AGREEMENT AND PLAN OF MERGER
Exhibit 10
AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (“Merger Agreement”) made this 13th
day of
April, 2006 by and among FILTERING ASSOCIATES, INC., (“FAI”), a Nevada
corporation, and Xxxxx Xxxxx and Xxxxxx Xxxxxxx, individual stockholders of
FAI
(the “FAI Stockholders”), on the one hand, and MATINEE MEDIA CORPORATION, a
Texas corporation (the “Company”), on the other hand.
Recitals:
A. The
respective Boards of Directors of FAI and the Company have determined that
a
merger of the Company with and into FAI (the “Merger”), with FAI being the
surviving corporation, upon the terms and subject to the conditions set forth
in
this Agreement, would be fair and in the best interests of their respective
shareholders, and such Boards of Directors have approved such Merger, pursuant
to which the shares of the Company’s common stock, no par value (“Company
Stock”), issued and outstanding immediately prior to the Effective Time of the
Merger (as defined in Section 1.03), other than Dissenting Shares (as defined
in
Section 2.01(d)), will be converted into the number of shares of Common Stock
of
FAI determined by application of the Exchange Ratio (defined
below).
B. FAI
and
the Company desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
C. For
federal income tax purposes, the parties intend that the Merger shall qualify
as
a plan of reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated
thereunder.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as
follows:
ARTICLE
I
The
Merger
1.01 The
Merger.
Upon
the terms and subject to the conditions set forth in this Agreement, and in
accordance with the Nevada Revised Statutes (the “Nevada Merger Statute”) and
the Texas Business Corporation Act (the “Texas Merger Statute”), which shall
govern the merger contemplated hereby, the Company shall be merged with and
into
FAI at the Effective Time of the Merger. At the Effective Time of the Merger,
the separate existence of the Company shall cease, and FAI shall continue as
the
surviving corporation (hereinafter sometimes referred to as “Public FAI”) under
the name “MATINEE MEDIA CORPORATION”.
1.02 Closing.
Unless
this Merger Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to Section 7.01 and subject
to
the satisfaction or waiver of the conditions set forth in Article VI, the
closing of the Merger (the “Closing”) will take place at 10:00 a.m. on the
business day after satisfaction of the conditions set forth in Article VI (or
as
soon as practicable thereafter following satisfaction or waiver of the
conditions set forth in Article VI) (the “Closing Date”), at the offices of the
Company, Austin, Texas, unless another date, time or place is agreed to in
writing by the parties hereto.
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1.03 Effective
Time of Merger.
As soon
as practicable following the satisfaction or waiver of the conditions set forth
in Article VI of this Agreement, the parties shall file with the Secretary
of
State of the State of Nevada articles of merger (the “Nevada Articles of
Merger”) in substantially the form attached hereto as Exhibit
A,
which
shall amend the Articles of Incorporation of Public FAI to reflect the name
change to “MATINEE MEDIA CORPORATION”, and with the Secretary of State of the
State of Texas articles of merger (the “Texas Articles of Merger”) in
substantially the form attached hereto as Exhibit
B,
each
executed in accordance with the relevant provisions of the Nevada Merger Statute
or the Texas Merger Statute, as the case may be, and shall make all other
filings or recordings required under the Nevada Merger Statute and the Texas
Merger Statute. The Merger shall become effective at such time as the Nevada
Articles of Merger are duly filed with the Secretary of State of the State
of
Nevada and the Texas Articles of Merger are duly filed with the Secretary of
State of the State of Texas and a certificate of merger has been issued by
each
such Secretary of State, to the extent required by the Nevada Merger Statute
or
the Texas Merger Statute for the Merger to become effective, or at such later
time as FAI and the Company shall agree, which time should be specified in
the
Nevada Articles of Merger (the time the Merger becomes effective being the
“Effective Time of the Merger”). FAI and the Company shall use reasonable
efforts to have the Closing Date and the Effective Time of the Merger to be
the
same day.
1.04 Effects
of the Merger.
The
Merger shall have the effects set forth in the applicable provisions of the
Nevada Merger Statute and the Texas Merger Statute.
