT- EXERCISE
STANDING PRICE STANDING PRICE STANDING PRICE
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING, SEPTEMBER 30, 1999... 497,000 $1.97 322,000 $1.50 175,000 $2.84
======= ======= =======
EXERCISABLE AT SEPTEMBER 30,
1999............................ 360,000 $2.15 185,000 $1.50 175,000 $2.84
======= ======= =======
</TABLE>
The following table summarizes information about the options outstanding at
September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
STOCK OPTIONS STOCK OPTIONS REMAINING
EXERCISE PRICE OUTSTANDING EXERCISABLE CONTRACTUAL LIFE
-------------- ------------- ------------- ----------------
<C> <C> <C> <S>
$1.50 322,000 185,000 10 years
$2.00 125,000 125,000 10 years
$6.00 50,000 50,000 10 years
------- -------
497,000 360,000
======= =======
</TABLE>
NOTE 13--YEAR 2000 ISSUE
The Company is conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the Issue.
The Issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is dependent on computer processing in the conduct of its
business activities.
F-22
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 13--YEAR 2000 ISSUE (CONTINUED)
Based on the review of the computer systems, management does not believe the
cost of implementation will be material to the Company's financial position and
results of operations.
NOTE 14--SUBSEQUENT EVENTS (UNAUDITED)
On November 1, 1999, the Company issued options to purchase 250,000 shares
of the Company's common stock to a consultant. The options are exercisable at
$1.50 per share, were immediately vested, and expire in five years from the date
of grant.
Subsequent to September 30, 1999, the Company began leasing new facilities.
The new lease calls for annual payments totaling $320,136 for the first year
with a 3.5% escalation rate each year thereafter. The lease expires on
December 31, 2004. Under the provisions of the lease, the Company is required to
deliver to the lessor a letter of credit in the amount of $240,000.
On November 1, 1999, the Company entered into an employment agreement with
its Chief Executive Officer. The agreement calls for annual payments of
$240,000, plus stock option grants to purchase a minimum of 50,000 shares of the
Company's common stock per year, and expires two years from execution.
On November 12, 1999, the Company received $500,000 in bridge financing,
secured by all assets of the Company. The advance bears an interest rate of 10%
and is due and payable on or before February 15, 2000. The loan is convertible
into 250,000 shares of common stock at the lender's election. Also in connection
with this loan, the Company issued 140,000 shares of common stock to the lenders
and granted certain stock registration rights. The financing costs associated
with the issuance of the 140,000 shares amounts to $310,520.
On December 29, 1999 the company raised $740,000, before offering costs,
through a private placement of units consisting of 10% secured promissory notes
and common stock purchase warrants. The notes mature and become immediately due
and payable on March 16, 2000. Related to the warrants, the company will
recognize interest expense of $888,000 ratably over the term of the notes. If
the notes are retired early, the remaining unamortized portion will be
recognized immediately.
F-23
<PAGE>
ENTERTAINMENT BOULEVARD, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM APRIL 1, 1997 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED.)
NOTE 14--SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
Subsequent to September 30, 1999 the company negotiated a term Sheet with a
placement agent to place a minimum of $5,000,000 to a maximum of $7,000,000 of
convertible preferred stock and stock purchase warrants.
On January 14, 2000, the company borrowed $200,000 in a convertible
promissory note. The note bears interest at 10% and is secured by all of the
assets of the company. The note is convertible into 200,000 shares of common
stock and was issued in conjunction with warrants to purchase 50,000 shares of
the company's common stock at $1.00 per share. In connection with the debt, the
company will recognize finance charges equal to the excess of the market value
of the company's common stock over the conversion rate of the debt.
F-24
<PAGE>
BETWEEN 9,143,020 AND 9,745,180 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 various investors for a total of
$37,000 in cash. The Registrant's current management has only limited
information regarding the issuances; however, it is believed that they were made
in reliance on Section 4(2) of the Securities Act of 1933 and that one of the
investors was the Registrant's sole officer and director.
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 regarding mining operations and was familiar with the Registrant's
business.
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
II-3
<PAGE>
offering, a private offering memorandum was provided to prospective investors.
All 2,925,000 of the $0.25 warrants were exercised in February 1999.
On January 15, 1999, the Registrant privately issued 2,600,000 shares of
Common Stock to the 46 holders of debt or equity in International Net
Broadcasting, LLC (the "INB Holders") in return for all of their equity or debt
interests in that entity. 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.
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).
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 accredited
investors (H.A.A. Inc., Beestons Investment Ltd. and Lowen Holdings) for
$2,000,000 in cash and (ii) agreed to issue an additional 2,000 shares of that
Preferred Stock to the investors for another $2,000,000 in cash upon the
occurrence of certain events. 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. In connection with that transaction,
II-4
<PAGE>
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.
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).
On December 28, 1999, the Registrant privately issued 7.5 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 or sophisticated and 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 or sophisticated 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
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 all but one of whom had previously
been granted warrants in the Registrant (see above).
II-5
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
3.1* Articles of Incorporation, as amended to date
3.2* Bylaws, as amended to date
4.1* Form of Common Stock certificate
4.2* Form of 8% Mandatorily Convertible Series A Preferred Stock
certificate
4.3* Form of Warrant issued to Farida Alikhan, Rochford Young,
Rohail Alikhan, Loretta Harty, Ray Longstaff, 531287
BC Ltd., RAK Enterprises, Oughton York Holdings,
Brunswick Ltd., Ray Alikhan and Raaheen Alikhan
4.4* Form of Warrant issued to Stephen Brown
4.5* Form of Warrant issued to various other investors
4.6* Form of Warrant issued to Robb Peck McCooey Clearing
Corporation
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
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
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
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
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
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<C> <S>
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.
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-11)
27* Financial Data Schedule (electronic filing version only)
</TABLE>
- ---------------------
* Previously filed.
+ To be filed by Amendment.
II-8
<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-9
<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
January 26, 2000.
<TABLE>
<S> <C> <C>
ENTERTAINMENT BOULEVARD, INC.
By: /s/ STEPHEN BROWN
-----------------------------------
Stephen Brown,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND TREASURER
</TABLE>
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement, 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 January 26, 2000
Stephen Brown Director
/s/ ARTHUR BROWN*
---------------------------------- Director January 26, 2000
Arthur Brown
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN BROWN
-----------------------------
Stephen Brown
ATTORNEY-IN-FACT
</TABLE>
II-10
<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-11
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
ENTERTAINMENT BOULEVARD, INC.
Expires December 29, 2004
No. W-
FOR VALUE RECEIVED, the undersigned, ENTERTAINMENT BOULEVARD, INC., a Nevada
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that
_________________________________ (the "Holder"),
or its registered assigns is entitled to purchase, during the period specified
in this Warrant, up to 40,000 shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
common stock, par value $0.001 per share, of the Issuer (the "Common Stock"), at
an exercise price per share equal to $1.00 per share (the "Exercise Price"),
subject to the provisions and upon the terms and conditions hereinafter set
forth. The shares of Common Stock to be issued upon exercise of this Warrant are
referred to herein as the "Warrant Shares."
1. TERM. The right to subscribe for and purchase the Warrant Shares
represented hereby shall commence upon issuance of this Warrant and shall expire
at 5:00 p.m., Los Angeles time, on December 29, 2004 (the "Term"). Prior to the
end of the Term, the Issuer will not take any action that would terminate this
Warrant.
1
<PAGE>
2. METHOD OF EXERCISE PAYMENT; ISSUANCE OF NEW WARRANT;
REGISTRATION, TRANSFER AND EXCHANGE.
(a) TIME OF EXERCISE. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
(b) MANNER OF EXERCISE. The Holder hereof may exercise this
Warrant, in whole or in part, by the surrender of this Warrant (together with
the exercise form attached hereto duly completed and executed) at the principal
office of the Issuer at 12910 Culver Boulevard, Suite I, Los Angeles,
California, or at such other location designated by the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Exercise Price multiplied by the number of Warrant Shares with respect to which
this Warrant is then being exercised (subject to adjustment in accordance with
the provisions of Section 4 hereof), payable at such holder's election (i) in
cash or cash equivalents, (ii) by surrender to the Issuer for cancellation of a
portion of this Warrant representing the difference between the total number of
Warrant Shares in respect of which this Warrant is being exercised minus the
amount determined by multiplying a fraction, the numerator of which is an amount
equal to the current market price per share of Common Stock as of the date of
such exercise less the Exercise Price, and the denominator of which is the
current market price, (iii) by cancellation of any indebtedness owed by the
Corporation to the Holder, or (iv) by a combination of the foregoing methods of
payment selected by the Holder. In any case where the consideration payable upon
such exercise is being paid in whole or in part pursuant to clause (ii) of this
Section 2(b), such exercise shall be accompanied by written notice from the
Holder specifying the manner of payment thereof and containing a calculation
showing the number of Warrant Shares with respect to which rights are being
surrendered thereunder and the net number of shares to be issued after giving
effect to such surrender.
(c) ISSUANCE OF CERTIFICATES. In the event of any exercise of
the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) a certificate or certificates for the number of
full Warrant Shares so purchased, shall be dated the date of such exercise and
delivered to the Holder hereof within a reasonable time after such exercise,
together with payment for any fractional shares as provided in Section 6 hereof,
and the Holder hereof shall be deemed for all purposes to be the Holder of the
Warrant Shares so purchased as of the date of such exercise, and (ii) unless
this Warrant has expired, a new Warrant representing the number of Warrant
Shares, if any, with respect to which this Warrant shall not then have been
exercised (less any amount thereof which shall have been canceled in payment or
partial payment of the Exercise Price as provided herein) shall also be issued
to the Holder hereof at the Issuer's expense within such time.
(d) WARRANT REGISTER. The Warrants shall be numbered and shall
be registered in a Warrant Register (the "Warrant Register"). The Issuer shall
be entitled to treat the registered holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration of
transfer of Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting
2
<PAGE>
registration of transfer, or with such knowledge of such facts that its
participation therein amounts to bad faith.
(e) TRANSFER OF WARRANT. The Warrants shall not be sold,
transferred, assigned or hypothecated, in part or in whole (other than by will
or pursuant to the laws of descent and distribution), except to registered
assigns of the Holder and thereafter only upon delivery thereof duly endorsed by
the Holder or by his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to transfer. In all
cases of transfer by an attorney, the original power of attorney, duly approved,
or an official copy thereof, duly certified, shall be deposited with the Issuer.
In case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Issuer in its discretion.
Upon any registration of transfer, the Issuer shall deliver a new Warrant or
Warrants to the persons entitled thereto. This Warrant may be exchanged at the
option of the Holder thereof for another Warrant, or other Warrants, of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares upon surrender to the Issuer
or its duly authorized agent. Notwithstanding the foregoing, the Issuer shall
have no obligation to cause Warrants to be transferred on its books to any
person if such transfer would violate the Securities Act.
(f) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment only, and
that the Holder will not offer, sell, otherwise dispose of this Warrant
or any Warrant Shares to be issued upon exercise hereof except pursuant
to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state
securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing Warrant Shares issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(iii) The restrictions imposed by this subsection (f) upon
transfer of this Warrant and the Warrant Shares to be purchased upon
exercise hereof shall terminate (A) when such
3
<PAGE>
securities shall have been effectively registered under the Securities
Act, (B) upon the Issuer's receipt of an opinion of counsel, in form
and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
insure compliance with the Securities Act or (C) upon the Issuer's
receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall
cease and terminate as to any such securities, the Holder thereof shall
be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of Warrant Shares, new stock
certificates) of like tenor not bearing the applicable legends required
by paragraph (ii) above relating to the Securities Act and state
securities laws.
3. STOCK FULLY PAID; PAYMENT OF TAXES; LOSS, THEFT, DESTRUCTION OF
WARRANTS.
(a) STOCK FULLY PAID. The Issuer represents, warrants, covenants and
agrees that all Warrant Shares that may be issued upon the exercise of this
Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
created by or through the Issuer. The Issuer further covenants and agrees that
during the period within which this Warrant may be exercised, the Issuer will at
all times have authorized and reserved for issuance upon exercise of this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
(b) PAYMENT OF TAXES. The Issuer will pay all documentary stamp taxes,
if any, attributable to the issuance of Warrant Shares; PROVIDED, HOWEVER, that
the Issuer shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any Warrants or
certificates for Warrant Shares in a name other than that of the registered
Holder of the Warrants in respect of which such Warrant Shares are issued, and
in such case the Issuer shall not be required to issue or deliver any
certificate for shares of Common Stock or any Warrant until the person
requesting the same has paid to the Issuer the amount of such tax or has
established to the Issuer's satisfaction that such tax has been paid.
(c) LOSS, THEFT, DESTRUCTION OF WARRANTS. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of this Warrant and in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor representing the
right to purchase the same number of Warrant Shares. An applicant for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Issuer may prescribe.
4. ADJUSTMENT OF EXERCISE PRICE AND WARRANT SHARE NUMBER. The Warrant
Shares purchasable upon exercise of this Warrant and the Exercise Price shall be
subject to adjustments from time to time upon the happening of certain events as
follows:
(a) MECHANICAL ADJUSTMENTS.
4
<PAGE>
(i) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate
structure affecting the Common Stock of the Issuer, except for those
events set forth in Section 4(b) below, an adjustment will be made in
the aggregate number of shares reserved for issuance upon exercise of
this Warrant and the kind, number and Exercise Price of the Warrant
Shares, provided that the number of Warrant Shares purchasable upon
exercise of this Warrant shall always be a whole number. The number of
Warrant Shares issuable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder of this Warrant shall be
entitled to receive the kind and number of Warrant Shares or other
securities of the Issuer that the Holder would have owned or been
entitled to receive after the occurrence of any of the events described
above, had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(ii) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares
purchasable upon the exercise of this Warrant; PROVIDED, HOWEVER, that
any adjustments which by reason of this paragraph (b) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-hundredth of a share.
(iii) Whenever the number of Warrant Shares purchasable upon
the exercise of this Warrant is adjusted, as herein provided, the
Exercise Price payable upon the exercise of this Warrant shall be
adjusted by multiplying the Exercise Price immediately prior to the
adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to the adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately thereafter.
(iv) For the purpose of this Subsection 4(a), the term "shares
of Common Stock" shall mean (i) the class of stock designated as the
Common Stock of the Issuer at the date of this Warrant, or (ii) any
other class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made
pursuant to paragraph (i) above, the Holder shall become entitled to
purchase any shares of the Issuer other than shares of Common Stock,
thereafter the number of such other shares purchasable upon exercise of
this Warrant and the Exercise Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraphs (i) through (iii) above, and the
provisions of Sections 1 and 2, with respect to the Warrant Shares,
shall apply on like terms to any such other shares.
(b) RIGHTS UPON CONSOLIDATION, MERGER, ETC.
5
<PAGE>
(i) In case the Issuer shall consolidate with or merge into
another corporation or entity or transfer all or substantially all of
its properties or assets to another corporation or entity (each, a
"Triggering Event"), such successor or purchasing entity may assume the
obligations hereunder, and may execute with the Issuer an agreement
that the Holder shall have the right thereafter upon payment of the
Exercise Price to purchase upon exercise of this Warrant the kind and
amount of shares and other securities and property (including cash)
which he would have owned or have been entitled to receive after the
consummation of such Triggering Event had such Warrant been exercised
immediately prior to the Triggering Event. Such agreement shall provide
for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The
Issuer shall mail to the Holder by first class mail, postage prepaid,
notice of any Triggering Event. The provisions of this Subsection
4(b)(i) shall similarly apply to successive Triggering Events.
(ii) In the event that such successor does not execute an
agreement with the Issuer as provided in paragraph (i) above, then the
Holder shall be entitled to exercise this Warrant upon the payment of
the Exercise Price during a period of at least thirty 30 days (or such
lesser number of days then remaining in the Term) which period shall
terminate not less than 10 days prior to consummation of the Triggering
Event, and thereby receive consideration in the transaction on the same
basis as other previously outstanding shares of the same class as the
Warrant Shares acquired upon exercise. Warrants not exercised in
accordance with this paragraph (ii) before consummation of the
Triggering Event will be canceled and become null and void. The Issuer
shall mail to the Holder by first class mail, postage prepaid, at least
10 days prior to the first date on which the Warrants are exercisable
pursuant to this paragraph (ii), notice of the proposed transaction
setting forth the first and last date on which the Holder may exercise
this Warrant and a description of the terms of this Warrant providing
for cancellation of the Warrants in the event the Warrants are not
exercised by the prescribed date.
(c) RIGHTS UPON LIQUIDATION. In case (i) the Issuer shall make
any distribution of its assets to holders of its shares of Common Stock
as a liquidation or partial liquidation, dividend or by way of return
of capital; or (ii) the Issuer shall liquidate, dissolve or wind up its
affairs (other than in connection with a Triggering Event); or (iii) an
involuntary liquidation occurs, then the Issuer shall cause to be
mailed to the Holder, by first class mail, at least 20 days prior to
the applicable record date, a notice stating the date on which such
distribution, liquidation, dissolution or winding up is expected to
become effective, and the date on which it is expected that holders of
shares of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property or assets
(including cash) deliverable upon such distribution, liquidation,
dissolution or winding up. The Issuer's failure to give the notice
required by this Subsection 4(c) or any defect therein shall not affect
the validity of such distribution, liquidation, dissolution or winding
up.
(d) FORM OF WARRANT AFTER ADJUSTMENTS. The form of this
Warrant need not be changed because of any adjustments in the Exercise
Price or the number and kind of securities issuable upon exercise of
this Warrant.
6
<PAGE>
5. NOTICE OF ADJUSTMENTS. Whenever the number of Warrant Shares
purchasable upon the exercise of this Warrant or the Exercise Price of such
Warrant Shares is adjusted, as herein provided, the Issuer shall cause to be
mailed by first class mail, postage prepaid, to the Holder notice of such
adjustment or adjustments setting forth the number of Warrant Shares purchasable
upon the exercise of each Warrant and the Exercise Price of such Warrant Shares
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Any failure by the Issuer to give notice to the Holder or any defect
therein shall not affect the validity of such adjustment or of the event
resulting in the adjustment, nor of the Holder's rights to such adjustment
6. FRACTIONAL SHARES. No fractional Warrant Shares will be issued in
connection with and exercise hereof, but in lieu of such fractional shares the
Issuer shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the per share market value then in effect.
7. NO RIGHTS AS STOCKHOLDERS. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
receive dividends or to consent or to receive notice as stockholders in respect
of any meeting of stockholders called for the election of directors of the
Issuer or any other matter, or any rights whatsoever as stockholders of the
Issuer.
8. NOTICES. Any notice pursuant to this Warrant by any Holder to the
Issuer or by the Issuer to the Holder, shall be in writing and shall be mailed
first class, postage prepaid, or delivered: (i) to the Issuer, at its office at
12910 Culver Boulevard, Suite I, Los Angeles, California 90066, or such other
address as the Issuer may designate in writing to the Holder; or (ii) to the
Holder, at the Holder's last known address on the books of the Issuer. The
Issuer's failure to give any notice required by this Warrant or any defect
therein shall not affect the validity of the action taken by the Issuer in
connection therewith.
9. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
principles of conflict of laws.
10. FORUM DESIGNATION. Any action or proceeding against any of the
parties hereto relating in any way to this Warrant or the subject matter hereof
shall be brought and enforced exclusively in the competent courts of California,
and the parties hereto consent to the exclusive jurisdiction of such courts in
respect of such action or proceeding.
11. HEADINGS. The headings of the sections and subsections of this
Warrant are for convenience of reference only and shall not, for any reason, be
deemed a part of this Warrant.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be executed
as of this ___ day of ___________.
7
<PAGE>
"ISSUER"
ENTERTAINMENT BOULEVARD, INC.
a Nevada corporation
By:
Stephen Brown
President and Chief Executive Officer
EXERCISE FORM
ENTERTAINMENT BOULEVARD, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder ______________ shares of Common Stock of ENTERTAINMENT BOULEVARD,
INC., as provided for therein, and tenders herewith payment of the purchase
price in full in the form of cash or a certified or official bank check in the
amount of $____________, or otherwise exercises this Warrant in accordance with
subsection ___ of Section 2 (b) of this Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of:
Name:
-----------------------------
-----------------------------------
-----------------------------------
-----------------------------------
(Please print Name, Address and
Social Security Number)
Signature
---------------------------
NOTE: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
ASSIGNMENT
Please issue a certificate or certificates for such Common Stock in the name of:
Name: _____________________________
8
<PAGE>
-----------------------------------
-----------------------------------------
(Please print Name, Address and
Social Security Number)
Signature ___________________________
NOTE: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
FOR USE BY THE ISSUER ONLY:
This Warrant No. W- ___ canceled (or transferred or exchanged) this _______ day
of __________, shares of Common Stock issued therefor in the name of
______________, Warrant No. W- _____ issued for _______ shares of Common Stock
in the name of ___________.
9
<PAGE>
MEDIA SEARCH LICENSE AGREEMENT
THIS MEDIA SEARCH LICENSE AGREEMENT ("Agreement") is made and entered into
effective October 28, 1998 (the "Effective Date"), by and between
Entertainment Boulevard, Inc., with its principal place of business at 12910
Culver Blvd, Suite 1, Los Angeles, CA 90066 USA, a California corporation,
("Media Search Partner" or EntertainmentBlvd") and AltaVista Company, a
Delaware corporation, with its principal place of business at 529 Bryant
Street, Palo Alto, CA 94301 USA ("AltaVista" or "AV").
1. DEFINITIONS. For purposes of this Agreement, "Content" shall refer to
the image media files, image media file indices, descriptive data feeds,
and other media Content resident on Media Search Partner's Web site
domain and/or aggregated by Media Search Partner, and made available to
the AltaVista search engine for purposes of generating one or more
custom multimedia search index files. For purposes of this Agreement,
"AltaVista Platform" refers to a generic set of Web pages that may also
function together as a Web site. The AltaVista Platform may contain any
or all of the following: an Internet index, a search tool (resident on
any of the AltaVista Platforms and/or any OEM version of the AltaVista
search service), advertising, or any other feature that might be
desirable on a Web site domain. For purposes of this Agreement,
"co-branding" refers to one or more web pages containing attribution and
brand features of both AltaVista and Media Search Partner.
2. LICENSE. Media Search Partner hereby grants to AltaVista (itself or
through its "Affiliates," which means any person or entity directly or
indirectly controlling, controlled by or under common control with
AltaVista), under all of Media Search Partner's intellectual property
rights, a worldwide, non-transferable, non-exclusive license, during the
term of this Agreement to access, crawl, reproduce, create derivatives
of, index, display, perform and distribute the Content to end users by
means of search results on the AltaVista Platform (as more particularly
described in Exhibit A to this Agreement). Search results may be in the
form of text links, thumbnails, both and/or some derivative form thereof.
3. USE OF TRADEMARKS. Each party grants the other a non-exclusive,
non-transferable, royalty-free right to display during the term of this
Agreement the trademarks, service marks and logos (collectively, the
"Marks") made available by such party, subject to the terms of this
Agreement and such party's typical trademark usage standards. In the
event either party determines that the other's use of the applicable
Marks is inconsistent with the applicable Mark holder's quality
standards, then upon written request and within ten (10) days, the
applicable party shall conform to the proper use of such Mark(s). If
either party fails to conform to the applicable use of the other party's
Marks, then the owner of such Marks shall have the right to suspend use
of such Mark(s) under the terms of this Agreement. Each party hereby
acknowledges and agrees that (i) the respective Marks are owned solely
and exclusively by the applicable party, (ii) except as set forth
herein, neither party has any rights, title or interest in or to the
other party's Marks and (iii) all use of the other party's Marks by
shall inure to the benefit of the applicable owner of the Mark(s). Each
party agrees not to apply for registration of the other party's Marks
(or any mark confusingly similar thereto) anywhere in the world.
TERM; TERMINATION. This Agreement shall be for an initial period of one
(1) year from the Effective Date (the "Initial Term"). In the event the
parties elect to continue this Agreement for an additional period of
time, each subsequent term of this Agreement shall be for a period of
three (3) months. This Agreement shall be renewed automatically for
additional three (3) months periods unless Media Search Partner provides
written notice of termination to AV not less than sixty (60) days before
the end of the then current term.
5. TERMINATION FOR CONVENIENCE. AV may terminate this Agreement at any
time, with or without cause, upon thirty (30) days prior written notice
to Media Search Partner. Upon termination of this Agreement, AV's
rights to publish or display the Content shall terminate. However, AV
and/or its Affiliates may continue to use previously delivered Content
for internal purposes only, including but not limited to archival. AV
and Media Search Partner shall work to ensure that end users who may
attempt to access previously delivered or produced Content are properly
referred to a non-expired Web page on the AV Platforms for a period of
thirty (30) days following termination of this Agreement.
6. REPRESENTATIONS AND WARRANTIES. Media Search Partner represents and
warrants that: (i) it has obtained all necessary consents and licenses
associated with the Content, and has full authority to grant the
licenses contained in this Agreement; and (ii) the Content does not, and
its placement within the AV Platform in accordance with this Agreement
will not: (a) violate any international, federal, state or local law or
regulation; (b) infringe any copyright, trademark, trade secret or other
intellectual property rights of any third party; (c) in any way
misappropriate any party's name or likeness, or violate any party's
right of privacy, publicity, or any other right of any third party; (d)
contain any material which is unlawful, harmful, abusive, hateful,
obscene, threatening, libelous or defamatory; (vi) the Content shall be
free of any viruses, Trojan horses, trap doors, back doors, Easter eggs,
worms, time bombs, cancelbots or other computer programming routines
that are intended to damage, interfere with, intercept, or expropriate
any system data or personal information; and (vii) its internal systems
and network shall be Year 2000 Compliant and, during the initial and
Subsequent Terms, Media Search Partner will use commercially reasonable
efforts to correct any errors which have a material adverse effect on
its internal systems and/or network.
7. INDEMNITY. Media Search Partner agrees to indemnify, defend and hold
harmless AltaVista, its affiliates and each of its respective
shareholders, officers, directors, employees and agents, harmless from
and against any and all losses, penalties, liabilities, injuries,
damages, judgments, attorneys' fees, appellate fees, and any other costs
and expenses incurred in connection with any third party claims, causes
of action, or claims by any person or entity relating to the Content
provided by Media Search Partner to AltaVista and its Affiliates
pursuant to this Agreement and/or the use by AltaVista of the Content
pursuant to this Agreement, including, but not limited to, any third
party claims alleging infringement of any copyright, patent, trademark
or other proprietary right, or alleging libel, slander, defamation or
invasion of privacy, arising from: (i) the use of the Content, Media
Search Partner's Marks, or other materials or information provided by
Media Search Partner; and (ii) any
<PAGE>
bridge Media Search Partner of the term representation and warranties set
forth in this Agreement.
8. LIMITATION OF LIABILITY. Each party's liability, and in AltaVista's
case the liability of its Affiliates, in connection with this Agreement
shall be limited to the aggregate amount of fees paid by Media Search
Partner under this Agreement. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY
BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR EXEMPLARY DAMAGES, LOST PROFITS, LOST USE OF EQUIPMENT, LOSS
OF STORED MEMORY, COST OF SUBSTITUTE EQUIPMENT OR OTHER DOWNTIME COSTS,
REGARDLESS OF WHETHER SUCH LIABILITY IS BASED ON BREACH OF CONTRACT,
TORT, STRICT LIABILITY, BREACH OF WARRANTIES, FAILURE OF ESSENTIAL
PURPOSE OR OTHERWISE, (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES), OR FOR ANY CLAIM AGAINST THE OTHER BY ANY
OTHER PARTY ARISING FROM THE RELATIONSHIP CONTEMPLATED BY THIS AGREEMENT.
9. 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.
10. PUBLICITY. Each party may issue a press release stating that they have
signed this Agreement and may utilize the other party's Marks or stock
symbol in such press release. Each party will supply the other with a
quote from an employee at the Vice President level or higher, or permit
the other party to attribute a quote to such an individual, to be
included in the initial press release. The parties agree to cooperate
with each other in announcing the Agreement to the media by making
spokespeople available, expediting approvals of media documents and
coordination thereof. Approval for such releases shall not be
unreasonably withheld by either party. Neither party shall issue or
permit to be issued, any additional press releases regarding the other
party or this agreement without prior coordination with and approval by
the other party.
11. CHANGE OF CONTROL. Each party shall provide written notice of any
Change of Control (as defined below) of such party to the other party
within ten (10) days of such change. Within thirty (30) days of receipt
of a notice of Change of Control, the other party may terminate this
contract by providing written notice of termination. A "Change of
Control" shall be deemed to have occurred if: (i) any person or entity
becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of securities
representing fifty percent (50%) or more of the combined voting power of
the party's outstanding securities; or (ii) a merger or consolidation of
the party with any other entity is approved, unless the voting
securities of the party outstanding immediately prior thereto continue
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%)
of the combined voting power of the outstanding securities of the
surviving entity immediately after such merger or consolidation.
12. GENERAL PROVISIONS.
12.1 NOTICES. All notices, requests and other communications hereunder
will be in writing and will be delivered in person, or sent by
certified mail, return receipt requested, overnight courier
service, or by facsimile to the address or facsimile number of the
parties set forth below, or to such other addresses or numbers as
may be stipulated in writing by the parties pursuant hereto.
Unless otherwise provided, notice will be effective on the date it
is officially recorded as delivered by return receipt or equivalent
or by facsimile confirmation date.
ALTAVISTA
Attn: Mark Wozniak
Title: Director of Business Development
Phone: 650.295.3300
E Mail: [email protected]
Address: 1825 S. Grant St. Suite 200
San Mateo, CA 94402
WITH A COPY TO:
Attn: Stephanie Lucie
Title: Corporate Counsel
Phone: 650.617.3443
Fax: 650.617.3528
E Mail: [email protected]
Address: 529 Bryant St.
Palo Alto, CA 94301
MEDIA SEARCH PARTNER
Attn: Adam Clampitt
Title: VP Of Business Development
Phone: 310.578.5404 x206
E Mail: [email protected]
Address: 12910 Culver Blvd. Suite 1
Los Angeles, CA 90086
14.3 ENTIRE AGREEMENT. This Agreement, together with any, appendices,
amendments, schedules and/or exhibits hereto, sets forth the entire
understanding between the parties, and supersedes any and all oral or
written
<PAGE>
agreements or understandings between the parties, as to the subject matter
of this Agreement. This Agreement may be modified only in a document
signed by both parties. This Agreement shall be binding upon and shall
inure to the benefit of the undersigned parties and their respective
successors and permitted assigns. In the event of a conflict between
any of the terms contained in this Agreement and those contained in any
appendices, amendments, schedules and/or exhibits made part of this
Agreement, the order of precedence shall be as follows:
- The Exhibits
- The Amendments
- The Appendices
- This Agreement
14.4. ASSIGNMENT. Neither party may assign this Agreement, or sublicense,
assign or delegate any right or duty hereunder, without the prior
written consent of the other, except that AV may assign this Agreement to
any of its Affiliates, or, in connection with any merger, sale of assets
or other reorganization transaction involving AV, to any other third
party. This Agreement shall inure to the benefit of AV's Affiliates.
14.5. SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding the termination or
expiration of this Agreement, the rights and obligations in Sections
3, 4, 5, 6, 7, 8, 9 and 10 shall survive termination or expiration of
this Agreement.
14.2. FORCE MAJEURE. In no event shall either party be liable to the other
for any delay or failure to perform hereunder, which delay or failure to
perform is due to causes beyond the control of said party including, but
not limited to, government restrictions, exchange or market rulings,
labor strike, war, act of civil or military authority, sabotage,
epidemic, flood, earthquake, fire, other natural disaster, or any other
event, condition or occurrence beyond the reasonable control of such
party.
14.3. WAIVER. The failure of either party at any time to require performance
by the other party of any provision hereof shall in no way affect the
full right to require such performance at any time thereafter, nor shall
the waiver by either party of a breach of any provision hereof be taken
or held to be a waiver of any succeeding breach of such provision or as
a waiver of the provision itself.
14.4. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances shall to any extent be held to be
invalid or unenforceable, the remainder of this Agreement, or the
application of such provisions to persons or circumstances as to which
it is not held to be invalid or unenforceable, shall not be affected
thereby, and each provision shall be valid and be enforced to the
fullest extent permitted by law.
14.5. RELATIONSHIP OF THE PARTIES. This Agreement does not and shall not be
deemed to constitute a partnership or joint venture between the parties
and neither party nor any of their respective directors, officers,
employees or agents shall, by virtue of the performance of their
obligations under this Agreement, be deemed to be an agent or employee
of the other.
14.6. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the laws of, the State of California without regard to
its conflict of laws principles.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
do each hereby warrant and represent that their respective signatory whose
signature appears below has been and is on the Effective Date of this
Agreement duly authorized by all necessary and appropriate corporate action
to execute this Agreement.
ALTAVISTA COMPANY
By: /s/ Greg Memo
---------------------------------
Name: GREG MEMO
-------------------------------
Title: GM AV Search
------------------------------
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
---------------------------------
Name: STEPHEN BROWN
-------------------------------
Title: CEO
------------------------------
<PAGE>
EXHIBIT A
1. CONTENT TO BE DELIVERED, INDEXED AND DISPLAYED:
a. EntertainmentBlvd.com will deliver data leads to AltaVista for the
Video Content on the following Media Search Partner site:
www.entertainmentblvd.com or successors to this site
("EntertainmentBlvd Content").
b. AV will index the EntertainmentBlvd Content and serve thumbnail
versions of the EntertainmentBlvd Content as search results on its
media search results pages.
c. EntertainmentBlvd will create a co-branded viewing page
("Co-Branded Viewing Page") that will display a full-sized version
of the EntertainmentBlvd Content thumbnails. AV users who click on
a EntertainmentBlvd Content thumbnails on AV media results pages
will link to this Co-Branded Viewing Page.
2. PRODUCTION/HOSTING OF THE VIDEO CLIP AND CO-BRANDED VIEWING PAGE:
a. Media Search Partner will produce and host the Co-Branded Viewing
Page where the video clips from the EntertainmentBlvd Content are
viewed when AV users click on EntertainmentBlvd's thumbnails on an
AV media search results page.
b. The Co-Branded Viewing Page will adhere to the AV look and feel and
AV design specifications. AV will work with EntertainmentBlvd to
create the Co-Branded Viewing Page. AV shall have approval rights
for the Co-Branded Viewing Page to insure it is consistent with
AV's design specifications. AV shall not unreasonably withhold
approval of the Co-Branded Viewing Page. The Co-Branded Viewing
Page will be located at the following URL:
www.entertainmentblvd.altavista.com.
c. AV will make available to EntertainmentBlvd, a media search box
tool on the Co-Branded Viewing Page free of charge, for a period of
one (1) year from the Effective Date of this Agreement. Should
EntertainmentBlvd elect to incorporate a media search box tool into
its site, AV will use reasonable commercial efforts to implement
the search box tool before the EntertainmentBlvd Content is
integrated and becomes available to the public as part of the AV
media search index.
d. If EntertainmentBlvd elects to incorporate an AV search box, AV
will produce and host a co-branded search results page ("Co-Branded
Results Page").
3. SEARCH RESULTS/RELEVANCY:
a. If a video search is initiated by an end user on the AV media
search page, then the media search results page may or may not
include combined results from the entire World Wide Web,
EntertainmentBlvd and/or other AV partners.
b. If ANY search query is made when a user selects the
EntertainmentBlvd Content under the premier media partner
collection, then the results page will serve thumbnails only from
the EntertainmentBlvd Content.
c. If EntertainmentBlvd elects to incorporate an AV search box on its
site (as per Section 2(c) above), and a media search (in the AV
search box) is initiated by an end user on EntertainmentBlvd's web
site, then the results page will only include Content from the
EntertainmentBlvd Content.
4. BRANDING/ATTRIBUTION:
a. The media search results page containing EntertainmentBlvd Content
thumbnails will display copyright information or other related
information as designated by EntertainmentBlvd as mouse-over text
when users' pointer passes over an EntertainmentBlvd thumbnail or
as may be agreed upon by the parties. The implementation of such
mouse-over text will be consistent with all other mouse-over
functionality on the AV media search results pages.
b. The Co-Branded Viewing Page will also contain an AV return
navigation logo/banner (to be supplied by AV).
5. RETURN NAVIGATION:
a. EntertainmentBlvd will provide AV with return navigation back to
the AV hosted page, from which the user clicked through to
Co-Branded Viewing Page.
b. AV will provide to EntertainmentBlvd the AV return navigation logo
or banner. Should AV change its back navigation logo or banner,
EntertainmentBlvd will substitute the new back navigation
logo/banner within a commercially reasonable time frame.
6. PREMIER PARTNER STATUS:
<PAGE>
a. AV shall give EntertainmentBlvd Premier Partner status free of
charge for six (6) months.
b. Premier Partner status is currently in a
developmental/experimental phase and may change from time to
time. AV will rollout Premier Partner features at its
discretion. During the term of the free Premier Partner status,
AV may add, delete, modify or enhance features and may add or
remove partners to these features at its discretion.
c. The current proposed implementation includes adding a Premier
Partner Area on AltaVista's media search page that will allow
users to search for content exclusively within a Premier
Partner's site and rotation along with the other Premier Partners
in a special Premier Partner section promoting the Partner's site
and/or special promotions or events.
7. PRESS RELEASES:
a. Either party may issue a press release announcing the
relationship, and may identify EntertainmentBlvd as an "AltaVista
Media Search Premier Partner." Either party's proposed press
release will be submitted to the other party for approval.
Neither party will unreasonably withhold approval of such.
b. Each party's proposed press release shall adhere to the terms and
conditions described in Section 10 ("Publicity") of this
Agreement.