1.05 Articles
of Incorporation; Bylaws; Purposes.
(a) The
Articles of Incorporation of FAI, as amended by the Nevada Articles of Merger,
shall be the Articles of Incorporation of Public FAI until thereafter changed
or
amended as provided therein or by applicable law.
(b) The
Bylaws of FAI in effect at the Effective Time of the Merger shall be the Bylaws
of Public FAI until thereafter changed or amended as provided therein or by
applicable law.
1.06 Directors.
The
directors of the Company at the Effective Time of the Merger shall be the
directors of Public FAI, until the earlier of their resignation or removal
or
until their respective successors are duly elected and qualified, as the case
may be.
1.07 Officers.
The
officers of the Company at the Effective Time of the Merger shall be the
officers of Public FAI, until the earlier of their resignation or removal or
until their respective
successors
are duly elected and qualified, as the case may be.
1.08 Stock
Cancellation.
On or
before the Closing, FAI shall cause to be cancelled 1,665,272 shares of its
outstanding Common Stock held by certain of its stockholders who hold restricted
Common Stock and it shall transfer to such stockholders its existing business
and related assets and liabilities in consideration of the cancellation of
their
FAI Common Stock. Such stockholders, by their signature below, agree to the
cancellation of their stock as aforesaid and to the assumption of all
liabilities of the FAI business. After the cancellation of these shares, the
total outstanding shares of FAI as of immediately prior to the Effective Time
of
the Merger shall not exceed 1,207,728 shares of Common Stock, which as of
immediately after the Effective Time of the Merger shall amount to no more
than
8% of the total shares of Public FAI Common Stock then outstanding, after giving
effect to the issuance of the Public FAI shares to the Company’s shareholders in
the Merger pursuant to this Agreement.
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ARTICLE
II
Effect
of
the Merger
on
the
Capital Stock
of
the
Constituent Corporations
2.01 Effect
on Capital Stock.
As of
the Effective Time of the Merger, by virtue of the Merger and without any action
on the part of the holders of shares of Company Stock or of FAI
Stock:
(a) FAI
Stock.
Each
share of FAI Stock issued and outstanding immediately prior to the Effective
Time of the Merger shall remain one share of Public FAI Common Stock, subject
to
adjustment as provided below (“FAI Exchange Ratio”). Certificates representing
shares of FAI Stock shall be exchanged for certificates reflecting the name
change to “Matinee Media Corporation” for that number of shares of Public FAI
Common Stock held prior to the Effective Time of the Merger.
(b) Conversion
of Company Stock.
Except
as otherwise provided herein, each issued and outstanding share of Company
Stock
shall be converted into one share of Public FAI Common Stock, subject to
adjustment as provided below (“Company Exchange Ratio”) so that upon such
issuance the shareholders of the Company shall own no less than 92% and the
shareholders of FAI shall own no more than 8% of the total shares of Public
FAI
Common Stock outstanding immediately after the Effective Time of the Merger.
Certificates representing such number of shares of Company Stock shall be
exchanged for certificates representing an equal number of shares of Public
FAI
Common Stock.
(c) Dissenting
Shares.
Notwithstanding anything in this Agreement to the contrary, shares of FAI Stock
issued and outstanding immediately prior to the Effective Time of the Merger
held by a holder (if any) who has the right to demand payment for and an
appraisal of such shares in accordance with the Nevada Merger Statute
(“Dissenting Shares”) shall not be converted into a right to receive sharers of
Public FAI Common Stock unless such holder fails to perfect or otherwise loses
such holder's right to such payment or appraisal, if any. If, after the
Effective Time of the Merger, such holder fails to perfect or loses any such
right to appraisal, each share of FAI Stock held by such holder shall be treated
as a share that had been converted as of the Effective Time of the Merger into
the right to receive Public FAI Common Stock in accordance with this Section
2.01. FAI shall give prompt notice to the Company of any demands received by
FAI
for appraisal of shares of FAI Stock, and the Company shall have the right
to
participate in all negotiations and proceedings with respect to such demands.
FAI shall not, except with the prior written consent of the Company, make any
payment with respect to, or settle or offer to settle, any such
demands.
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(d) Cancellation
and Retirement of Stock.
As of
the Effective Time of the Merger, all shares of Company Stock issued and
outstanding immediately prior to the Effective Time of the Merger, shall no
longer be outstanding and shall automatically be cancelled and retired and
shall
cease to exist, and each holder of a certificate representing any such shares
of
Company Stock shall cease to have any rights with respect thereto, except the
right to receive certificates representing shares of Public FAI Common Stock
to
be issued in consideration therefore upon surrender of such certificates in
accordance with Section 2.04.
2.02 Intentionally
Deleted
2.03 Company
Securities.
(a) Assumption
of Company Warrants.
At the
Effective Time of the Merger, each outstanding warrant or option to purchase
Company Stock (each a “Company Warrant”), shall by virtue of the Merger be
assumed by Public FAI and each employee stock incentive plan of the Company
under which any Company Warrant may be granted (the “Company Plans”) shall by
virtue of the Merger be assumed by Public FAI. Each Company Warrant so assumed
by Public FAI will continue to have, and be subject to, the same terms and
conditions of such Company Warrant immediately prior to the Effective Time
of
the Merger and will be exercisable for that number of shares of Public FAI
Common Stock equal to the number of Company Stock that were issuable upon
exercise of such Company Warrant immediately prior to the Effective Time of
the
Merger and (ii) the per share exercise price for the shares of Public FAI
Common Stock issuable upon exercise of such assumed Company Warrant will be
equal to the exercise price that would have been paid prior to the Effective
Time of the Merger if the Company Warrant were exercised in full prior to the
Effective Time of the Merger. Public FAI shall comply with the terms of all
such
Company Warrants and Company Plans. Public FAI shall take all corporate actions
necessary to reserve for issuance a sufficient number of shares of Public FAI
Common Stock for delivery upon exercise of all Company Warrants outstanding
at
the Effective Time of the Merger on the terms set forth in this
Section 2.03 and all other shares of Public FAI Common Stock issuable under
the Company Plans.
(b) Pre-Merger
Increase in Issued and Outstanding Shares of Company Stock
FAI
acknowledges that the Company has entered into a securities purchase agreement
pursuant to which, prior to the Effective Time of the Merger, the Company issued
and sold to certain institutional and individual accredited investors shares
of
Company Stock and issued Company Warrants to purchase one share of Company
Stock
for every two shares of Company Stock issued to such investors, with an exercise
price of $3.50 per share (the “Company Funding”). Upon the closing of the
Company Funding, up to $2,500,000 in principal amount of the Company’s
convertible promissory notes (the “Bridge Notes”), plus accrued and unpaid
interest thereon, automatically converted into shares of Company Stock at a
conversion price of $1.707 per share, and Company Warrants to purchase one
share
of Company Stock for every two shares of Company Stock issued to the holders
of
the Bridge Notes, with an exercise price of $3.50 per share.
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(c) Adjustment
to Exchange Ratios.
The
Company Exchange Ratio set forth above in Section 2.01(b) is based on the
assumption that the shareholders of FAI will own 8% of the outstanding Common
Stock of Public FAI as of immediately after the Effective Time of the Merger.
If
necessary to maintain this percentage ownership immediately after the Effective
Time of the Merger, the Company Exchange Ratio set forth in Section 2.01(b)
or
the FAI Exchange Ratio set forth in Section 2.01(a) shall be proportionately
adjusted so as to achieve this 8% target for the FAI shareholders in the
Merger.
ARTICLE
III
Representations
and Warranties
3.01 Representations
and Warranties of the Company.
Except
as set forth in the disclosure schedule delivered to FAI by the Company at
the
time of the execution of this Agreement (the “Company Disclosure Schedule”), the
Company represents and warrants to FAI as follows:
(a) Organization,
Standing and Corporate Power.