8. DATA FEED SPECIFICATIONS/REQUIREMENTS:
a. Data feed shall be hosted on an FTP server to which AV shall have
access. The data feed will consist of a video data feed in XML
format.
b. Video data feed must contain the following:
i) Text or keywords that sufficiently describe the makeup
or content of each media item
ii) Media item URL, source, title, author, copy right and
file name
iii) Target page URL, title and abstract
iv) If available a thumbnail that visually represents the
content of each video
v) Duration, file size, and encoding information - frame
depth, rate, height, weight and/or any other relevant
data if available.
vi) If available, closed caption, teleprompter files, and
run down sheets
vii) Start and stop positions if clip is part of a larger
file
c. Thumbnails delivered to AV must be a minimum of 105x105 pixels and
a maximum of 1024x1024, (e.g. 256x256) in jpeg format. This does
not mean all images must be square. Media Search Partner grants
AV the right to create derivative works from the Content delivered
to AV for the purpose of reformatting the Content for display as
search results within AV generated search results pages. If
pre-constructed thumbnails are not available for video Content, AV
will automatically select a key frame from the first thirty
seconds of the video to act as the thumbnail.
d. The parties agree the delivery of data feeds will be in a format
to be mutually agreed upon.
e. Media Search Partner will identify to AV what can be used as a
caption, which AV will display as mouse-over text (also called
"nearby text").
9. CHANGES TO PARTNER CONTENT:
a. As EntertainmentBlvd makes updates and additions to its
Content, EntertainmentBlvd shall make such updates and
additions available to AV. EntertainmentBlvd will make
commercially reasonable efforts to notify AV of updates and
additions within two (2) business days and AV shall have the
option to incorporate such updates and additions to its media
index immediately or during its next indexing period.
b. If there is EntertainmentBlvd Content that is already indexed by
AV and EntertainmentBlvd removes or changes the location of the
Content, EntertainmentBlvd will make commercially reasonable
efforts to notify AV within in two (2) business days that the
Content has been removed or changed and AV will make
commercially reasonable efforts to remove the Content from its
index within two (2) business days.
10. DELIVERY SCHEDULE:
a. EntertainmentBlvd will deliver sample feeds for each
EntertainmentBlvd site by November 7, 1999.
<PAGE>
c. EntertainmentBlvd will produce and deliver to AV for review and
approval, the Co-Branded Viewing Page at least two (2) weeks
prior to the date EntertainmentBlvd's Content is slated to be
incorporated into the production version of the AV media search
index and results. The slated date for production will be
determined by AV and communicated to the Search Partner as soon
as such date is established by AV and incorporated into AV's
production schedule.
11. REVENUE MODEL:
a. Through the term of this Agreement, EntertainmentBlvd will pay AV
a percentage of the net e-commerce revenue accrued by
EntertainmentBlvd (EntertainmentBlvd's net e-commerce revenue
shall be fixed at eight percent (8%) for the purpose of this
agreement) equal to the percentage of traffic that AV represents
of EntertainmentBlvd's total traffic in a given month. For
example, if EntertainmentBlvd's total traffic for Month A is 10
million and AV is responsible for 1 million, then AV would
receive ten percent (10%) of EntertainmentBlvd's eight percent
(8%) of total e-commerce revenue in Month A. Since
EntertainmentBlvd cannot track AV traffic beyond the Viewing Page
and therefore cannot accurately measure AV traffic by total page
views, traffic will be measured by total unique visits to
EntertainmentBvld.
b. Through the term of this Agreement, AV shall be responsible for
the sales, management, administration, ad serving, billing and
collection for all advertising and sponsorship on any
Co-Branded Pages. AV shall pay EntertainmentBlvd 40% of Net Ad
Revenues accrued from all Banner Ads sold for the Co-Branded
Viewing Page. "Net Ad Revenues" means gross advertising
revenues accrued to AV for Banner Ads and/or other promotions
displayed on the Co-Branded Pages less third party commissions,
direct ad serving costs, doubtful accounts and concessions
(such commissions, costs, doubtful accounts and concessions, in
aggregate shall not exceed 41% of gross advertising revenue).
Fees are due and payable in full in U.S. dollars within
forty-five (45) days after the each fiscal quarter (Q1 ending
month is October, Q2 is January, Q3 is April, Q4 is July) in
which ad share revenues have been accrued.
12. REVENUE REPORTING:
a. Media Search Partner will on a weekly basis, provide Revenue
reporting of AltaVista generated traffic going to pages hosted by
Media Search Partner and shall include in such reports initial
page traffic and click through site traffic reports based upon
AltaVista generated traffic. Data will be made available through
an automated secure FTP transfer. The parties shall mutually
agree upon the format of the files. All such information shall
be subject to the confidentiality provisions herein.
b. Each party, using one of the big five accounting firms, will have
the right to audit and inspect such files, books and records of
account of the other upon reasonable notice during regular
business hours, but no more frequently than once each year. In
the event a discrepancy is found to exist, the party favored by
such discrepancy shall be entitled to payment of such amounts.
Payment of the auditor will be the responsibility of the
initiating party, unless the auditor finds a discrepancy of
greater than five percent (5%), in which case the party
responsible for the error shall pay the reasonable costs of the
auditor.
13. TRAFFIC REPORTING:
a. Media Search Partner will on a weekly basis, provide traffic
reporting of AltaVista generated traffic going to pages hosted by
Media Search Partner and shall include in such reports initial
page traffic and click through site traffic reports based upon
AltaVista generated traffic. Data will be made available through
an automated secure FTP transfer. The parties shall mutually
agree upon the format of the files.
b. All such information shall be subject to the confidentiality
provisions herein.
14. PROPOSED PREMIER PARTNERSHIP FLOW:
See Exhibit B. The Content of Exhibit B is designed to graphically represent
the current proposed navigational flow from AV search results to the viewing of
an image, video clip and/or other Content hosted and/or owned by the Media
Content Partner. It is not intended to be binding nor is it intended to
supersede any clause or term in this Agreement.
<PAGE>
[CHART]
<PAGE>
IFILM-TM- NETWORK
AFFILIATE AGREEMENT
ENTERTAINMENT BOULEVARD, INC.
This AFFILIATE AGREEMENT ("AGREEMENT") dated as of December 22, 1999
(the "EFFECTIVE DATE"), is made by and between IFILM Corp. ("IFILM"), a Delaware
corporation with a principal place of business at 400 Pacific Avenue, San
Francisco, CA 94133 and Entertainment Boulevard, Inc. ("AFFILIATE"), a Nevada
corporation with a principal place of business at 12910 Culver Boulevard, Suite
1, Los Angeles, CA 90066.
RECITALS
WHEREAS, IFILM operates the IFILM Network, a Web site portal
including the Web site with the URL of www.ifilm.com ("IFILM WEB SITE"), and
that features, among other things, a community for the viewing and discussion
of films;
WHEREAS, Affiliates maintains a Web site portal identified by the
URL of www.entertainmentblvd.com ("AFFILIATE WEB SITE") and that offers its
users access to various levels of commerce, content, or communities on the
World Wide Web;
WHEREAS, IFILM and Affiliate seek to enter into a relationship
whereby portions of the IFILM Web Site may be displayed on the Affiliate Web
Site according to the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the IFILM and
Affiliate agree as follows:
ARTICLE I
IFILM AREA ON AFFILIATE WEB SITE
IFILM AREA ON AFFILIATE WEB SITE. Affiliate, at its own expense, shall build
and maintain an area on the Affiliate Web Site ("IFILM AREA") for the purpose
of displaying portions of the IFILM Web Site, such as films ("FILMS"),
related information, functionalities, or custom software (collectively
referred to, including Films, as "Content"), as these terms are defined on
Exhibit "A" attached hereto.
The IFILM Area shall be designed in such a manner to include the
following:
DISPLAY OF IFILM LOGO. The IFILM Area shall include a prominently
displayed authorized IFILM logo that when electronically depressed
brings the user of the Affiliate Web Site to the IFILM Web Site.
FILMS PRECEDED BY IFILM LOGO. Prior to and/or at the conclusion of
the display or "streaming" of a Film, IFILM shall have right to place
an "in-stream" authorized IFILM logo.
DISPLAY OF TERMS OF USE. The IFILM Area shall include a link
identified as "Terms of Use" and that when electronically depressed
brings the user of the Affiliate Web Site to the IFILM NETWORK'S TERMS
OF USE AGREEMENT.
ACCESS TO CONTENT. Affiliate shall access the Content only by means
specified by IFILM in writing, such as a link to IFILM's server(s) or
use of secure protocols for verification of Affiliate's identity.
Affiliate shall take reasonable precautions to ensure that the Content
is not misused or misappropriated by any third party. Affiliate shall
access the IFILM server(s) only for the purposes expressly set forth in
this Agreement.
NO MODIFICATION OF CONTENT. Affiliate shall not modify or alter the
Content in any manner, including, without limitation, the insertion of
"in-stream" advertisements or notices or the removal of copyright or
proprietary information, without the prior written consent of IFILM.
<PAGE>
NO UNAUTHORIZED MATERIALS. Except for Banner Advertising (as defined
below), the IFILM Area shall consist only of the materials or
information that have been authorized by IFILM in writing or pursuant
to the terms of this Agreement.
REMOVAL OF CONTENT. Affiliate agrees to immediately remove any Content
from the IFILM Area that IFILM requests to be removed, provided that
IFILM supplies Affiliate with replacement Content in a comparable
amount.
ARTICLE II
ADVERTISING
INTERSTITIAL ADVERTISING. Prior to and/or at the conclusion of the display or
streaming of a Film, IFILM shall have the right to sell (or give away for
promotional purposes) and place an "in-stream" advertisement ("INTERSTITIAL
ADVERTISING") of a duration of thirty (30) seconds or less. Affiliate and IFILM
shall each be entitled to fifty percent (50%) of the net revenues, if any,
resulting from Interstitial Advertising. Net revenue from Interstitial
Advertising means gross revenue less third party agencies and a twelve percent
(12%) administrative fee. For the first six (6) months of the term of this
Agreement, Affiliate shall have the first opportunity to exclusively sell
Interstitial Advertising. After the first six (6) months of the term of this
Agreement, the sale of Interstitial Advertising shall be at the sole discretion
of IFILM. IFILM shall not include advertisements of companies in direct
competition with affiliate.
BANNER ADVERTISING. In the event that the IFILM Area includes any advertisement
(other than Interstitial Advertising) ("BANNER ADVERTISING"), Affiliate and
IFILM shall each be entitled to fifty percent (50%) of the net revenues, if
any, generated from Banner Advertising. Net revenues means gross revenue less
third party agencies and a twelve percent (12%), with said twelve percent (12%)
being allocated to Affiliate to cover its production and selling costs.
PAYMENT. Affiliate and IFILM shall provide each other with accounting
statements and the amount of advertising revenue due to the other party under
this Agreement within thirty (30) days following each quarter of the calendar
year.
AUDIT. Affiliate and IFILM shall have the right, upon thirty (30) days prior
written notice, to audit each others' books and records pertaining to the
accounting statements hereunder once each calendar year during the term of this
Agreement and once within one year of termination. Any such audit may be
conducted only once with respect to any particular accounting statement, shall
be made during regular business hours where the other party's books and records
are maintained, and shall be conducted by an independent auditor who agrees to
be bound by the confidentiality provisions of this Agreement. Any such audit
shall be conducted at the expense of the party seeking the audit, except that
if such audit reveals an underpayment in excess of ten percent (10%) of monies
owing, then the party conducting the audit will be entitled to be reimbursed
for its reasonable out-of-pocket costs associated with the audit.
ARTICLE III
TERM
DURATION OF AGREEMENT. The term of this Agreement shall be one (1) year from
the Effective Date and thereafter shall automatically renew on a month-to-month
basis.
TERMINATION. During the first ninety (90) days of this Agreement, Affiliate or
IFILM may unilaterally terminate this Agreement at any time, with or without
cause, by providing the other party with thirty (30) days written notice of
termination. After the first ninety (90) days of this Agreement, Affiliate or
IFILM may unilaterally terminate this Agreement at any time, with or without
cause, by providing the other party with ninety (90) days written notice of
termination. Notwithstanding the foregoing, either party may terminate this
Agreement upon a material breach of the other party if such a breach has not
been cured within twenty (20) days after written notice. Upon termination of
this Agreement, the rights granted by the parties shall automatically revert
back to respective parties.
ARTICLE IV
PRESS RELEASES
Both Affiliate and IFILM will consult with each other and obtain the other
party's prior consent before issuing any press release with respect to the
transactions contemplated by this Agreement.
<PAGE>
ARTICLE V
NO INFRINGEMENT/OBSCENE/ILLEGAL CONTENT
Affiliate and IFILM represent to the best of their information, knowledge and
belief that the rights provided to the other party under this Agreement will
not violate or infringe upon the copyright, literary, privacy, publicity,
trademark, service mark or any other personal or property right of any person
or entity, nor will same constitute a libel or defamation of any person
(collectively, "THIRD PARTY RIGHTS"). IFILM acknowledges that the IFILM
NETWORK'S TERMS OF SERVICE AGREEMENT ("SERVICE AGREEMENT") directs a user of
the IFILM Web Site not to display Content constituting obscenity,
exploitation of children, or infringement of Third Party Rights.
Notwithstanding the above, Affiliate acknowledges that IFILM does not make
any representation or warranty that the Content does not or will not violate
any Third Party Rights or that the Content complies with the terms of the
Service Agreement. Affiliate represents and warrants that the operation of
the Affiliate Web Site does not violate any rights or applicable laws or
regulations that would give rise to an action or claim against IFILM as
result of the display of the IFILM Area on Affiliate Web Site.
Except for any obligations arising out of the parties' indemnity obligations
or actions relating to willful misconduct, IFILM and Affiliate shall not be
liable for any direct, incidental, consequential, indirect, or punitive
damages arising out of or connected with the subject matter of this Agreement.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY CONTAINED HEREIN,
NO PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED, AS TO ANY MATTER INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE
WHICH WOULD EXTEND BEYOND THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN.
ARTICLE VI
INDEMNIFICATION
Each party agrees to indemnify and hold harmless the other party and its
respective officers, directors, shareholders, employees, accountants,
attorneys, agents, affiliates, subsidiaries, permitted successors and assigns
from and against any and all third party claims, damages, liabilities, costs
and expenses, including reasonable legal fees and expenses, arising out of or
related to any breach of any warranty, representation, covenant or agreement
made by the indemnifying party in this Agreement and that are reduced to
final judgment or settled with consent of the other party. The party seeking
indemnification shall give prompt written notice to the indemnifying party of
any claim, action or demand for which indemnity is claimed. The party seeking
indemnification shall not take any action that may prejudice the other
party's defense or increase its liability. The other party has the right to
participate in the defense of a claim with its own counsel.
ARTICLE VII
CONFIDENTIALITY
CONFIDENTIALITY. During the period this Agreement is in force and thereafter,
each party will use and reproduce the other's Confidential Information only
for purposes of this Agreement and only to the extent necessary for such
purposes and will restrict disclosure of the other party's Confidential
Information solely to its employees, consultants or independent contractors
with a need to know, who have undertaken a written obligation of
confidentiality substantially similar to that contained herein, and who will
not use or disclose the other party's Confidential Information to any third
party without the prior written approval of the other party. Notwithstanding
the foregoing, it will not be a breach of this Agreement to disclose
Confidential Information of the other party if required to do so under law or
in a judicial or other governmental investigation or proceeding, provided the
other party has been given reasonable prior written notice and the disclosing
party has sought reasonable safeguards against widespread dissemination prior
to such disclosure.
For the purposes of this Agreement, "CONFIDENTIAL INFORMATION" means: (i) the
terms and conditions of this Agreement; (ii) the party's trade secrets,
business plans, strategies, methods and/or practices; and (iii) any other
information relating to either party or its business that is not generally
known to the public, including but not limited to information about either
party's personnel, products, customers, marketing strategies, services or
future business plans. Notwithstanding the foregoing, Confidential
<PAGE>
Information specifically excludes (A) information that is now in the public
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (B) information that is known
to the parties without restriction, prior to receipt from the other party
under this Agreement, from its own independent sources as evidenced by such
party's written records, and which was not acquired, directly or indirectly,
from the other party; (C) information that either party receives from any
third party reasonably known by such receiving party to have a legal right to
transmit such information, and not under any obligation to keep such
information confidential; and (D) information independently developed by the
party's employees or agents provided that the party can show that those same
employees or agents had no access to the Confidential Information received
hereunder.
ARTICLE VIII
INTELLECTUAL PROPERTY
ALL RIGHTS RESERVED. All rights not expressly granted to Affiliate by IFILM
under this Agreement are reserved by IFILM. All rights not expressly granted
to IFILM by Affiliate under this Agreement are reserved by Affiliate.
Without limiting the forgoing:
During the term of this Agreement and thereafter, Affiliate agrees not to use
any of IFILM's trademarks, service marks or logos or any confusingly similar
marks for any purpose without the express prior written consent of IFILM in
each instance.
Upon termination of this Agreement, Affiliate shall not use or retain any
copies or reproductions of the Content.
IFILM shall have all right, title, and interest in any data resulting from
iFilm-Directed Processing, including but not limited to, the encoding,
compressing, formatting, and processing of audio and video data for streaming
playback over the Internet or direct playback on a prepared file such as
DVDROM, CDROM, or other.
The parties acknowledge that, except as expressly provided for in this
Agreement, no party shall acquire any right, title, or interest in the other
parties' Technology. Each party shall not copy, modify, adapt, translate,
prepare derivative works from, decompile, reverse engineer, disassemble or
otherwise attempt to derive source code, re-sell, loan, rent, pledge, assign,
sublicense or otherwise transfer the other party's Technology.
For the purposes of this Agreement, "TECHNOLOGY" means the parties' Web sites
and any and all Intellectual Property, including without limitation all the
Interface Tools, databases, user lists, source code and object code therefore,
derivative products thereof and all algorithms, ideas and other related
Intellectual Property therein. "INTELLECTUAL PROPERTY" means any and all
rights existing from time to time under patent law, copyright law,
semiconductor chip protection law, moral rights law, trade secret law,
trademark law, unfair competition law, publicity rights law, privacy rights
law, and any and all other proprietary rights, and any and all applications,
renewals, extensions and restorations thereof, now or hereafter in force and
effect worldwide. "INTERFACE TOOLS" means both the password-protected,
hypertext transfer protocol (HTTP) interface provided by IFILM to Affiliate to
allow Affiliate to update the IFILM Area as well as any and all hardware
and/or software tools, including source code and object code, provided by
IFILM to Affiliate to allow Affiliate to use the HTTP interface.
ARTICLE IV
MISCELLANEOUS
9.1 RELATIONSHIP OF PARTIES. The parties are independent contractors under
this Agreement and nothing herein will be construed to create a partnership,
joint venture or agency relationship between them. No party has authority to
enter into agreements of any kind on behalf of the other.
9.2 CHOICE OF LAW AND FORUM. This Agreement, its interpretation,
performance or any breach thereof, will be construed in accordance with, and
all questions with respect thereto will be determined by, the laws of the
State of California applicable to contracts entered into and wholly to be
performed within said state. Both parties hereby consent to the personal
jurisdiction of the State of California, acknowledge that venue is proper in
any state or Federal court in the State of California, agree that any action
related to this Agreement, subject to Section 9.14, must be brought in a
state or Federal court in the State of California, and waive any objection it
has or may have in the future with respect to any of the foregoing.
<PAGE>
9.3 ENTIRE AGREEMENT. This Agreement contain the entire understanding of
the parties hereto with respect to the transactions and matters contemplated
hereby, supersedes all previous agreements among the parties concerning the
subject matter, and cannot be amended except by a writing signed by the
parties. No party hereto has relied on any statement, representation or
promise of any other party or with any other officer, agent, employee or
attorney for the other party in executing this Agreement except as expressly
stated herein.
9.4 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in multiple counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
Facsimile signatures will be considered original signatures.
9.5 SURVIVAL. All terms of this Agreement, which by their nature extend
beyond its termination, including, without limitation, confidentiality
obligations, remain in effect until fulfilled and apply to respective
successors and assigns.
9.6 NOTICE. Any notice required for or permitted by this Agreement shall
be in writing and shall be delivered as follows with notice deemed given as
indicated: (i) by personal delivery when delivered personally, (ii) by
overnight courier upon written verification or receipt, (iii) by telecopy or
facsimile transmission when confirmed by telecopier or facsimile transmission
report, or (iv) by certified or registered mail, return receipt requested,
upon verification of receipt. All notices must be sent to the addresses first
described above or to such other address that the receiving party may have
provided for the purpose of notice in accordance with this Section. Notices
to IFILM shall be addressed as written first above and separately addressed
to the Chief Executive Officer and Director of Legal Affairs.
9.7 ASSIGNMENT. No party may assign its rights or delegate its
obligations under this Agreement without the other party's prior written
consent, except to the surviving entity in a merger or consolidation in which
it participates or to a purchaser of all or substantially all of its assets,
so long as such surviving entity or purchaser shall assume in writing
performance of all of the terms of this Agreement.
9.8 NO THIRD PARTY BENEFICIARIES. All rights and obligations of the
parties, hereunder are personal to them. This Agreement is not intended to
benefit, nor shall it be deemed to give rise to, any rights in any third
party.
9.9 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
9.10 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
9.11 FORCE MAJEURE. No party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder (except for
the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, earthquakes, acts of God, war, governmental
action, or any other cause which is beyond the reasonable control of such
party (each a "FORCE MAJEURE EVENT"). Each party will use its reasonable best
efforts to notify the other party of the occurrence of a Force Majeure Event
within five (5) business days of such occurrence.
9.12 WAIVER. The failure of a party to require performance by the other
party of any provision shall not affect the full right to require such
performance at any time thereafter; nor shall the waiver by either party of a
breach of any provision hereof be taken or held to be a waiver of the
provision itself.
9.13 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be contrary to law, such provision shall be
changed and interpreted so as to best accomplish the objectives of the
original provision to the fullest extent allowed by law and the remaining
provisions of this Agreement shall remain in full force and effect.
9.14 ARBITRATION. Except as otherwise set forth herein, any dispute or
controversy arising out of or relating to any interpretation, construction,
performance or breach of this Agreement shall be settled by arbitration to be
held in San Francisco, California, in accordance with the rules of the
American Arbitration Society. The decision of the arbitrator shall be final,
conclusive and binding on the parties. The parties agree that judgment may be
entered on the arbitrator's decision in a court of competent jurisdiction as
set forth in Section 9.2. Notwithstanding any provision in this Agreement to
the contrary, either party may commence an action in a court of competent
jurisdiction pursuant to Section 9.2 in order to obtain injunctive relief to
terminate the violation of a party's Intellectual Property rights or
Confidential Information.
9.15 AUTHORITY. The parties represent that they each have the right to
enter into this Agreement and that person signing on behalf of the respective
party has authority to do so.
<PAGE>
9.16 ATTORNEYS' FEES. Should a party resort to litigation or arbitration
in connection with this Agreement, the prevailing party shall be entitled, in
addition to such other relief as may be granted, to recover from the
nonprevailing party the prevailing party's attorneys' fees and costs in such
litigation or arbitration.
9.17 CAPTIONS. The captions used in this Agreement have been inserted for
convenience and for reference only and shall not be deemed to limit or define
the text of this Agreement.
IN WITNESS WHEREOF, the undersigned parties hereby agree to the foregoing.
AFFILIATE
By: /s/ Stephen Brown
--------------------------
Name: STEPHEN BROWN
-------------------------
Title: CEO
------------------------
Date: 12-22-99
------------------------
IFILM CORP.
By: /s/ Rodger Radskman
--------------------------
Name: RODGER RADSKMAN
-------------------------
Title: FOUNDER/CO-CHAIRMAN
------------------------
Date: 12-23-99
------------------------
[Signature Page to AFFILIATE AGREEMENT]
<PAGE>
EXHIBIT "A"
TO AFFILIATE AGREEMENT
For the purposes of this Agreement, the terms "Content" and "Film" shall mean
the following (except for any Film that IFILM may be prohibited from
providing) Affiliate with access to pursuant to an agreement with an IFILM
content provider:
i. IFILM OF THE DAY 1 Film
ii. FEATURED IFILMS - 5-10 Films
iii. MOST VIEWED - 20 Films
iv. HIGHEST RATED 20 Films
v. News, articles, and reviews as may be mutually agreed upon
by IFILM and Affiliate.
***
<PAGE>
EXHIBIT 10.38
ISP AND MICROSOFT
NETWORK CREDITS PROGRAM SERVICES AGREEMENT
This Network Credits Program Services Agreement (the "Agreement") is
entered into and effective as of October 1, 1999 (the "Effective Date") by and
between Microsoft Corporation, a Washington corporation located at One Microsoft
Way, Redmond, WA 98052 ("Microsoft") and ISP, as described immediately below.
This Agreement is entered into with reference to the following ISP
details, as well as the definitions set forth in Section 1 and elsewhere in this
Agreement:
- --------------------------------------------------------------------------------
ISP Corporate Information: Corporate Name: Entertainment Boulevard.,
Inc.
Place of Incorporation: Nevada
Address for Notices: 12910 Culver Blvd.
Suite I, Los Angeles, CA 90066
- --------------------------------------------------------------------------------
ISP Contact: ISP Contact/Title: Adam Clampitt/VP
Business Development
Telephone Number: 310-578-5404
Facsimile Number: 310-578-6304
Email: [email protected]
- --------------------------------------------------------------------------------
ISP Name and ISP Service Name(s) ISP Name: Entertainment Boulevard
(as requested for press release): ISP Service Name(s): Encoding
- --------------------------------------------------------------------------------
"ISP Web Site": www.entertainmentblvd.com and any
successors, additional and/or new versions
of such Web site(s) owned or controlled by
ISP during the Term
- --------------------------------------------------------------------------------
"Term": Beginning on the Effective Date and
continuing through October 1, 2000 unless
earlier terminated in accordance with
Section 9
- --------------------------------------------------------------------------------
1. DEFINITIONS
1.1 ABOVE THE FOLD means the placement of Content (including an icon and/or
link) or other material on ISP Web Site pages such that the material is
viewable on a computer screen at a 800 x 600 pixels resolution when the
user first accesses such Web page and without having to scroll down to
view more of the Web page.
1.2 ASF means the proposed industry standard format referred to as the
"Advanced Streaming Format," which, as of the Effective Date, is in
comment/revision processes within industry standards bodies, and also any
successors or replacements for such format that may be designated by
Microsoft.
1.3 CONFIDENTIAL INFORMATION means: (a) any source code of software
disclosed by either party to the other party; (b) any trade secrets
and/or other proprietary non-public information not generally known
relating to either party's product plans, designs, costs, prices or
names, finances, marketing plans, business opportunities, personnel,
research, development or know-how; and (c) the terms and conditions of
this Agreement. "Confidential Information" does not include information
that: (i) is or becomes generally known or available by publication,
commercial use or otherwise through no fault of the
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 1 OF 15
<PAGE>
receiving party; (ii) is known and has been reduced to tangible form
by the receiving party prior to the time of disclosure and is not subject
to restriction; (iii) is independently developed by the receiving party
without the use of the other party's source code, trade secrets,
information, or terms and conditions (all as referenced and further
described in clauses (a), (b) and (c) of this Section 1.3); (iv) is
lawfully obtained from a third party that has the right to make such
disclosure; or (v) is made generally available by the disclosing party
without restriction on disclosure.
1.4 CONTENT means data, text, audio, video, graphics, photographs, artwork
and other technology and materials.
1.5 ISP SERVICES means the provision by ISP, at any time during the Term, of
development, production, encoding, hosting, management, delivery, and/or
other services involving "live," "on-demand" or archived Streaming Media,
or applications related to the downloading and playing of multimedia
Content, to third parties.
1.6 ISP SERVICES GUIDELINES means the guidelines and procedures on (i) how
ISP will be engaged by Network Credits Program Participants to deliver
ISP Services to such customers, and (ii) how ISP will apply Network
Credits against such provision of services, all as more fully described
in Exhibit A.
1.7 MICROSOFT SOFTWARE means Windows NT Server (including Microsoft Windows
NT Server Windows Media Services), Windows Media Tools, Microsoft Site
Server 4.0, and all Updates thereto that are commercially released during
the Term.
1.8 NETWORK CREDITS means credits available to Network Credits Program
Participants that may be applied against the cost of ISP Services
pursuant to the ISP Services Guidelines. The total dollar value of
Network Credits available under this Agreement shall equal the dollar
amount paid to ISP by Microsoft during the Term, as set forth in
Section 2.1. Exhibit A sets forth additional terms agreed to by the
parties with respect to the valuation of such Network Credits.
1.9 NETWORK CREDITS PROGRAM means the program established by Microsoft
whereby Network Credits Program Participants may use Network Credits to
obtain third parties' services, such as ISP Services, to deliver Content
to Network Credits Program Participant customers through the use of
Windows Media Technologies.
1.10 NETWORK CREDITS PROGRAM PARTICIPANT means an Internet content provider or
other entity (which may include Microsoft) designated by Microsoft in its
sole discretion to participate in the Network Credits Program.
1.11 STREAMING MEDIA means multimedia Content that is transmitted and played
or displayed via the Web incrementally, or in semi-real time, such that
it can be heard, viewed or received by an end user with minimal download
delays, if any.
1.12 UPDATES means, as to any Microsoft software, all subsequent public
releases thereof during the Term, including public maintenance releases,
error corrections, upgrades, enhancements, additions, improvements,
extensions, modifications and successor versions.
1.13 WINDOWS MEDIA PLAYER means the North American English version of the
upgrade to
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 2
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
the Windows 95 and Windows 98 Microsoft Windows Media Player client
technology that displays ASF, Windows Media Audio, other formats of
Streaming Media, and other multimedia data-types, and all successors and
Updates to such technology which are commercially released during the
Term.
1.14 WINDOWS MEDIA TECHNOLOGIES means, collectively and interchangeably,
Windows Media Player, Microsoft Windows NT Server Windows Media Services,
and Windows Media Tools.
1.15 WINDOWS MEDIA TOOLS means a collection of Microsoft tools, including
without limitation Windows Media Encoder, for creating and editing on
demand and live Content in ASF and for converting other file formats to
ASF.
All other initially capitalized terms shall have the meanings assigned to them
in this Agreement.
2. MICROSOFT OBLIGATIONS
2.1 FEE. In consideration of ISP's provision of ISP Services to Network
Credits Program Participants under this Agreement, Microsoft will pay the
sum of $100,000 to ISP during the Term. Microsoft will pay such amount
in accordance with the following payment schedule:
(a) A payment of One Hundred Thousand Dollars ($100,000) shall be made
to ISP by Microsoft within thirty (30) days after the effective
date.
The total dollar value of Network Credits available under this Agreement
at any given date shall equal the dollar amount paid to ISP by Microsoft
pursuant to this Section 2.1 through such date, less any Network Credits
already applied for ISP Services to Network Credits Program Participants
in accordance with the terms of this Agreement.
2.2 LICENSE GRANT. Microsoft hereby grants to ISP a non-exclusive,
non-transferable, royalty-free license for the Term, subject to the
further terms of the end user license agreement accompanying the
applicable software, to use the Microsoft Software in object code form
only on computers owned or controlled by ISP solely for purposes of
providing ISP Services that use Windows Media Technologies. Microsoft
will deliver to ISP copies of the Microsoft Software for use hereunder as
described in Section 2.5.
2.3 DEPLOYMENT SUPPORT. During the Term, and at no charge to ISP, Microsoft
shall provide high-level technical support from Microsoft's developer
relations group or product support group in order to assist ISP with its
obligations under this Agreement. Such support shall include providing
reasonable on-site deployment support services to ISP, provided that
Microsoft shall be entitled to charge ISP at its then-current rates for
any such on-site deployment support services which exceed a cumulative
total of One-Half (.5) of a forty (40)-hour person-week (i.e., a total of
Twenty (20) hours).
2.4 PROMOTION OF ISP'S SERVICES. During the Term, Microsoft will use
commercially reasonable efforts to include and promote ISP as a provider
of hosting and other services related to Streaming Media, including
without limitation as part of Microsoft's applicable marketing efforts
and materials, sales training, Web sites, and other promotions,
consistent with Microsoft's promotion of other Network Credits Program
service
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 3
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
providers which have entered into agreements with Microsoft on terms
similar to those in this Agreement.
2.5 EARLY RELEASES. During the Term, Microsoft will provide to ISP, at no
charge, successive final and early (beta, and where practical as
determined by Microsoft in its sole discretion, pre-beta) releases of
Microsoft Software in object code form. Any Microsoft Software provided
hereunder may be used by ISP only in accordance with the license grants
accompanying such Microsoft Software and the further limitations set
forth in Section 2.2. ISP understands that pre-release software is not
intended for full-scale commercial use.
3. ISP OBLIGATIONS
3.1 ISP SERVICES. In consideration of the fees paid by Microsoft under
Section 2.1, ISP shall provide to each Network Credits Program
Participant the amount and type of ISP Services designed by Microsoft
for such participant. Such application of the Network Credits shall
continue until the earlier of the exhaustion of all Network Credits or
twelve (12) months after the date on which this Agreement terminates or
expires. In the event that Microsoft authorizes ISP to provide ISP
Services that exceed in value (as calculated pursuant to the terms set
forth in Exhibit A) the value of then-existing Network Credits that have
been paid for and have not yet been applied under this Agreement,
Microsoft agrees to pay ISP for such ISP Services in accordance with
ISP's then-current pricing to third parties which are purchasing ISP
Services in aggregate volumes comparable to those being purchased by
Microsoft in connection with this Agreement.
3.2 USE AND PROMOTION OF WINDOWS MEDIA TECHNOLOGIES. Throughout the Term, ISP
will develop and deploy Windows Media Technologies-compatible services
and formats and promote the use of the same to all of its prospective
customers for Streaming Media-related services and applications. ISP's
use and promotion of Windows Media Technologies shall include:
(a) CONTENT FORMAT. Within Sixty (60) days after the Effective Date
(the "Trigger Date"), and continuing thereafter throughout the
Term, all Streaming Media available on the ISP Web Site shall be
made available in Windows Media Technologies-compatible ASF and/or
Windows Media Audio formats, as appropriate; provided, however,
that nothing herein shall be deemed to limit ISP's ability to make
Streaming Media available in other Streaming Media formats.
(b) DEPLOYMENT OF SERVICES. Throughout the Term, ISP will make
available and promote to its customers all new or updated services
related to Streaming Media on Windows Media Technologies platforms
and in Windows Media Technologies-compatible formats, as
applicable, concurrently with or sooner than the time that ISP
makes such new applications and services available based on or in
conjunction with other Streaming Media technologies or formats.
(c) SPONSORSHIP. Beginning on the Effective Date and continuing
thereafter throughout the Term, ISP shall include on ISP Web Site
pages a prominent "Get Windows Media Player" link logo (the
"Windows Media Sponsorship Notice") which links to a
Microsoft-authorized Windows Media Player download site
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 4
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
Above the Fold on each ISP Web Site page that contains or provides
access to Streaming Media or that materially focuses on any ISP
Service that relates to Streaming Media. Such notice shall be
included in at least as prominent a manner and position, on every
page of the ISP Web Site, as any sponsorship or other notice
concerning other streaming media technologies. In all cases, the
Windows Media Sponsorship Notice shall be a minimum of 65 by 57
pixels, and shall conform to trademark usage standards provided by
Microsoft to ISP from time to time. Microsoft shall be entitled
to substitute a different hypertext link and/or link logo as the
Windows Media Sponsorship Notice, subject to the same pixel size
restrictions as are set forth in this Section 3.2(c), in place of
the "Get Windows Media Player" link logo for purposes of this
Agreement, including without limitation ISP's responsibilities
under this Section 3.2(c), upon Microsoft's reasonable advance
written notice to ISP.
(d) USES OF THE GET WINDOWS MEDIA PLAYER LOGO. All use by ISP of the
"Get Windows Media Player" link logo (or any successor logo) in
connection with this Agreement is subject to compliance with
Microsoft's guidelines relating to the use of such logo. The
current version of such guidelines as of the Effective Date is set
forth in Exhibit B hereto.
3.3 PUBLICITY. ISP will work with Microsoft to finalize a mutually agreeable
press release to be released upon both parties' execution of this
Agreement, provided that the text of such press release must have been
approved in writing by each party before its release. In such press
release, ISP shall endorse Windows Media Technologies, ASF and Windows
Media Audio as a leading platform and set of formats used by ISP in its
services. Further, during the Term, ISP shall work with Microsoft to
develop and release joint press announcements as may be agreed by the
parties, and ISP shall not itself issue nor approve press releases from
third parties that are inconsistent with the spirit of this Section 3.3.
During the Term, ISP will also provide Microsoft with reasonably detailed
information on ISP's use of Microsoft technology in its business for
inclusion in a case study which ISP shall be entitled to review and
approve, with such approval not be unreasonably withheld or delayed.
3.4 REPORTING. By the tenth (10th) day of each calendar month during the Term
(other than the month in which the Effective Date falls), ISP shall
provide a report to Microsoft setting forth the following information
concerning the previous calendar month, to the extent ISP's provision of
such information to Microsoft does not conflict with any obligation of
ISP to a customer.
(a) The total number of minutes of video and audio material encoded
per month and the total number of minutes of video and audio
material encoded to date.
(b) The number of units encoded i.e. 20 Music Videos, 30 CD's, 120
individual songs, etc. and specific accounting of the various data
rates for each unit.
(c) The total amount of the materials encoded in Windows Media in
comparison to other formats encoded by ISP.