The
Company is duly organized, validly existing and in good standing under the
laws
of the State of Texas and has the requisite corporate power and authority to
carry on its business as now being conducted. The Company is duly qualified
or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a material adverse effect (as defined in Section
9.02)
with respect to the Company. Attached as Schedule
3.01(a)
of the
Company Disclosure Schedule are complete and correct copies of the Articles
of
Incorporation and Bylaws of the Company, each as amended through the date of
this Agreement.
(b) Subsidiaries.
The
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any person.
(c) Capital
Structure.
The
authorized capital stock of the Company consists of 25,000,000 shares of Company
Stock, of which 15,096,601 shares are issued and outstanding, including the
securities issued in the Company Funding, as described in Schedule 3.01(c)
of
the Company Disclosure Schedule. Except as set forth in Schedule 3.01(c) of
the
Company Disclosure Schedule, as of the date hereof no other shares of capital
stock or other equity securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no outstanding bonds, debentures, notes
or other indebtedness or other securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to
vote) on any matters on which shareholders of the Company may vote. Except
as
set forth in Section 3.01(c) of the Company Disclosure Schedule, there are
no
outstanding securities, options, warrants, calls, rights, commitments, phantom
equity or similar rights, agreements, arrangements or undertakings of any kind
to which the Company is a party or by which it is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of the Company
or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations, commitments, understandings
or
arrangements of the Company to repurchase, redeem or otherwise acquire or make
any payment in respect of any shares of capital stock of the Company.
Schedule
3.01(c)
of the
Company Disclosure Schedule sets forth the ownership of the Company Stock.
Except as set forth on Schedule
3.01(c)
of the
Company Disclosure Schedule, there are no agreements or arrangements pursuant
to
which the Company is or could be required to register shares of Company Stock
or
other securities under the Securities Act of 1933, as amended (the “Securities
Act”) or, to the best of the Company’s knowledge, other agreements or
arrangements with or among any security holders of the Company with respect
to
equity securities of the Company.
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(d) Authority;
Noncontravention.
The
Company has the requisite corporate and other power and authority to enter
into
this Agreement and to consummate the Merger. Subject to obtaining the Company
Shareholder Approval (as defined in Section 3.01(o)), the execution and delivery
of this Agreement by the Company and this Agreement, the merger and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law. The execution and delivery
of
this Agreement do not, and the consummation of the transactions contemplated
by
this Agreement and compliance with the provisions hereof will not, conflict
with, or result in any breach or violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or “put” right with respect to any obligation or
to loss of a material benefit under, or result in the creation of any lien
upon
any of the properties or assets of the Company under, (i) the Articles of
Incorporation or Bylaws of the Company, (ii) any loan or credit agreement,
note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company, its properties
or
assets, or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to the Company,
its
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or liens that
individually or in the aggregate could not have a material adverse effect with
respect to the Company or could not prevent, hinder or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any federal, state or local government
or any court, administrative agency or commission or other governmental
authority, agency, domestic or foreign (a “Governmental Entity”), is required by
or with respect to the Company in connection with the execution and delivery
of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except, with respect to this Agreement, for
the filing of the Texas Articles of Merger with the Secretary of State of the
State of Texas and the filing of the Nevada Articles of Merger with the
Secretary of State of the State of Nevada.
(e) Absence
of Certain Changes or Events.
The
Company was organized on October 13, 2005. The Company has provided FAI with
the
Company’s unaudited balance sheet as of December 31, 2005. Since December 31,
2005, there is not and has not been: (i) any material adverse change with
respect to the Company; (ii) any condition, event or occurrence which
individually or in the aggregate could reasonably be expected to have a material
adverse effect or give rise to a material adverse change with respect to the
Company; (iii) any event which, if it had taken place following the execution
of
this Agreement, would not have been permitted by Section 4.01 without prior
consent of FAI; or (iv) any condition, event or occurrence which could
reasonably be expected to prevent, hinder or materially delay the ability of
the
Company to consummate the transactions contemplated by this
Agreement.
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(f) Litigation;
Labor Matters; Compliance with Laws.