ISP shall provide all reports hereunder to Microsoft via Microsoft's
Web reporting system located at http://webevents.microsoft.com/report.asp, or
any successor thereto. All information provided pursuant to this Section
will be deemed to be Confidential Information of Microsoft.
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 5
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
4. NON-EXCLUSIVE
Nothing in this Agreement shall be deemed to restrict either party's ability
to license, develop, sub-license, manufacture, deploy, support, promote, or
distribute software, Content, Streaming Media or any other format or
technology, whether or not similar to Windows Media Technologies.
5. CONFIDENTIALITY
5.1 Each party shall protect the other's Confidential Information from
unauthorized dissemination and use with the same degree of care that such
party uses to protect its own like information and in no event using less
than a reasonable degree of care. Neither party will use the other's
Confidential Information for purposes other than those necessary to
directly further the purposes of this Agreement. Neither party will
disclose to third parties the other's Confidential Information without
the prior written consent of the other party. Except as expressly
provided in this Agreement, no ownership or license rights are granted
hereby in any Confidential Information. The other provisions of this
Agreement notwithstanding, either party will be permitted to disclose the
Confidential Information to its outside legal and financial advisors. In
addition, either party will be permitted to disclose Confidential
Information to the extent required by applicable law, provided, however,
that before making any such legally required disclosure, the disclosing
party shall first give written notice of the intended disclosure to the
other party, within a reasonable time from the time disclosure is
requested prior to the time when disclosure is to be made, and the
disclosing party will exercise all reasonable efforts, in cooperation
with and at the expense of the other party, consistent with reasonable
time constraints, to obtain confidential treatment for all non-public and
sensitive provisions of this Agreement, including without limitation
dollar amounts and other numerical information.
5.2 The parties' obligations of confidentiality under this Agreement shall
not be construed to limit either party's right to independently develop
or acquire products without use of the other party's Confidential
Information. Further, either party shall be free to use for any purpose
the residuals resulting from access to or work with such Confidential
Information, provided that such party shall maintain the confidentiality
of the Confidential Information as provided herein. The term "residuals"
means information in non-tangible form, which may be retained by persons
who have had rightful and good faith access to the Confidential
Information, including ideas, concepts, know-how or techniques contained
therein. Neither party shall have any obligation to limit or restrict
the assignment of such persons or to pay royalties for any work resulting
from the use of residuals. However, the foregoing shall not be deemed to
grant to either party a license under the other party's copyrights or
patents.
6. WARRANTIES AND DISCLAIMERS
6.1 WARRANTIES. Each party warrants and covenants that it has the full power
and authority to enter into and perform according to the terms of this
Agreement.
6.2 DISCLAIMERS. ANY AND ALL SOFTWARE, TECHNOLOGY, SERVICES, CONTENT, OR
INFORMATION PROVIDED BY ONE PARTY TO THE OTHER HEREUNDER
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 6
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
IS PROVIDED "AS IS," WITHOUT WARRANTY OF ANY KIND. EACH PARTY DISCLAIMS ALL
WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE AND NONINFRINGEMENT, WITH RESPECT TO ANY SOFTWARE, TECHNOLOGY,
SERVICES, CONTENT, OR INFORMATION PROVIDED HEREUNDER.
7. INDEMNITY
7.1 INDEMNIFICATION OF MICROSOFT. ISP shall, at its expense and Microsoft's
request, defend any claim or action brought by a third party against
Microsoft, or Microsoft's affiliates, directors, or officers, to the
extent it is based upon a claim involving the ISP Services and/or the
ISP Web Site, including without limitation any claim that any ISP
Services or any Content included in or uploaded to the ISP Web Site
infringes or violates any copyright, patent, trademark, trade secret,
right of publicity, or other intellectual property, proprietary or
contractual right of a third party (all such claims or actions being
referred to hereinafter as "ISP Claims" provided, however, that in no
event shall a claim based on Content, logos or other materials provided
by Microsoft to ISP be deemed to be a "ISP Claim"), and ISP will
indemnify and hold Microsoft harmless from and against any costs,
damages and fees reasonably incurred by Microsoft, including but not
limited to fees of outside attorneys and other professionals, that are
attributable to such ISP Claims. Microsoft shall: (a) provide ISP
reasonably prompt notice in writing of any such ISP Claims and permit
ISP, through counsel chosen by ISP, to answer and defend such ISP
Claims; and (b) provide the entity defending such claim information,
assistance and authority, at such entity's expense, to help defend such
ISP Claims. ISP will not be responsible for any settlement made by
Microsoft without ISP's written permission, which permission will not
be unreasonably withheld or delayed. Reasonable withholding of
permission may be based upon, among other factors, editorial and
business concerns. ISP will consult with Microsoft on the choice of any
counsel under this Section 7.1.
7.2 SETTLEMENT BY ISP. Unless ISP obtains for Microsoft a complete release
of all ISP Claims thereunder, ISP may not settle any ISP Claim under
Section 7.1 on Microsoft's behalf without first obtaining Microsoft's
written permission, which permission will not be unreasonably withheld
or delayed. Reasonable withholding of permission may be based upon,
among other factors, the ability for Microsoft to ship any product. In
the event ISP and Microsoft agree to settle a ISP Claim, ISP agrees not
to disclose terms of the settlement without first obtaining Microsoft's
written permission, which will not be unreasonably withheld or delayed.
7.3 INDEMNIFICATION OF ISP. Microsoft shall, at its expense and ISP's
request, defend any claim or action brought by a third party against
ISP, or ISP's affiliates, directors, or officers, to the extent it is
based upon a claim concerning any Microsoft Web site in which Microsoft
promotes ISP or the ISP Services pursuant to this Agreement (all such
claims or actions being referred to hereinafter as "Microsoft Claims";
provided, however, that in no event shall a claim based on Content,
logos or other materials provided by ISP to Microsoft be deemed to be a
"Microsoft Claim"), and Microsoft will indemnify and hold ISP harmless
from and against any costs, damages and fees reasonably incurred by
ISP, including but not limited to fees of outside attorneys and other
professionals, that are attributable to such Microsoft Claims. ISP
shall: (a) provide Microsoft reasonably prompt notice in writing of any
such Microsoft Claims and permit Microsoft, through
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 7
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
counsel chosen by Microsoft, to answer and defend such Microsoft
Claims; and (b) provide the entity defending such claim information,
assistance and authority, at such entity's expense, to help defend such
Microsoft Claims. Microsoft will not be responsible for any settlement
made by ISP without Microsoft's written permission, which permission
will not be unreasonably withheld or delayed. Reasonable withholding of
permission may be based upon, among other factors, editorial and
business concerns. Microsoft will consult with ISP on the choice of any
counsel under this Section 7.3.
7.4 SETTLEMENT BY ISP. Unless Microsoft obtains for ISP a complete release
of all Microsoft Claims thereunder, Microsoft may not settle any
Microsoft Claim under Section 7.3 on ISP's behalf without first
obtaining ISP's written permission, which permission will not be
unreasonably withheld or delayed. Reasonable withholding of permission
may be based upon, among other factors, the ability for ISP to provide
any service. In the event Microsoft and ISP agree to settle a Microsoft
Claim, Microsoft agrees not to disclose terms of the settlement without
first obtaining ISP's written permission, which will not be
unreasonably withheld or delayed.
8. LIMITATION OF LIABILITIES
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER IN CONNECTION
WITH THIS AGREEMENT FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL,
PUNITIVE OR SPECIAL DAMAGES WHATSOEVER. INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, AND THE LIKE, ARISING OUT OF THIS AGREEMENT OR
THE USE OF OR INABILITY TO USE MICROSOFT SOFTWARE OR EITHER PARTY'S
CONFIDENTIAL INFORMATION, CONTENT, OR SERVICES, EVEN IF A PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THIS SECTION SHALL NOT APPLY TO SECTION 5 (REGARDING CONFIDENTIALITY),
NOR TO THE INDEMNITY OBLIGATIONS WITH RESPECT TO THIRD PARTY CLAIMS AS
PROVIDED IN SECTION 7.
9. TERMINATION
9.1 TERMINATION BY EITHER PARTY. Either party may suspend performance
and/or terminate this Agreement:
(a) Immediately upon written notice at any time, if the other party
is in breach of any warranty, term, condition or covenant of this
Agreement, other than those contained in Section 5, and fails to
cure that breach within thirty (30) days after written notice
thereof; or
(b) Immediately upon written notice at any time, if the other party
is in material breach of Section 5.
9.2 EFFECT OF TERMINATION.
(a) Neither party shall be liable to the other for damages of any
sort resulting solely
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 8
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
from terminating this Agreement in accordance with its terms.
(b) Termination of this Agreement shall not affect any other
agreement between the parties.
(c) Should either ISP or Microsoft terminate this Agreement pursuant
to Section 9.1(a) or (b), neither party shall have any further
obligations to the other under Sections 2 or 3, with the exception
that within twelve (12) months of any termination or expiration of
this Agreement, Microsoft shall be entitled to apply towards the
use of ISP Services any Network Credits that have been paid for
but not yet been applied under this Agreement as of the date of
termination or expiration. Without limiting the generality of the
foregoing, Microsoft will have no obligation following any
termination of this Agreement to make any additional payments
(other than any payments due prior to the date of termination of
this Agreement) or provide any further services or promotions to
ISP under Section 2 of this Agreement.
9.3 SURVIVAL. In the event of termination or expiration of this Agreement
for any reason, Section 1, and Section 4 through 10 (including this
Section 9.3) shall survive termination and continue in effect in
accordance with their terms.
10. GENERAL PROVISIONS
10.1 NOTICES. All notices and requests in connection with this Agreement
shall be deemed given as of the day they are received either by
messenger, delivery service, or in the United States of America mails,
postage prepaid, certified or registered, return receipt requested. Any
such notices to ISP should be sent to the address and ISP Contact set
forth for ISP on the first page of this Agreement. Any such notices to
Microsoft should be addressed as follows:
---------------------------------------
ADDRESS:
---------------------------------------
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Patty Jackson
---------------------------------------
Phone: (425) 882-8080
---------------------------------------
Fax: (425) 936-7329
---------------------------------------
COPY TO: LAW AND CORPORATE AFFAIRS
---------------------------------------
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Law & Corporate Affairs
---------------------------------------
Phone: (425) 882-8080
---------------------------------------
Fax: (425) 936-7409
---------------------------------------
or to such other address as a party may designate pursuant to this
notice provision.
10.2 RESERVATION OF RIGHTS. Except as expressly agreed pursuant to this
Agreement, ISP shall
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 9
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
have no rights in the Microsoft Software or any other Microsoft
Software, technology or service provided to ISP hereunder, and nothing
in this Agreement shall be construed, by implication, estoppel or
otherwise, as granting ISP any rights to any Microsoft software,
technology, service or other intellectual property rights other than the
express rights described herein. Microsoft retains all right, title and
interest in and to the Microsoft Software and any other Microsoft
software, technologies and services.
10.3 INDEPENDENT PARTIES. Nothing in this Agreement shall be construed as
creating an employer-employee relationship, an agency relationship, a
partnership, or a joint venture between the parties.
10.4 GOVERNING LAW. This Agreement will be governed by the laws of the State
of Washington, without reference to the conflict of law principles
thereof. Any action or litigation concerning this Agreement will take
place exclusively in the federal or state courts in King County,
Washington, and the parties expressly consent to jurisdiction of and
venue in such courts and waive all defenses of lack of personal
jurisdiction and forum non conveniens with respect to such courts. ISP
hereby agrees to service of process by mail or other method acceptable
under the laws of the State of Washington.
10.5 ATTORNEYS' FEES. In any action or suit to enforce any right or remedy
under this Agreement or to interpret any provision of this Agreement,
the prevailing party shall be entitled to recover its costs, including
reasonable attorney's fees.
10.6 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the parties' successors and lawful assigns; provided,
however, that this Agreement and any rights or obligations hereunder may
not be assigned by ISP without Microsoft's prior written approval, which
will not be unreasonably withheld or delayed. Any attempted assignment,
sub-license, transfer, encumbrance or other disposal by ISP without such
consent will be void and will constitute a material default and breach
of this Agreement for which Microsoft may terminate this Agreement in
accordance with Section 9.1(a).
10.7 FORCE MAJEURE. Neither party shall be liable to the other under this
Agreement for any delay or failure to perform its obligations under this
Agreement if such delay or failure arises from any cause(s) beyond such
party's reasonable control, including by way of example labor disputes,
strikes, acts of God, floods, fire, lightning, earthquakes, vandalism,
war, acts of terrorism, riots, insurrections, embargoes, or laws,
regulations or orders of any governmental entity.
10.8 CONSTRUCTION. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision. This Agreement has been negotiated by the parties
and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor
of or against either party.
10.9 ENTIRE AGREEMENT. This Agreement does not constitute an offer by
Microsoft and it shall not be effective until signed by both parties.
This Agreement, including all Exhibits attached hereto, which Exhibits
are hereby incorporated by this reference, constitutes the
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 10
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
entire agreement between the parties with respect to the subject matter
hereof and merges all prior and contemporaneous communications. It
shall not be modified except by a written agreement dated subsequent to
the date of this Agreement and signed on behalf of ISP and Microsoft by
their respective duly authorized representatives.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
------------------------------------------------------------------------
MICROSOFT CORPORATION [ISP]
------------------------------------------------------------------------
By: By: /s/ Stephen Brown
------------------------------------------------------------------------
Name (print): Name (print): Stephen Brown
------------------------------------------------------------------------
Title: Title: CEO
------------------------------------------------------------------------
Date: Date: 10-1-99
------------------------------------------------------------------------
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 11
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
EXHIBIT A
ISP SERVICES GUIDELINES
1. APPROVAL OF PROGRAM PARTICIPANTS
Microsoft shall have sole discretion regarding the designation of
Network Credits Program Participants and allocation of Network Credits for
use by such entities and/or Microsoft under this Agreement. Microsoft shall
make reasonable efforts to accommodate customers that ISP recommends for the
Network Credits Program, provided that in no event shall ISP provide any
Microsoft Confidential Information to any customer or prospective customer
except with Microsoft's express written approval. Microsoft shall notify ISP
from time to time in writing of approved Network Credits Program
Participants, the particular ISP Services to be used by each such entity
pursuant to this Agreement, and the approved allocation of Network Credits
among such Network Credits Program Participants and Microsoft (if
applicable). Microsoft and ISP will cooperate in good faith following the
Effective Date to develop and implement operational procedures to coordinate
allocation of Network Credits in accordance with this Agreement.
2. TERMS OF SERVICE
Notwithstanding anything to the contrary in the foregoing paragraph,
the relationship between ISP and any Network Credits Program Participant
shall be separate from ISP's relationship with Microsoft, and ISP shall have
the right to choose, in its sole discretion, not to do business with any
Network Credits Program Participant. ISP shall enter into a separate
agreement, in a timely manner, with each Network Credits Program Participant
to which ISP intends to provide ISP Services pursuant to this Agreement, and
ISP shall perform all such ISP Services in a manner as mutually agreed upon
by ISP and each such Network Credits Program Participant. ISP shall be solely
responsible for all services it provides to Network Credits Program
Participants, including without limitation the ISP Services, and for
enforcing the terms of any services or other agreements it enters into with
Network Credits Program Participants.
At Microsoft's sole discretion, ISP may perform ISP Services for
Microsoft acting on behalf of a Network Credits Program Participant, in which
event such provision of ISP Services shall be subject to the terms of this
Agreement and any further services agreement that Microsoft and ISP may
mutually agree upon.
3. RATE SCHEDULE
In applying Network Credits under this Agreement, ISP will calculate
use of Network Credits on the basis of then-current rates for ISP Services
which rates shall be at least as favorable as those charged by ISP from time
to time to any other customer which is purchasing ISP Services in aggregate
volumes that are comparable to those being purchased by Microsoft in
connection with this Agreement. Without limiting the foregoing, ISP further
agrees that in no event will it charge Microsoft, in connection with any ISP
Services performed in connection with this Agreement, any rate that is higher
than ISP's standard commercially available terms in effect from time to time
during the Term.
ISP will encode video material at Twelve Dollars and Fifty Cents
($12.50) per minute.
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 12
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
EXHIBIT C
ENCODING DELIVERABLES
ISP agrees to to the following:
Encode Two Thousand (2000) Music Videos of approximately four minutes each in
Windows Media Technologies at four bit rates: 28, 56, 128, and 300 kbs.
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 13
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NETWORK CREDITS PROGRAM SERVICES AGREEMENT
EXHIBIT C
GET WINDOWS MEDIA-TM- PLAYER
LINK LOGO GUIDELINES
GET WINDOWS MEDIA-TM- PLAYER LOGO USAGE INSTRUCTIONS
To put the logo and link on your Web site, follow these easy steps:
1. Read our policy below on using the GET WINDOWS MEDIA PLAYER logo.
2. Copy the GET WINDOWS MEDIA PLAYER logo.gif file image to your
desktop.
[graphic] [graphic]
3. Move the GET WINDOWS MEDIA PLAYER logo.gif file from your desktop
to your Web server.
4. Insert the following HTML code on your Web page. Be sure to point
the < IMG SRC > to the location of the GET WINDOWS MEDIA PLAYER
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default.asp" >
< IMG SRC="type path to logo image here" WIDTH="65"
HEIGHT="57" BORDER="0"
ALT="Get Windows Media Player" VSPACE="7" >< /A >
< /CENTER >< BR >
5. You can modify this HTML code to fit your formatting as long as
you follow the guidelines outlined below.
GET WINDOWS MEDIA-TM- PLAYER LOGO USAGE GUIDELINES
1. Except as Microsoft may authorize elsewhere, non-Microsoft Web sites
may display only the GET WINDOWS-Registered Trademark- MEDIA-TM-
PLAYER logo provided above ("Logo"). By downloading the Logo to your Web
site, you agree to be bound by these Policies.
2. You may only display the Logo on your Web site, and not in any other
manner. It must always be an active link to the download page for the
Windows Media Player at
http://www.microsoft.com/windows/mediaplayer/download/default.asp.
3. The Logo GIF image includes the words "Get Windows Media Player"
describing the significance of the Logo on your site (that the Logo is a
link to the download page for the Microsoft Windows Media Player, not an
endorsement of your site). You may not remove or alter any element of the
Logo.
4. The Logo may be displayed only on Web pages that make accurate
references to Microsoft or its products or services or as otherwise
authorized by Microsoft. Your Web page title and other trademarks and
logos must appear at least as prominently as the Logo. You may not
display the Logo in any manner that implies sponsorship, endorsement, or
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5. The Logo must appear by itself, with a minimum spacing (30 pixels)
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MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 14
<PAGE>
NETWORK CREDITS PROGRAM SERVICES AGREEMENT
displayed as a feature or design element of any other logo.
6. You may not alter the Logo in any manner, including size, proportions,
colors, elements, or animate, morph, or otherwise distort its
perspective or appearance, except in the event expressly authorized by
Microsoft.
7. You may not display the Logo on any site that infringes any Microsoft
intellectual property or other rights, or violates any state, federal, or
international law.
8. These Policies do not grant a license or any other right to Microsoft's
logos or trademarks. Microsoft reserves the right at its sole discretion
to terminate or modify permission to display the Logo at any time.
Microsoft reserves the right to take action against any use that does not
conform to these Policies, infringes any Microsoft intellectual property
or other right, or violates other applicable law.
9. MICROSOFT DISCLAIMS ANY WARRANTIES THAT MAY BE EXPRESS OR IMPLIED BY
LAW REGARDING THE LOGO, INCLUDING WARRANTIES AGAINST INFRINGEMENT.
- -C- 1999 Microsoft Corporation. All rights reserved. Terms of Use.
MICROSOFT CONFIDENTIAL & PROPRIETARY PAGE 15
<PAGE>
[LOGO]
FORM OF
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement made this 28th day of December, 1999, by and
between Entertainment Boulevard Inc., a Nevada corporation (the "Company"), and
_______, an individual (the "Investor").
W I T N E S S E T H :
WHEREAS, the Company desires to borrow certain amounts from the Investor
and the Investor desires to make a loan (the "Loan") to the Company;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties contained herein, the parties hereby agree as follows:
1. LOAN. The Investor hereby lends to the Company the aggregate principal
amount of $100,000. The Loan shall be evidenced by a bridge note (the "Note") in
the form attached hereto as Exhibit A, shall bear interest at the rate of 10%
per annum and shall be due and payable 90 days from the date of funding, or
earlier as provided in the Note. In consideration for such Loan, the Company
will pay the Investor and/or its designee 40,000 warrants to purchase the common
stock of the Company at an exercise price of $1.00 per share (the "Payment
Warrants"). The common stock
<PAGE>
underlying the Payment Warrants will be registered immediately with the
Securities and Exchange Commission.
2. CONDITIONS TO LOAN. The obligation of the Investor to make the Loan is
subject to the conditions that the following shall have occurred prior to or
concurrently with the Loan:
(a) Stephen Brown, the Company's Chief Executive Officer and
President, shall have granted to the Investor, from his personal warrant
holdings, a valid security interest in 200,000 warrants to purchase the
Company's common stock with an exercise price of $1 pursuant to this agreement
dated the date hereof.
(b) The Company agrees to Register the common stock underlying the
Payment Warrants in a time-frame, which shall be reasonably acceptable to the
Investor.
3. GRANT OF SECURITY INTEREST. Stephen Brown, the Company's Chief Executive
Officer and President, hereby grants to the Investor all of the right, title,
and interest in and to 200,000 warrants to purchase the Company's common stock
with an exercise price of $1 from his personal assets. Until such time as there
is an Event of Default, the Investor will not pursue the collateral described in
this Section 3.
4. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to
the Investor as follows:
4.1. The issuance of the Note and the Payment Warrants pursuant to the
provisions of this Agreement has been duly and validly authorized. No approval
or authorization of the shareholders or the directors of the Company or of any
governmental authority or agency which has not been obtained will be required by
the Company for the issuance of the Note or the Payment Warrants,
2
<PAGE>
as contemplated by this Agreement. When the Payment Warrants are exercised, the
common stock underlying the Payment Warrants will be duly and validly issued and
will be free and clear of any liens or encumbrances created by the Company.
4.2 The Company has the full corporate power and authority to enter
into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement and the Note by the
Company have been duly authorized by all necessary corporate action. This
Agreement and the Note constitute legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
4.3 Neither the issuance of the Note, the Payment Warrants, the
execution and delivery of this Agreement, nor the fulfillment of the terms set
forth in this Agreement and the consummation of the transactions contemplated by
this Agreement, will (i) conflict with or constitute a breach of, or constitute
a default under or an event which, with or without notice of lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any agreement, document, lease or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject, would be a violation of any law, administrative regulation, judgment,
order or decree applicable to the Company, or (ii) subject to the listing
approval requirements of the OTC Stock Market, require the consent which has not
been obtained of any other person or entity under any agreement, lease, document
or other instrument or undertaking by which the Company is bound or to which any
of its properties are subject.
3
<PAGE>
4.4 The security interest in 200,000 warrants to purchase the
Company's common stock with an exercise price of $1.00 from Stephen Brown's
personal assets (the "Asset") granted pursuant to Section 3 hereto constitutes a
valid security interest in the Asset.
5. REPRESENTATIONS OF THE INVESTOR. The Investor understands that the
common stock underlying the Payment Warrants has not been registered under the
Securities Act of 1933 (the "Securities Act"). The Investor is an accredited
investor within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act. The Investor is acquiring the Payment Warrants for his own
account and not with a present view to, or for sale in connection with, any
distribution in violation of the Securities Act. The Investor acknowledges that
a restrictive legend will be placed on the common stock underlying the Payment
Warrants until the shares are registered under the Securities Act.
6. COVENANTS OF THE COMPANY. The Company covenants with the Investor as
follows:
(a) The proceeds of the Loan will be used for working capital and
general corporate purposes.
7. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement or in any document, exhibit, schedule or certificate
delivered in connection herewith shall survive the execution and delivery of
this Agreement and the closing of the Loan and any investigation at any time
made by the Investor or on his behalf.
8. MISCELLANEOUS PROVISIONS.
8.1. This Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of California without giving
any effect to principles of conflicts of laws.
4
<PAGE>
8.2. All notices hereunder shall be in writing and shall be deemed to
have been given at the time when mailed by certified mail, addressed to the
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
Entertainment Boulevard, Inc.
4502 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
Attn: Stephen Brown
To the Investor:
[Investor Name]
[Investor Address]
provided, however, that any notice of change of address shall be effective only
upon receipt.
8.3. This Agreement shall be binding upon and inure to the benefit of
the Company, the Investor and the successors and assigns of the Investor. The
Company may not assign this Agreement without the prior written consent of the
Investor. The Investor may assign all or any part of his rights and obligations
hereunder to any affiliate of the Investor, without the consent of the Company.
8.4. This Agreement and all exhibits and schedules hereto set forth
the entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended, the Company or the Investor
may take any action herein prohibited or omit to take action herein required to
be performed by it or him, and any breach of or compliance with any covenant,
agreement, warranty or representation may be waived, only if the Company or the
Investor has obtained the written consent of the other party to this Agreement.
5
<PAGE>
8.5. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
8.6. The headings in this Agreement are for reference purposes only
and shall not constitute a part hereof.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
----------------------------------------
By: Stephen Brown
Title: Chairman of the Board
[Investor Name]
----------------------------------------
By: [Investor Name]
Title: Investor
7
<PAGE>
EXHIBIT A
[LOGO]
FORM OF
SECURED BRIDGE NOTE
$100,000 December 28, 1999
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of [Investor Name]. (the "Payee"), [Investor
address] or at such other place as the Payee may designate in writing, in lawful
money of the United States of America, the principal sum of one hundred thousand
dollars ($100,000) together with interest from the date hereof at the rate of
10% per annum, computed on the basis of a 360-day year of twelve 30-day months.
The principal of this Note shall be payable in full 90 days from the date
hereof. Interest shall accrue from the date hereof and shall be paid when the
principal amount of this Note has been paid in full.
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note: (i) the failure to pay principal of or
interest on this Note as and when due; (ii) any representation or warranty of
the Maker contained in the Loan and Security Agreement dated as of the date
hereof between the Maker and the Payee shall not be true and correct in all
material respects and the same shall not be cured within 30 days after written
notice thereof by the Payee to the Maker or the Maker shall have breached any
covenant contained in the Loan and Security Agreement and such
<PAGE>
breach shall not be cured within 30 days; (iii) a proceeding being filed or
commenced against the Maker for bankruptcy, dissolution or liquidation which
shall not be dismissed within 60 days, or the Maker voluntarily or involuntarily
terminating or dissolving or being terminated or dissolved; (iv) the Maker
filing a petition under bankruptcy, insolvency or debtor's relief law or making
an assignment for the benefit of creditors; or (v) the appointment of a
custodian, trustee, liquidator or receiver for any of the property of the Maker,
which shall not be dismissed, released or vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all or
any part of the unpaid principal balance of and interest on this Note shall
immediately become due and payable without notice or demand. If an Event of
Default occurs, the Maker agrees to pay to the holder all reasonable expenses
incurred by the holder, including reasonable attorneys' fees, in enforcing and
collecting this Note.
Failure of the Payee hereof to assert any right contained herein will not
be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Note operate to invalidate this Note, then and in either of those events, such
provision or provisions only shall be deemed null and void and shall not affect
any other provision of this Note and the remaining provisions of this Note shall
remain operative and in full force and effect and shall in no way be affected,
prejudiced or disturbed thereby.
2
<PAGE>
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time to
time without premium. This Note shall be paid without deduction by reason of any
set-off, defense or counterclaim of the Maker.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the successors
and assigns of the Maker and shall inure to the benefit of the successors and
assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
----------------------------------------------
By: Stephen Brown
Title: Chairman of the Board
Chief Executive Officer
3
<PAGE>
EXHIBIT 10.40
FORM OF
ENTERTAINMENT BOULEVARD, INC.
SUBSCRIPTION AGREEMENT
(this "Subscription Agreement")
The undersigned (the "Purchaser") hereby applies to purchase the number of
Units set forth below, each Unit consisting of a $100,000.00 secured promissory
note (the "Note") and a five-year warrant (the "Warrant") to purchase up to
40,000 shares of common stock, $0.001 par value per share of ENTERTAINMENT
BOULEVARD, INC. (the "Company") bearing an exercise price of $1.00 per share for
a subscription price $100,000 per Unit from the Company (this "Subscription").
This Subscription is made with reference to the provisions, terms and conditions
set out in the ENTERTAINMENT BOULEVARD, INC. CONFIDENTIAL PRIVATE PLACEMENT
MEMORANDUM, dated December 28, 1999, including all of the Exhibits thereto (the
"Memorandum"). Purchaser acknowledges that this Subscription may be accepted or
rejected by the Company in its sole discretion, at any time pursuant hereto. If
rejected, the check or funds tendered by Purchaser will be returned.
1. REPRESENTATIONS. The Purchaser makes the following representations,
which may be relied upon by the Company in accepting the Purchaser's application
to purchase the Securities:
i. Purchaser has received the Memorandum and the Company's
Registration Statement on Form SB-2 (SEC File No. 333-91825) attached as
Exhibit A thereto and is familiar with the terms and conditions and other
information set forth therein and herein.
ii. Purchaser has had the opportunity to ask of the Company, or a
person or persons acting on its behalf, any and all relevant questions in
connection with any aspect of the Company and has received answers which
Purchaser considers to be responsive to such questions.
iii. Purchaser is able to bear the economic risk of the investment
represented by the Securities.
iv. Purchaser is acquiring the Securities for Purchaser's own account
for the purpose of investment and not for or with a view to the resale,
distribution, subdivision or fractionalization thereof.
v. Purchaser understands that his right to transfer the Securities
will be subject to certain restrictions as described in the Memorandum,
including restrictions under applicable state and federal securities laws.
vi. In considering this investment, Purchaser is not relying on any
representation, warranty or statement made by the Company or any of its
agents, employees, officers or
<PAGE>
representatives not specifically referenced herein or in any document
attached hereto. Without limiting the foregoing, Purchaser specifically
disclaims any reliance on the information, representations and warranties
contained in the Memorandum.
2. INVESTOR ELIGIBILITY. Offers and sales of Securities will be made to
purchasers whom the Company believes (i) are "Accredited Investors" pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D thereunder and
similar provisions of applicable state law, or are otherwise deemed appropriate
investors under applicable securities laws and, in addition (ii) meet the other
suitability standards, if any, as set forth in the Memorandum. Purchaser
represents and warrants that (check all applicable boxes):
/ / a. Purchaser has such knowledge and experience in business and
financial matters as to be able to evaluate the merits and
risks of the investment in the Securities; and
/ / b. Purchaser is an "Accredited Investor" as that term is defined
in the Memorandum.
Purchaser understands that the Company reserves the right, in individual cases,
to waive certain of the foregoing criteria and accept this Subscription.
3. MISCELLANEOUS.
i. This Subscription Agreement is subject to all of the terms and
provisions of the Memorandum.
ii. Purchaser may not assign any of his rights under this Subscription
Agreement without the written consent of the Company.
iii. Purchaser may not cancel, terminate or revoke this Subscription
Agreement or any agreement of the Purchaser made herein.
iv. This Subscription Agreement shall be construed in accordance with
and governed by the laws of the State of California.
v. This Subscription Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the Purchaser.
vi. If the Purchaser is more than one person, the obligations of the
Purchaser shall be joint and several and the representations herein
contained shall be deemed to be made by and binding upon each such person
and their heirs, executors, administrators, successors and assigns.
vii. Throughout this Subscription Agreement, as the context may
require, the masculine gender includes the feminine and neuter genders.
-2-
<PAGE>
The undersigned hereby represents that the undersigned has read this entire
Subscription Agreement and the Memorandum, understands them, and wishes to
subscribe for the Securities indicated below.
- --------------------------------------------------------------------------------
Please Complete the Following:
Purchaser: Name:
----------------------------------------------------
Age (if individual):
------------------------------
Date of Formation: (if an entity)
-----------------
Residence/Principal
Place of Business:
--------------------------------
Telephone Number: (Business Hrs.)
----------------
(Evenings):
---------------------------------------
Subscription: Units totaling $ .
-------- ----------
Type of Ownership:
(select one)
___ Corporation (Signature of authorized officer required --
include certified corporate resolution authorizing
signature)
___ Partnership Limited/General (signature of all general
partners required -- include a copy of the Partnership
Agreement authorizing signature)
___ Trust (Signature of trustee required -- include a copy of
the trust agreement)
___ Individual Ownership (One signature required)
___ Community Property (One signature required if interest is
to be held in both names)
___ Tenants in common (Signature of both or all parties
required) Joint Tenants with Right of Survivorship
(Signatures of both or all parties required)
___ Joint Tenants with Right of Survivorship (Signatures of
both or all parties required)
DOCUMENTS TO BE RETURNED:
1. One copy of this Subscription Agreement completed, dated and
signed with the Purchaser's(s') signature(s).
-3-
<PAGE>
2. One copy of the Investor's Questionnaire completed and
signed with the Purchaser(s) signature(s).
3. A wire transfer of the purchase price to
___________________, ________, account number _______, ABA
number _________ .
- --------------------------------------------------------------------------------
Purchaser #1 Purchaser #2 (If the Units
are to be held as tenants in
common, as joint tenants, or
as community property in both
names)
Dated: Dated:
------------------------- -------------------------
By By
---------------------------- ----------------------------
(Signature) (Signature)
Name: Name:
-------------------------- --------------------------
(Print or Type) (Print or Type)
- ------------------------------- -------------------------------
Social Security or Tax I.D. No. Social Security or Tax I.D. No.
(If none, so state) (If none, so state)
-4-
<PAGE>
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement made this 14th day of January, 2000, by and
between Entertainment Boulevard Inc., a Nevada corporation (the "Company"),
Forest Equities, Ltd., a foreign corporation and H.A.A. Inc., a foreign
corporation (each an "Investor" and collectively, the "Investors").
W I T N E S S E T H :
WHEREAS, the Company desires to borrow certain amounts from the Investors
and the Investors desire to make a loan (the "Loan") to the Company;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties contained herein, the parties hereby agree as follows:
1. LOAN. The Investors hereby lend to the Company the aggregate principal
amount of $200,000. The Loan shall be evidenced by a two notes, one to Forest
Equities, Ltd. and the other to H.A.A. Inc. (the "Notes") in the form annexed
hereto as Exhibit A, shall bear interest at the rate of 10% per annum and shall
be due and payable on or before February 15, 2000 or earlier as provided in the
Notes. Each Note may be converted at any time by the its respective Investor
prior to repayment thereof into shares of Common Stock of the Company at $1.00
per share and will be entitled to resale registration rights (subject to the
registration rights previously granted to security holders of the Company).
2. CONDITIONS TO LOAN. The obligation of the Investors to make the Loan is
subject to the conditions that the following shall have occurred prior to or
concurrently with the Loan:
<PAGE>
(a) The Company shall have granted to the Investors a valid pari
passu security interest in all its assets pursuant to this agreement dated the
date hereof.
(b) The Company agrees that various UCC statements will have to
be filed after the date hereof to perfect the Investors' pari passu security
interest in the Company's assets as set forth in subsection (a). As such, the
Company grants Stroock & Stroock & Lavan LLP ("SSL") power of attorney to sign
as debtor on its behalf on the requisite UCC filings. The Company also agrees it
will prepare such filings as needed (such decision to be at the sole discretion
of SSL).
(c) The Company has also entered into a Registration Rights
Agreement (containing substantially the same terms as the registration rights
previously granted to security holders of the Company but being subject to such
previously granted rights) regarding the Warrants (as defined below) and the
shares underlying the Notes (upon conversion), which is reasonably acceptable to
the Investors.
3. WARRANTS. In consideration for the Investors making the Loan, the
Company has issued and delivered warrants to each Investor (the "Warrants") in
the forms annexed hereto as Exhibit B, each of which authorize the purchase of
25,000 shares of the Company's common stock pursuant to the terms set forth in
the Warrants. The Warrants shall be covered by the Registration Rights
Agreement.
4. GRANT OF SECURITY INTEREST. The Company hereby grants to the Investors
all of the right, title, and interest in and to the Company's assets, whether
now existing or hereafter from time to time acquired, including: (i) each and
every Receivable; (ii) all Contracts, together with all Contract Rights arising
thereunder; (iii) all Inventory; (iv) all Equipment; (v) all Marks, together
with the registrations and right to all renewals thereof, and the goodwill of
the business of the Company symbolized by the Marks;
2
<PAGE>
(vi) all Patents and Copyrights; (vii) all computer programs of the Company and
all intellectual property rights therein and all other proprietary information
of the Company, including, but not limited to, trade secrets; (viii) all Stock;
(ix) the Cash Collateral Account and all monies, securities, and instruments
deposited or required to be deposited in the Cash Collateral Account; (x) all
other Goods, General Intangibles, Chattel Paper, Documents, and Instruments; and
(xi) all Proceeds and products of any and all of the foregoing. Until such time
as there is an Event of Default, the Investors will not collect any revenues
from the collateral described in this Section 4.
5. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to
the Investors as follows:
5.1. The issuance of the Notes and the Warrants pursuant to the
provisions of this Agreement has been duly and validly authorized. No approval
or authorization of the shareholders or the directors of the Company or of any
governmental authority or agency which has not been obtained will be required by
the Company for the issuance and sale of the Notes or the Warrants, as
contemplated by this Agreement. When issued and sold to the Investors, the
Warrants will be duly and validly issued, fully paid and non-assessable, and
will be free and clear of any liens or encumbrances created by the Company.