(i) There
is
no suit, action or proceeding or investigation pending or, to the best of the
Company’s knowledge, threatened against or affecting the Company that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect with respect to the Company or prevent, hinder or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
the
Company having, or which, insofar as reasonably could be foreseen by the
Company, in the future could have, any such effect.
(ii) The
Company is not a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is it the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to bargain with
any
labor organization as to wages or conditions of employment nor is there any
strike, work stoppage or other labor dispute involving it pending or, to its
the
best of its knowledge, threatened, any of which could have a material adverse
effect with respect to the Company.
(iii) The
Company is not in violation of any statute, law, regulation, ordinance, rule,
judgment, order, decree or arbitration award applicable to the Company or its
business.
(g) Benefit
Plans.
The
Company is not a party to any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) under which the Company
currently has an obligation to provide benefits to any current or former
employee, officer or director of the Company (collectively, “Benefit
Plans”).
(h) Certain
Employee Payments.
The
Company is not a party to any employment agreement which could result in the
payment to any current, former or future director or employee of the Company
of
any money or other property or rights or accelerate or provide any other rights
or benefits to any such employee or director as a result of the transactions
contemplated by this Agreement, whether or not (i) such payment, acceleration
or
provision would constitute a “parachute payment” (within the meaning of Section
280G of the Code), or (ii) some other subsequent action or event would be
required to cause such payment, acceleration or provision to be
triggered.
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(i) Tax
Returns and Tax Payments.
The
Company has timely filed all Tax Returns required to be filed by it, has paid
all Taxes shown thereon to be due and, to the best of the Company’s knowledge,
has provided adequate reserves in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any returns. No
material claim for unpaid Taxes has been made or become a lien against the
property of the Company or is being asserted against the Company, no audit
of
any Tax Return of the Company is being conducted by a tax authority, and no
extension of the statute of limitations on the assessment of any Taxes has
been
granted by the Company and is currently in effect. As used herein, “taxes” shall
mean all taxes of any kind, including, without limitation, those on or measured
by or referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any Governmental Entity, domestic or foreign. As used herein, “Tax
Return” shall mean any return, report or statement required to be filed with any
Governmental Entity with respect to Taxes.
(j) Environmental
Matters.
To the
best of its knowledge, the Company is in compliance with all applicable
Environmental Laws. “Environmental Laws” means all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and common
law
relating in any manner to contamination, pollution or protection of human health
or the environment, and similar state laws.
(k) Material
Contract Defaults.
The
Company has provided or made available to FAI copies of all material contracts,
agreements, commitments, arrangements, leases, policies or other instruments
to
which it is a party or by which it is bound (“Material Contracts”) all of which
are listed on Schedule
3.01(k)
of the
Company Disclosure Schedule. The Company is not, nor has it received any notice
or has any knowledge that any other party is, in default in any respect under
any Material Contract; and, to the best of the Company’s knowledge, there has
not occurred any event that with the lapse of time or the giving of notice
or
both would constitute such a material default. For purposes of this Agreement,
a
Material Contract means any contract, agreement or commitment to which the
Company is a party (i) with expected receipts or expenditures in excess of
$50,000, (ii) requiring the Company to indemnify any person, (iii) granting
exclusive rights to any party, or (iv) evidencing indebtedness for borrowed
or
loaned money in excess of $50,000 or more, including guarantees of such
indebtedness. Notwithstanding the foregoing definition, a Material Contract
shall not include any contract with a fair market valuation equal to or less
than $50,000.
(l) Properties.
The
Company has good, clear and marketable title to all the tangible properties
and
tangible assets reflected in the latest balance sheet as being owned by the
Company or acquired after the date thereof which are, individually or in the
aggregate, material to the Company's business (except properties sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all liens.
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(m) Trademarks,
Broadcast Licensees and Related Contracts.