5.2 The Company has the full corporate power and authority to enter
into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement and the Notes by the
Company have been duly authorized by all necessary corporate action. This
Agreement and the Notes constitute legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
3
<PAGE>
5.3 Neither the sale of the Notes, the Warrants, the execution and
delivery of this Agreement, nor the fulfillment of the terms set forth in this
Agreement and the consummation of the transactions contemplated by this
Agreement, will (i) conflict with or constitute a breach of, or constitute a
default under or an event which, with or without notice of lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any agreement, document, lease or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject, would be a violation of any law, administrative regulation, judgment,
order or decree applicable to the Company, or (ii) subject to the listing
approval requirements of the OTC Stock Market, require the consent which has not
been obtained of any other person or entity under any agreement, lease, document
or other instrument or undertaking by which the Company is bound or to which any
of its properties are subject.
5.4 Subject to the filing of UCC-1 Financing Statements in appropriate
jurisdictions, the security interest in all of the assets of the Company (the
"Assets") granted pursuant to Section 4 hereto constitutes a valid security
interest in the Assets.
6. COVENANTS OF THE COMPANY. The Company covenants with the Investors as
follows:
(a) The proceeds of the Loan will be used for working capital and
general corporate purposes.
(b) At all times while the Notes are outstanding, the Company will
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the Notes, the full
number of shares of Common Stock deliverable upon conversion of the Notes.
4
<PAGE>
7. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement or in any document, exhibit, schedule or certificate
delivered in connection herewith shall survive the execution and delivery of
this Agreement and the closing of the Loan and any investigation at any time
made by the Investors or on their behalf.
8. MISCELLANEOUS PROVISIONS.
8.1. This Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of New York without giving
any effect to principles of conflicts of laws.
8.2. All notices hereunder shall be in writing and shall be deemed to
have been given at the time when mailed by certified mail, addressed to the
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
Entertainment Boulevard, Inc.
4502 Del Rey Avenue
Suite 108
Marina Del Rey, California 90292
Attn: Stephen Brown
5
<PAGE>
To the Investors:
Forest Equities, Ltd.
c/o Lowe, Lipman & Company
Attention: Mr. Joe Frank
5 St. Kilda Road
St. Kilda 3182 Melbourne
Victoria, Australia
and to
H.A.A. Inc.
1601-42nd Street
Brooklyn, New York 11204
provided, however, that any notice of change of address shall be effective only
upon receipt.
8.3. This Agreement shall be binding upon and inure to the benefit of
the Company, the Investors and the successors and assigns of the Investors. The
Company may not assign this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of his rights and
obligations hereunder to any affiliate of the Investors without the consent of
the Company.
8.4. This Agreement and all exhibits and schedules hereto set forth
the entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended and the Company or either
Investor may take any action herein prohibited or omit to take action herein
required to be performed by it or him, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company or the Investors has obtained the written consent of the other party
parties to this Agreement.
8.5. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
6
<PAGE>
8.6. The headings in this Agreement are for reference purposes only
and shall not constitute a part hereof.
8.7 Investors' reasonable attorneys fees and expenses, incurred by the
Investors in connection with the preparation, execution and delivery of this
Agreement, the Notes and the Registration Rights Agreement, shall be deducted
from the proceeds of the Notes.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
FOREST EQUITIES, LTD.
-----------------------------------
By:
Title:
H.A.A. INC.
-----------------------------------
By:
Title:
8
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EXHIBIT A
SECURED NOTE
$100,000 January __, 2000
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of (the "Payee"), at or at such other place as the
Payee may designate in writing, in lawful money of the United States of America,
the principal sum of one hundred thousand dollars ($100,000) together with
interest from the date hereof at the rate of 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months. The principal of this Note
shall be payable in full on or before February 15, 2000. Interest shall accrue
from the date hereof and shall be paid when the principal amount of this Note
has been paid in full.
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note: (i) the failure to pay principal of or
interest on this Note as and when due; (ii) any representation or warranty of
the Maker contained in the Loan and Security Agreement dated as of the date
hereof between the Maker and the Payee shall not be true and correct in all
material respects and the same shall not be cured within 30 days after written
notice thereof by the Payee to the Maker or the Maker shall have breached any
covenant contained in the Loan and Security Agreement and such breach shall not
be cured within 30 days; (iii) a proceeding being filed or commenced against the
Maker for bankruptcy, dissolution or liquidation which shall not be dismissed
within 60 days, or the Maker voluntarily or involuntarily terminating or
dissolving or being terminated or dissolved; (iv) the Maker filing a petition
under bankruptcy, insolvency or debtor's relief law or making an assignment for
9
<PAGE>
the benefit of creditors; or (v) the appointment of a custodian, trustee,
liquidator or receiver for any of the property of the Maker, which shall not be
dismissed, released or vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all or
any part of the unpaid principal balance of and interest on this Note shall
immediately become due and payable without notice or demand. If an Event of
Default occurs, the Maker agrees to pay to the holder all reasonable expenses
incurred by the holder, including reasonable attorneys' fees, in enforcing and
collecting this Note.
Failure of the Payee hereof to assert any right contained herein will not
be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Note operate to invalidate this Note, then and in either of those events, such
provision or provisions only shall be deemed null and void and shall not affect
any other provision of this Note and the remaining provisions of this Note shall
remain operative and in full force and effect and shall in no way be affected,
prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time to
time without premium. This Note shall be paid without deduction by reason of any
set-off, defense or counterclaim of the Maker.
10
<PAGE>
The principal and accrued interest on this Note may be converted into
shares of Common Shares (the "Common Shares") of the Maker at the option of the
Payee at $1.00 per share and the Maker agrees to cause such Common Shares to be
registered for resale (subject to the registration rights previously granted to
security holders of the Maker) under the Securities Act of 1933, as amended.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the successors
and assigns of the Maker and shall inure to the benefit of the
successors and assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
----------------------------------
By: Stephen Brown
Title: Chairman of the Board
11
<PAGE>
EXHIBIT B
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED THE DATE
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE RIGHTS OF THE
HOLDER.
ENTERTAINMENT BOULEVARD INC.
COMMON STOCK PURCHASE WARRANT
No. Warrant to Purchase 25,000 Shares
ENTERTAINMENT BOULEVARD INC. a foreign corporation (the "COMPANY"), hereby
certifies that, for value received, or assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time during the period commencing January , 2000 and ending January , 2005 (the
"EXERCISE PERIOD"), at the Purchase Price (as hereinafter defined), twenty-five
thousand (25,000) shares of the fully paid and nonassessable shares of Common
Stock of the Company. The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued in
substitution therefor) is issued in connection with that certain Loan and
Securities Agreement (the "Agreement") dated of even date herewith among the
initial Holder hereof, the Company and certain other parties thereto.
Capitalized terms used herein not otherwise defined shall have the meanings
ascribed thereto in the Agreement. As used herein the following terms, unless
the context otherwise requires, have the following respective meanings:
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<PAGE>
(a) The term "AGREEMENT" refers to that certain Loan and Securities
Agreement dated the date herewith among the initial Holder hereof and the
Company.
(b) The term "COMPANY" shall include Entertainment Boulevard Inc. and any
corporation that shall succeed or assume the obligations of such corporation
hereunder.
(c) The term "COMMON STOCK" includes (a) the Company's common stock, $ par
value per share, (b) any other capital stock of any class or classes (however
designated) of the Company, authorized on or after such date, the Holders of
which shall have the right, without limitation as to amount, either to all or to
a share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
the Holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency) and (c) any other securities into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(d) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) that the Holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to Common Stock, or that at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3 or otherwise.
(e) The term "PURCHASE PRICE" means $1.00 per share of Common Stock.
(f) The term "REGISTRATION RIGHTS AGREEMENT" refers to that certain
Registration Rights Agreement dated herewith among the initial Holder hereof,
the Company and certain other parties hereto.
1. EXERCISE OF WARRANT.
1.1. METHOD OF EXERCISE.
(a) This Warrant may be exercised in whole or in part (but not as to a
fractional share of Common Stock), at any time and from time to time during
the Exercise Period by the Holder hereof by delivery of a notice of
exercise (a "NOTICE OF EXERCISE") in the form attached hereto as Exhibit A
via facsimile to the Company. Promptly thereafter the Holder shall
surrender this Warrant to the Company at its principal office, accompanied
by payment of the Purchase Price multiplied by the number of shares of
Common Stock for which this Warrant is being exercised (the "EXERCISE
PRICE"). Payment of the Exercise Price shall be made by wire transfer to
the account of the Company. Upon exercise, the Holder shall be entitled to
receive,
13
<PAGE>
one or more certificates, issued in the Holder's name or in such name or
names as the Holder may direct, subject to the limitations on transfer
contained herein, for the number of shares of Common Stock so purchased.
The shares of Common Stock so purchased shall be deemed to be issued as of
the close of business on the date on which the Company shall have received
from the Holder payment of the Exercise Price (the "EXERCISE DATE").
(b) Notwithstanding anything to the contrary set forth herein, upon
exercise of all or a portion of this Warrant in accordance with the terms
hereof, the Holder shall not be required to physically surrender this
Warrant to the Company. Rather, records showing the amount so exercised and
the date of exercise shall be maintained on a ledger (the "Ledger") (a copy
of which shall be delivered to the Company or transfer agent with each
Notice of Exercise). It is specifically contemplated that the Company
hereof shall act as the calculation agent for all exercises of this
Warrant. In the event of any dispute or discrepancies, such records
maintained by the Company shall be controlling and determinative in the
absence of manifest error. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following an exercise of a portion of this Warrant, the
number of shares of Common Stock represented by this Warrant will be the
amount indicated on the Ledger attached hereto (which may be less than the
amount stated on the face hereof).
1.2. REGULATION D RESTRICTIONS. The Holder hereof represents and warrants
to the Company that it has acquired this Warrant and anticipates acquiring the
shares of Common Stock issuable upon exercise of the Warrant solely for its own
account for investment purposes and not with a view to or for resale of such
securities unless such resale has been registered with the Commission or an
applicable exemption is available therefor. At the time this Warrant is
exercised, the Company may require the Holder to state in the Notice of Exercise
such representations concerning the Holder as are necessary or appropriate to
assure compliance by the Holder with the Securities Act.
1.3. LIMITATION ON EXERCISE. Notwithstanding the rights of the Holder to
exercise all or a portion of this Warrant as described herein, such exercise
rights shall be limited, solely to the extent set forth in the Agreement as if
such provisions were specifically set forth herein. Specifically, the rights of
the Holder to exercise all or a portion of this Warrant are subject to the
limitation on exercise provisions specified in Section 10.1 of the Agreement.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. Within 5 business days after
the exercise of this Warrant, the Company at its expense (including the payment
by it of any applicable issue, stamp or transfer taxes) will cause to be issued
in the name of and delivered to the Holder thereof, or, to the extent
permissible hereunder, to such other person as such Holder may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction multiplied by
the then applicable Purchase Price, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or
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<PAGE>
otherwise which certificate or certificates shall be without restrictive legend
of any nature provided that a registration statement has been declared effective
in accordance with the Registration Rights Agreement, and if a registration
statement has not been declared effective, then in accordance with Rule 144.
3. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefor on such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of this Warrant, and (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate or
otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of this Warrant.
4. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the Holders of any class or
securities for the purpose of determining the Holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer
of all or substantially all the assets of the Company to or consolidation
or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
then and in each such event the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any, as of which the Holders
of record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any action is to be taken.
15
<PAGE>
5. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of this Warrant, all shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of this Warrant.
6. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant, properly
endorsed and in compliance with the restrictions on transfer set forth in the
legend on the face of this Warrant, to the Company, the Company at its expense
will issue and deliver to or on the order of the Holder thereof a new Warrant of
like tenor, in the name of such Holder or as such Holder (on payment by such
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face of the Warrant so surrendered.
7. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
8. REMEDIES. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
9. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to
all of which each Holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by endorsement and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery.
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered
to transfer absolute title hereto by endorsement and delivery hereof to a
BONA FIDE purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of each
such BONA FIDE purchaser, and each such BONA FIDE purchaser shall acquire
absolute title hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered Holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary; and
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<PAGE>
(d) notwithstanding the foregoing, this Warrant may not be sold,
transferred or assigned except pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption
therefrom.
10. REGISTRATION RIGHTS. The Company is obligated to register the shares of
Common Stock issuable upon exercise of this Warrant in accordance with the terms
of the Registration Rights Agreement.
11. NOTICES. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder of this Warrant who has
so furnished an address to the Company.
12. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
DATED as of January , 2000.
ENTERTAINMENT BOULEVARD, INC.
By:
Name:
Title:
[Corporate Seal]
Attest:
By:
------------------------------
Secretary
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<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
(To be executed only upon exercise
of the Warrant in whole or in part)
To: ENTERTAINMENT BOULEVARD, INC.
The undersigned registered Holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
______________ (1) shares of Common Stock (as defined in such Warrant) and
herewith makes payment therefor in the amount and manner set forth below, as
of the date written below. The undersigned requests that the certificates for
such shares of Common Stock be issued in the name of, and delivered to,
______________________ whose address is ______________________________________.
The Exercise Price is paid by check or wire transfer to the account of the
Company in the amount of $________.
Upon exercise pursuant to this Notice of Exercise, the Holder will be in
compliance with the Limitation on Exercise (as defined in the Loan and
Securities Agreement pursuant to which this Warrant was issued).
Dated: ____________________ ______
------------------------------------------
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
Address of Holder:
----------------
Date of exercise:
- -------------------
(1) Insert the number of shares of Common Stock as to which the accompanying
Warrant is being exercised. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the accompanying Warrant, to the holder surrendering
the same.
<PAGE>
Exhibit 10.41
TERMINATION AGREEMENT
This Termination Agreement ("Termination Agreement") by and between
Entertainment Boulevard, Inc., a Nevada corporation (the "Company"), and Robb
Peck McCooey Clearing Corporation ("RPMCC") becomes effective when at least
$5,000,000 is raised by Cruttenden Roth Incorporated ("CRI") under the
Follow-on Placement (as that term is defined below).
WITNESSETH:
WHEREAS, the Company and RPMCC are parties to a placement Agency
Agreement dated September 3, 1999 (the "Agreement").
WHEREAS, the Company proposes to engage CRI to act as a placement agent
in two offerings as follows: (i) an offering of 7.5 units of the Company's
securities (the "Bridge Placement"), each unit consisting of (x) a $100,000
secured promissory note and (y) warrants to purchase 40,000 shares of the
Company's common stock, par value $.001 per share, at an exercise price of
$1.00 per share and (ii) an offering of up to $7,000,000 in convertible
preferred securities pursuant to Regulation D in a private placement (the
"Follow-on Placement").
WHEREAS, in connection with the foregoing, the Company desires to
terminate the Agreement and all amendments thereto (except as specifically
set forth herein), provided that at least $5,000,000 is raised by CRI under
the Follow-on Placement. Following satisfaction of such condition, RPMCC
will agree to waive all its rights legally available under the Agreement and
allow the Company to accept funding from CRI.
WHEREAS, the Company and RPMCC desire to have CRI act in the
aforementioned offerings.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. RPMCC retains the right to complete the placement of securities
as per the Agreement and receive all compensation due under the Agreement.
2. RPMCC agrees to use its best efforts to cause its investors to
convert the $4 million of 8.0% Mandatorily Convertible Series A Preferred
Stock into shares of the Company's common stock at a floor price of $1.50 per
share concurrent with the closing of at least $5,000,000 under the Follow-on
Placement.
3. For a period of one year from the date hereof, RPMCC retains the
right to designate one person who shall have Board Observer status. Although
this person shall not be a Director of the Company, he shall have the right to
attend all meetings of the Board of Directors.
<PAGE>
4. For a period of nine (9) months from the date hereof, RPMCC
retains the exclusive right (which it may decline) to issue an opinion when
requested by the Company regarding valuation or fairness of any offer in the
event of a merger or sale of the Company.
5. The Company agrees to include in its recently filed SB-2
registration statement all shares issuable upon conversion of the Series A
Convertible Preferred, all shares issued in connection with the loans to the
Company as listed in Paragraph 11 below, the Placement Agent Warrants issued
as compensation for various financings for the Company and any warrants
issued under this Termination Agreement and to use its best efforts to have
that registration statement declared effective.
6. Except for the securities being registered under the aforesaid
SB-2 registration statement, the Company agrees not to register for resale
any of its securities until 90 days after the effectiveness of the
above-mentioned registration statement.
7. The Company agrees not to affect a recapitalization (forward
split, reverse split, etc.) until the later of (i) 90 days after the
effectiveness of the aforesaid SB-2 registration statement or (ii) the
closing of the Follow-on Placement.
8. In consideration of RPMCC relinquishing its valuable rights
under the Agreement, and causing its investors to convert all of their
Preferred Stock under Paragraph 2 above and obtaining consents from such
investors in the form of Schedule B attached hereto, the Company agrees to
issue 500,000 warrants to the parties and in the amounts as disclosed in
Schedule A attached hereto to purchase shares of the Company's common stock,
250,000 of such warrants exercisable at $0.50 per share and 250,000 warrants
exercisable at $3.50 per share. The term and the form of warrants and
registration rights related thereto shall be the same as the warrants issued
to RPMCC under the Agreement.
9. RPMCC will waive any and all rights it has under Paragraph 7(e)
of that certain Registration Rights Agreement dated September 3, 1999 between
RPMCC and the Company if at least $5,000,000 is raised under the Follow-on
Placement on or before March 15, 2000. If the $5,000,000 is raised by CRI
subsequent to March 15, 2000, RPMCC will waive only thirty (30) days of the
late fees to which it is entitled under said Paragraph 7(e).
10. This Termination Agreement supersedes, restates and amends that
certain Termination Agreement dated December 30, 1999 between the parties
hereto; provided, however, the waiver of RPMCC's rights hereunder shall only
be effective if at least $5,000,000 is raised by CRI under the Follow-on
Placement.
11. The Company agrees to pay RPMCC, to the extent not heretofore
paid, its usual placement and attorney fees (as per the Agreement) out of its
proceeds from the CRI Follow-on Placement for services rendered in the
following transactions: (a) the $500,000 loan to the Company dated November
1999, (b) the $200,000 loan to the Company dated January 2000 and (c) this
Termination Agreement. In addition, the Company agrees to pay, out of the
proceeds of the Follow-on Placement, all costs and expenses incurred in
connection with the negotiation and execution of this Termination Agreement,
including reasonable fees and disbursements of counsel.
2
<PAGE>
ROBB PECK McCOOEY CLEARING CORPORATION
By: /s/ Richard Rosenblum
--------------------------------------------
Title: Managing Director
-------------------------------------------
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Stephen Brown
----------------------------------------------
Stephen Brown, Chairman & Chief Executive Officer
3
<PAGE>
SCHEDULE A
Anthony K. Soich 30,000 (1/2 @ $0.50 and 1/2 @ $3.50)
Robb Peck McCooey
Clearing Corporation 188,000 (1/2 @ $0.50 and 1/2 @ $3.50)
Richard Rosenblum 101,000 (1/2 @ $0.50 and 1/2 @ $3.50)
David Stefansky 101,000 (1/2 @ $0.50 and 1/2 @ $3.50)
Vincent Calicchia 50,000 (1/2 @ $0.50 and 1/2 @ $3.50)
Steven Freifeld 30,000 (1/2 @ $0.50 and 1/2 @ $3.50)
<PAGE>
Exhibit 10.42
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement made this 14th day of January, 2000, by and
between Entertainment Boulevard Inc., a Nevada corporation (the "Company"),
Forest Equities, Ltd., a foreign corporation and H.A.A. Inc., a foreign
corporation (each an "Investor" and collectively, the "Investors").