To the
best of the Company’s knowledge:
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(i)
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As
used in this Agreement, the term “Trademarks” means trademarks, service
marks, trade names, Internet domain names, designs, slogans, and
general
intangibles of like nature; the term “Trade Secrets” means technology;
trade secrets and other confidential information, know-how, proprietary
processes, formulae, algorithms, models, and methodologies; the term
“Intellectual Property” means patents, copyrights, Trademarks,
applications for any of the foregoing, and Trade Secrets; the term
“Company License Agreements” means any license agreements granting any
right to use or practice any rights under any Intellectual Property
(except for such agreements for shrink-wrap or click wrap software
or
other off-the-shelf products that are generally available for less
than
$25,000), and any written settlements relating to any Intellectual
Property, to which the Company is a party or otherwise bound; and
the term
“Software” means any and all computer programs, including any and all
software implementations of algorithms, models and methodologies,
whether
in source code or object code.
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(ii)
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Schedule
3.01(m)
of
the Company Disclosure Schedule sets forth, for the Intellectual
Property
owned by the Company, a complete and accurate list of all U.S. and
foreign
(1) patents and patent applications; (2) Trademark registrations
(including Internet domain registrations) and applications and material
unregistered Trademarks; (3) copyright registrations and applications,
indicating for each, the applicable jurisdiction, registration number
(or
application number), and date issued (or date filed) (4) Federal
Communications Commission (“FCC”) broadcast licenses, options and
agreements to acquire rights to such licenses, including terms, parties,
dates, restrictions (“Broadcast Licenses”). Schedule
3.01(m)
of
the Disclosure Schedule sets forth a list of all third party Software
that
is incorporated in any Software sold, licensed, leased or otherwise
distributed by the Company, indicating for each the title, owner/licensor
of the Software. Third party Software tools that are used to create
the
Software sold, licensed, leased or otherwise distributed by the Company
but are not incorporated therein are specifically excluded from this
list.
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(iii)
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The
Intellectual Property owned by the Company is listed in the records
of the
appropriate United States, state or foreign agency as the sole owner
of
record for each application and registration listed in Schedule
3.01(m)
of
the Company Disclosure Schedule.
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9
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(iv)
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The
patents and Broadcast Licenses owned by the Company are valid and
enforceable, in full force and effect, and have not been canceled,
expired, or abandoned. There is no pending or threatened opposition,
interference or cancellation proceeding before any court or registration
authority in any jurisdiction against any Intellectual Property licensed
to the Company or with the FCC with respect to the Broadcast Licenses.
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(v)
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The
conduct of the Company’s business as currently conducted does not,
infringe upon any Intellectual Property rights owned or controlled
by any
third party (either directly or indirectly such as through contributory
infringement or inducement to infringe). Schedule
3.01(m)
of
the Company Disclosure Schedule lists all U.S. and foreign patents
for
which: (i) the Company has obtained written opinion of counsel; or
(ii)
the Company has received written notice of infringement or license
offer
outside the ordinary course of business. There are no claims or suits
pending or threatened against the Company, and the Company has not
received any notice of a third party claim or suit against the Company
(1)
alleging that its activities or the conduct of its businesses infringes
upon, violates, or constitutes the unauthorized use of the Intellectual
Property rights of any third party or (2) challenging the ownership,
use,
validity or enforceability of any Intellectual
Property.
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(vi)
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There
are no settlements, forbearances to xxx, consents, judgments, or
orders or
similar obligations to which the Company is bound which (1) restrict
the
Company’s rights to use any Intellectual Property or License, (2) restrict
the Company’s business in order to accommodate a third party’s
Intellectual Property or License or (3) permit third parties to use
any
Intellectual Property or License owned by the Company. There exists
no
event or condition, which will result in a violation or breach of,
or
constitute (with or without due notice or lapse of time or both)
a default
by the Company or any other party under any Company License Agreement
or
Broadcast License.
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(vii)
|
The
Company takes reasonable measures to protect the confidentiality
of Trade
Secrets, including requiring its employees and independent contractors
having access thereto to execute written non-disclosure agreements.
No
Trade Secret of the Company has been disclosed or authorized to be
disclosed to any third party other than pursuant to a non-disclosure
agreement that protects the Company’s proprietary interests in and to such
Trade Secrets. Neither the Company nor any other party to any
non-disclosure agreement relating to the Company’s Trade Secrets is in
breach or default thereof.
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|
(viii)
|
The
consummation of the transactions contemplated hereby will not result
in
the loss or impairment of the Company’s right to own or use any of the
Intellectual Property or License, nor will require the consent of
any
Governmental Entity or third party in respect of any such Intellectual
Property or Broadcast License.
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|
(ix)
|
Schedule
3.01(m)
of
the Company Disclosure Schedule lists all Software sold, licensed,
leased
or otherwise distributed by the Company to any third party, and identifies
which Software is sold, licensed, leased, or otherwise distributed
as the
case may be. With respect to the Software set forth in Schedule
3.01(m)
of
the Company Disclosure Schedule which the Company purports to own,
such
Software was either developed (1) by employees of the Company within
the
scope of their employment; or (2) by independent contractors who
have
assigned all of their rights in such Software to the Company pursuant
to
written agreements.
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10
(n) Board
Recommendation.
The
Board of Directors of the Company has unanimously determined that the terms
of
the Merger are fair to and in the best interests of the shareholders of the
Company and has recommended that the holders of the shares of Company Stock
approve the Merger.
(o) Company
Shareholder Approval. The
affirmative vote or consent of a majority of the issued and outstanding shares
of the Company Stock is the only vote or consent of the holders of any class
of
the Company’s securities required to approve the Merger (the “Company
Shareholder Approval”).
3.02 Representations
and Warranties of FAI and the FAI Shareholders.
Except
as set forth in the disclosure schedule delivered to the Company by FAI and
the
FAI Shareholders at the time of the execution of this Agreement (the “FAI
Disclosure Schedule”), FAI and the FAI Shareholders hereby, jointly and
severally, represent and warrant to the Company as follows:
(a) Organization,
Standing and Corporate Power.
FAI is
duly organized, validly existing and in good standing under the laws of the
State of Nevada as is applicable, and has the requisite corporate power and
authority to carry on its business as now being conducted. FAI is duly qualified
or licensed to do business and is in good standing in each jurisdiction in
which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a material adverse effect with respect to FAI. FAI
has
delivered to the Company complete and correct copies of its Articles of
Incorporation and Bylaws, which reflect all amendments made thereto prior to
the
date of this Agreement, and such Articles of Incorporation (or other
organization documents) and Bylaws of FAI are included in Schedule 3.02(a)
of
the FAI Disclosure Schedule. The records of meetings of the stockholders and
Board of Directors of FAI furnished to the Company are complete and correct
in
all material respects. The stock records of FAI furnished to the Company are
complete and correct in all material respects and accurately reflect the record
ownership and beneficial ownership of all of the outstanding shares of FAI
Stock
and any other outstanding securities issued by FAI.
11
(b) Subsidiaries.
FAI
does not own, directly or indirectly, any capital stock or other ownership
interest in any person.
(c) Capital
Structure.
The
authorized capital stock of FAI consists of 50,000,000 shares of Common Stock,
0.001 par value, of which 2,873,000 shares of FAI Stock are issued and
outstanding, and 5,000,000 shares of Preferred Stock, 0.001 par value, none
of
which are issued and outstanding. As of immediately prior to Effective Time
of
the Merger, 1,665,272 shares of FAI restricted Common Stock shall be cancelled
as provided in Section 1.08 so that as of prior to the Effective Time of the
Merger, no more than 1,207,728 shares of FAI Common Stock, and no other
securities, or convertible securities, shall be outstanding. There are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, phantom equity or similar rights, arrangements or undertakings
of
any kind to which FAI is a party or by which it is bound obligating FAI to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of FAI or
obligating FAI to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking, and
no
shares of FAI Common Stock are or shall be reserved for issuance pursuant to
any
FAI stock plans or any other plan, contract or obligation. Except as set forth
above, no shares of capital stock or other equity securities of FAI shall be
issued, reserved for issuance or outstanding as of the Effective Time of the
Merger. All outstanding shares of capital stock of FAI are, and all shares
which
may be issued pursuant to this Agreement shall be, when issued, duly authorized,
validly issued, fully paid and nonassessable and, not subject to preemptive
rights, and issued in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of FAI having the
right to vote (or convertible into, or exchangeable for, securities having
the
right to vote) on any matters on which shareholders of FAI may vote. There
are
no outstanding contractual obligations, commitments, understandings or
arrangements of FAI to repurchase, redeem or otherwise acquire or make any
payment in respect of any shares of capital stock of FAI, except as to the
cancellation of those shares of common stock held by the FAI Stockholders
specified in Section 1.08 of this Agreement. There are no agreements or
arrangements pursuant to which FAI is or could be required to register the
issuance or resale of shares of FAI Stock or other securities under the
Securities Act or other agreements or arrangements with or among any security
holders of FAI with respect to equity securities of FAI.