W I T N E S S E T H :
WHEREAS, the Company desires to borrow certain amounts from the
Investors and the Investors desire to make a loan (the "Loan") to the Company;
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties contained herein, the parties hereby agree as
follows:
1. LOAN. The Investors hereby lend to the Company the aggregate
principal amount of $200,000. The Loan shall be evidenced by a two notes, one
to Forest Equities, Ltd. and the other to H.A.A. Inc. (the "Notes") in the
form annexed hereto as Exhibit A, shall bear interest at the rate of 10% per
annum and shall be due and payable on or before February 15, 2000 or earlier
as provided in the Notes. Each Note may be converted at any time by the its
respective Investor prior to repayment thereof into shares of Common Stock of
the Company at $1.00 per share and will be entitled to resale registration
rights (subject to the registration rights previously granted to security
holders of the Company).
2. CONDITIONS TO LOAN. The obligation of the Investors to make the
Loan is subject to the conditions that the following shall have occurred
prior to or concurrently with the Loan:
(a) The Company shall have granted to the Investors a valid pari
passu security interest in all its assets pursuant to this agreement dated the
date hereof.
(b) The Company agrees that various UCC statements will have to
be filed after the date hereof to perfect the Investors' pari passu security
interest in the Company's assets as set forth in subsection (a). As such, the
Company grants Stroock & Stroock & Lavan LLP
<PAGE>
("SSL") power of attorney to sign as debtor on its behalf on the requisite UCC
filings. The Company also agrees it will prepare such filings as needed (such
decision to be at the sole discretion of SSL).
(c) The Company has also entered into a Registration Rights
Agreement (containing substantially the same terms as the registration rights
previously granted to security holders of the Company but being subject to such
previously granted rights) regarding the Warrants (as defined below) and the
shares underlying the Notes (upon conversion), which is reasonably acceptable to
the Investors.
3. WARRANTS. In consideration for the Investors making the Loan, the
Company has issued and delivered warrants to each Investor (the "Warrants") in
the forms annexed hereto as Exhibit B, each of which authorize the purchase of
25,000 shares of the Company's common stock pursuant to the terms set forth in
the Warrants. The Warrants shall be covered by the Registration Rights
Agreement.
4. GRANT OF SECURITY INTEREST. The Company hereby grants to the
Investors all of the right, title, and interest in and to the Company's
assets, whether now existing or hereafter from time to time acquired,
including: (i) each and every Receivable; (ii) all Contracts, together with
all Contract Rights arising thereunder; (iii) all Inventory; (iv) all
Equipment; (v) all Marks, together with the registrations and right to all
renewals thereof, and the goodwill of the business of the Company symbolized
by the Marks; vi) all Patents and Copyrights; (vii) all computer programs of
the Company and all intellectual property rights therein and all other
proprietary information of the Company, including, but not limited to, trade
secrets; (viii) all Stock; (ix) the Cash Collateral Account and all monies,
securities, and instruments deposited or required to be deposited in the Cash
Collateral Account; (x) all other Goods, General Intangibles, Chattel Paper,
Documents, and Instruments; and (xi) all Proceeds and products of any and all
of the foregoing. Until such time as there is an Event of Default, the
Investors will not collect any revenues from the collateral described in this
Section 4.
5. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
to the
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Investors as follows:
5.1. The issuance of the Notes and the Warrants pursuant to the
provisions of this Agreement has been duly and validly authorized. No approval
or authorization of the shareholders or the directors of the Company or of any
governmental authority or agency which has not been obtained will be required by
the Company for the issuance and sale of the Notes or the Warrants, as
contemplated by this Agreement. When issued and sold to the Investors, the
Warrants will be duly and validly issued, fully paid and non-assessable, and
will be free and clear of any liens or encumbrances created by the Company.
5.2 The Company has the full corporate power and authority to enter into
this Agreement and to perform all of its obligations hereunder. The execution,
delivery and performance of this Agreement and the Notes by the Company have
been duly authorized by all necessary corporate action. This Agreement and the
Notes constitute legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms.
5.3 Neither the sale of the Notes, the Warrants, the execution and
delivery of this Agreement, nor the fulfillment of the terms set forth in this
Agreement and the consummation of the transactions contemplated by this
Agreement, will (i) conflict with or constitute a breach of, or constitute a
default under or an event which, with or without notice of lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any agreement, document, lease or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject, would be a violation of any law, administrative regulation, judgment,
order or decree applicable to the Company, or (ii) subject to the listing
approval requirements of the OTC Stock Market, require the consent which has not
been obtained of any other person or entity under any agreement, lease, document
or other instrument or undertaking by which the Company is bound or to which any
of its properties are subject.
5.4 Subject to the filing of UCC-1 Financing Statements in appropriate
jurisdictions, the security interest in all of the assets of the Company (the
"Assets") granted
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pursuant to Section 4 hereto constitutes a valid security interest in the
Assets.
6. COVENANTS OF THE COMPANY. The Company covenants with the Investors as
follows:
(a) The proceeds of the Loan will be used for working capital and
general corporate purposes.
(b) At all times while the Notes are outstanding, the Company will
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
Notes, the full number of shares of Common Stock deliverable upon conversion
of the Notes.
7. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement or in any document, exhibit, schedule or certificate
delivered in connection herewith shall survive the execution and delivery of
this Agreement and the closing of the Loan and any investigation at any time
made by the Investors or on their behalf.
8. MISCELLANEOUS PROVISIONS.
8.1. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of New York without
giving any effect to principles of conflicts of laws.
8.2. All notices hereunder shall be in writing and shall be
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company:
Entertainment Boulevard, Inc.
4502 Del Rey Avenue Suite 108
Marina Del Rey, California 90292
Attn: Stephen Brown
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To the Investors:
Forest Equities, Ltd.
c/o Lowe, Lipman & Company
Attention: Mr. Joe Frank
5 St. Kilda Road
St. Kilda 3182 Melbourne
Victoria, Australia
and to
H.A.A. Inc.
1601-42nd Street
Brooklyn, New York 11204
provided, however, that any notice of change of address shall be effective only
upon receipt.
8.3. This Agreement shall be binding upon and inure to the
benefit of the Company, the Investors and the successors and assigns of the
Investors. The Company may not assign this Agreement without the prior written
consent of the Investors. The Investors may assign all or any part of his rights
and obligations hereunder to any affiliate of the Investors without the consent
of the Company.
8.4. This Agreement and all exhibits and schedules hereto set
forth the entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended and the Company or either
Investor may take any action herein prohibited or omit to take action herein
required to be performed by it or him, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company or the Investors has obtained the written consent of the other party
parties to this Agreement.
8.5. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
8.6. The headings in this Agreement are for reference purposes
only and shall
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not constitute a part hereof.
8.7 Investors' reasonable attorneys fees and expenses, incurred
by the Investors in connection with the preparation, execution and delivery of
this Agreement, the Notes and the Registration Rights Agreement, shall be
deducted from the proceeds of the Notes.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ENTERTAINMENT BOULEVARD, INC.
/s/ STEPHEN BROWN
-----------------------------------
By: Stephen Brown
Title: Chairman of the Board
FOREST EQUITIES, LTD.
-----------------------------------
By:
Title:
H.A.A. INC.
-----------------------------------
By:
Title:
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EXHIBIT A
SECURED NOTE
$100,000 January __, 2000
FOR VALUE RECEIVED, Entertainment Boulevard, Inc. (the "Maker"), hereby
promises to pay to the order of (the "Payee"), at or at such other place as the
Payee may designate in writing, in lawful money of the United States of America,
the principal sum of one hundred thousand dollars ($100,000) together with
interest from the date hereof at the rate of 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months. The principal of this Note
shall be payable in full on or before February 15, 2000. Interest shall accrue
from the date hereof and shall be paid when the principal amount of this Note
has been paid in full.
The occurrence of any one or more of the following events shall constitute
an Event of Default under this Note: (i) the failure to pay principal of or
interest on this Note as and when due; (ii) any representation or warranty of
the Maker contained in the Loan and Security Agreement dated as of the date
hereof between the Maker and the Payee shall not be true and correct in all
material respects and the same shall not be cured within 30 days after written
notice thereof by the Payee to the Maker or the Maker shall have breached any
covenant contained in the Loan and Security Agreement and such breach shall not
be cured within 30 days; (iii) a proceeding being filed or commenced against the
Maker for bankruptcy, dissolution or liquidation which shall not be dismissed
within 60 days, or the Maker voluntarily or involuntarily terminating or
dissolving or being terminated or dissolved; (iv) the Maker filing a petition
under bankruptcy, insolvency or debtor's relief law or making an assignment for
the benefit of creditors; or (v) the appointment of a custodian, trustee,
liquidator or receiver for
8
<PAGE>
any of the property of the Maker, which shall not be dismissed, released or
vacated within 60 days.
The Maker agrees that in an Event of Default under this Note, then all or
any part of the unpaid principal balance of and interest on this Note shall
immediately become due and payable without notice or demand. If an Event of
Default occurs, the Maker agrees to pay to the holder all reasonable expenses
incurred by the holder, including reasonable attorneys' fees, in enforcing and
collecting this Note.
Failure of the Payee hereof to assert any right contained herein will not
be deemed to be a waiver thereof.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Note operate to invalidate this Note, then and in either of those events, such
provision or provisions only shall be deemed null and void and shall not affect
any other provision of this Note and the remaining provisions of this Note shall
remain operative and in full force and effect and shall in no way be affected,
prejudiced or disturbed thereby.
The Maker hereby forever waives presentment, presentment for payment,
demand, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note may be prepaid in whole or in part at any time and from time to
time without premium. This Note shall be paid without deduction by reason of any
set-off, defense or counterclaim of the Maker.
The principal and accrued interest on this Note may be converted into
shares of Common Shares (the "Common Shares") of the Maker at the option of the
Payee at $1.00 per share and the Maker agrees to cause such Common Shares to be
registered for resale (subject to the registration rights previously granted to
security holders of the Maker) under the Securities Act of 1933, as
9
<PAGE>
amended.
This Note is secured pursuant to the terms of the Loan and Security
Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without giving any effect to
principles of conflicts of laws. This Note shall be binding upon the successors
and assigns of the Maker and shall inure to the benefit of the successors and
assigns of Payee.
ENTERTAINMENT BOULEVARD, INC.
----------------------------------
By: Stephen Brown
Title: Chairman of the Board
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<PAGE>
EXHIBIT B
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED THE DATE
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE RIGHTS OF THE
HOLDER.
ENTERTAINMENT BOULEVARD INC.
COMMON STOCK PURCHASE WARRANT
No. Warrant to Purchase 25,000 Shares
ENTERTAINMENT BOULEVARD INC. a foreign corporation (the "COMPANY"), hereby
certifies that, for value received, or assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time during the period commencing January , 2000 and ending January , 2005 (the
"EXERCISE PERIOD"), at the Purchase Price (as hereinafter defined), twenty-five
thousand (25,000) shares of the fully paid and nonassessable shares of Common
Stock of the Company. The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued in
substitution therefor) is issued in connection with that certain Loan and
Securities Agreement (the "Agreement") dated of even date herewith among the
initial Holder hereof, the Company and certain other parties thereto.
Capitalized terms used herein not otherwise defined shall have the meanings
ascribed thereto in the Agreement. As used herein the following terms, unless
the context otherwise requires, have the following respective meanings:
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<PAGE>
(a) The term "AGREEMENT" refers to that certain Loan and Securities
Agreement dated the date herewith among the initial Holder hereof and the
Company.
(b) The term "COMPANY" shall include Entertainment Boulevard Inc. and
any corporation that shall succeed or assume the obligations of such
corporation hereunder.
(c) The term "COMMON STOCK" includes (a) the Company's common stock, $
par value per share, (b) any other capital stock of any class or classes
(however designated) of the Company, authorized on or after such date, the
Holders of which shall have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on
any shares entitled to preference, and the Holders of which shall
ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even though the right
so to vote has been suspended by the happening of such a contingency) and
(c) any other securities into which or for which any of the securities
described in (a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(d) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) that the Holder of this Warrant at any time shall be entitled
to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or that at any time shall be
issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 or otherwise.
(e) The term "PURCHASE PRICE" means $1.00 per share of Common Stock.
(f) The term "REGISTRATION RIGHTS AGREEMENT" refers to that certain
Registration Rights Agreement dated _________________________ herewith
among the initial Holder hereof, the Company and certain other parties
hereto.
1. EXERCISE OF WARRANT.
1.1. METHOD OF EXERCISE.
(a) This Warrant may be exercised in whole or in part (but not as to a
fractional share of Common Stock), at any time and from time to time during
the Exercise Period by the Holder hereof by delivery of a notice of
exercise (a "NOTICE OF EXERCISE") in the form attached hereto as EXHIBIT A
via facsimile to the Company. Promptly thereafter the Holder shall
surrender this Warrant to the Company at its principal office, accompanied
by payment of the Purchase Price multiplied by the number of shares of
Common Stock for which this Warrant is being exercised (the "EXERCISE
PRICE"). Payment of the Exercise Price shall be made by wire transfer to
the account of the Company. Upon exercise, the Holder shall be entitled to
receive, one or more
12
<PAGE>
certificates, issued in the Holder's name or in such name or names as the
Holder may direct, subject to the limitations on transfer contained herein,
for the number of shares of Common Stock so purchased. The shares of Common
Stock so purchased shall be deemed to be issued as of the close of business
on the date on which the Company shall have received from the Holder
payment of the Exercise Price (the "EXERCISE DATE").
(b) Notwithstanding anything to the contrary set forth herein, upon
exercise of all or a portion of this Warrant in accordance with the terms
hereof, the Holder shall not be required to physically surrender this
Warrant to the Company. Rather, records showing the amount so exercised and
the date of exercise shall be maintained on a ledger (the "LEDGER") (a copy
of which shall be delivered to the Company or transfer agent with each
Notice of Exercise). It is specifically contemplated that the Company
hereof shall act as the calculation agent for all exercises of this
Warrant. In the event of any dispute or discrepancies, such records
maintained by the Company shall be controlling and determinative in the
absence of manifest error. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following an exercise of a portion of this Warrant, the
number of shares of Common Stock represented by this Warrant will be the
amount indicated on the Ledger attached hereto (which may be less than the
amount stated on the face hereof).
1.2. REGULATION D RESTRICTIONS. The Holder hereof represents and warrants
to the Company that it has acquired this Warrant and anticipates acquiring the
shares of Common Stock issuable upon exercise of the Warrant solely for its own
account for investment purposes and not with a view to or for resale of such
securities unless such resale has been registered with the Commission or an
applicable exemption is available therefor. At the time this Warrant is
exercised, the Company may require the Holder to state in the Notice of Exercise
such representations concerning the Holder as are necessary or appropriate to
assure compliance by the Holder with the Securities Act.
1.3. LIMITATION ON EXERCISE. Notwithstanding the rights of the Holder to
exercise all or a portion of this Warrant as described herein, such exercise
rights shall be limited, solely to the extent set forth in the Agreement as if
such provisions were specifically set forth herein. Specifically, the rights of
the Holder to exercise all or a portion of this Warrant are subject to the
limitation on exercise provisions specified in Section 10.1 of the Agreement.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. Within 5 business days after
the exercise of this Warrant, the Company at its expense (including the payment
by it of any applicable issue, stamp or transfer taxes) will cause to be issued
in the name of and delivered to the Holder thereof, or, to the extent
permissible hereunder, to such other person as such Holder may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction multiplied by
the then applicable
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<PAGE>
Purchase Price, together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled upon such
exercise pursuant to Section 1 or otherwise which certificate or certificates
shall be without restrictive legend of any nature provided that a registration
statement has been declared effective in accordance with the Registration Rights
Agreement, and if a registration statement has not been declared effective, then
in accordance with Rule 144.
3. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefor on such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of this Warrant, and (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate or
otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of this Warrant.
4. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the Holders of any class or
securities for the purpose of determining the Holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or
merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
then and in each such event the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any, as of which the Holders
of record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common
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<PAGE>
Stock (or Other Securities) for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 20 days prior to the date specified in such notice
on which any action is to be taken.
5. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of this Warrant, all shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of this Warrant.
6. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant, properly
endorsed and in compliance with the restrictions on transfer set forth in the
legend on the face of this Warrant, to the Company, the Company at its expense
will issue and deliver to or on the order of the Holder thereof a new Warrant of
like tenor, in the name of such Holder or as such Holder (on payment by such
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face of the Warrant so surrendered.
7. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
8. REMEDIES. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
9. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to
all of which each Holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by endorsement and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery.
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered
to transfer absolute title hereto by endorsement and delivery hereof to a
BONA FIDE purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of each
such BONA FIDE purchaser, and each such BONA FIDE purchaser shall acquire
absolute title hereto and to all rights represented hereby;
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<PAGE>
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered Holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may not be sold,
transferred or assigned except pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption
therefrom.
10. REGISTRATION RIGHTS. The Company is obligated to register the shares of
Common Stock issuable upon exercise of this Warrant in accordance with the terms
of the Registration Rights Agreement.
11. NOTICES. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder of this Warrant who has
so furnished an address to the Company.
12. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
DATED as of January , 2000.
ENTERTAINMENT BOULEVARD, INC.
By:
Name:
Title:
[Corporate Seal]
Attest:
By:
Secretary
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EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
(To be executed only upon exercise
of the Warrant in whole or in part)
To: ENTERTAINMENT BOULEVARD, INC.
The undersigned registered Holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
______________(1) shares of Common Stock (as defined in such Warrant) and
herewith makes payment therefor in the amount and manner set forth below, as of
the date written below. The undersigned requests that the certificates for such
shares of Common Stock be issued in the name of, and delivered to,
_________________________ whose address is ___________________________________.
The Exercise Price is paid by check or wire transfer to the account of the
Company in the amount of $________.
Upon exercise pursuant to this Notice of Exercise, the Holder will be in
compliance with the Limitation on Exercise (as defined in the Loan and
Securities Agreement pursuant to which this Warrant was issued).
Dated: ____________________ ____________________________________________
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Address of Holder:
Date of exercise:
- --------
(1) Insert the number of shares of Common Stock as to which the accompanying
Warrant is being exercised. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
the accompanying Warrant, to the holder surrendering the same.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 16, 1999, accompanying the financial
statements of Entertainment Boulevard, Inc. contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."
/s/ Singer Lewak Greenbaum & Goldstein LLP
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
January 21, 2000