(d) Authority;
Noncontravention.
FAI has
all requisite corporate authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. Subject to obtaining the FAI
Shareholder Approval (as defined in Section 3.02(r)), the execution and delivery
of this Agreement by FAI and the consummation by FAI of the transactions
contemplated by this Agreement have been (or at Closing will have been) duly
authorized by all necessary corporate action on the part of FAI. The
cancellation of the restricted FAI Common Stock and the transfer of its FAI
business and assets as provided in Section 1.08 complies with all applicable
corporate and fiduciary law requirements. This Agreement has been duly executed
and delivered by and constitutes a valid and binding obligation of FAI,
enforceable against FAI in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any breach or violation
of, or default (with or without notice or lapse of time, or both) under, or
give
rise to a right of termination, cancellation or acceleration of or “put” right
with respect to any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of FAI under,
(i) the articles of incorporation or bylaws of FAI, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to FAI or its
properties or assets, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award applicable to
FAI
or its properties or assets, other than, in the case of clauses (ii) and (iii),
any such conflicts, breaches, violations, defaults, rights, losses or liens
that
individually or in the aggregate could not have a material adverse effect with
respect to FAI or could not prevent, hinder or materially delay the ability
of
FAI to consummate the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, or notice to, any Governmental Entity is required by or with respect
to
FAI in connection with the execution and delivery of this Agreement by FAI
or
the consummation by FAI of any of the transactions contemplated by this
Agreement, except for the filing of the Texas Articles of Merger with the
Secretary of State of the State of Texas and the filing of the Nevada Articles
of Merger with the Secretary of State of the State of Nevada and such other
consents, approvals, orders, authorizations, registrations, declarations,
filings or notices as may be required under the “blue sky” laws of various
states.
12
(e) S.E.C.
Documents; Undisclosed Liabilities.
FAI has
filed with the Securities and Exchange Commission (the “S.E.C.”) all reports,
schedules, forms, statements and other documents as were required by the
Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), during the period FAI has been required by law to file such material, and
FAI has delivered or made available to the Company all such reports, schedules,
forms, statements and other documents filed by FAI with the S.E.C.
(collectively, and in each case including all exhibits and schedules thereto
and
documents incorporated by reference therein, the “FAI S.E.C. Documents”). As of
their respective dates, the FAI S.E.C. Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the
case may be, and the rules and regulations of the S.E.C. promulgated thereunder
applicable to such FAI S.E.C. Documents, and none of the FAI S.E.C. Documents
(including any and all consolidated financial statements included therein)
as of
such date contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent revised or superseded by a subsequent
filing with the S.E.C. (a copy of which has been provided to the Company prior
to the date of this Agreement), none of the FAI S.E.C. Documents contains any
untrue statement of a material fact or omits to state any material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of FAI included in
such
FAI S.E.C. Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the S.E.C.
with respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by the applicable form under the Exchange Act) applied
on a consistent basis during the periods involved (except as may be indicated
in
the notes thereto) and fairly present the financial position of FAI as of the
dates thereof and the results of operations and changes in cash flows for the
periods then ended (subject, in the case of unaudited quarterly statements,
to
the extent they may not include footnotes or may be condensed). FAI does not
have, and at the Effective Time of the Merger FAI will not have, any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) which, individually or in the aggregate, exceed
$100,000.
(f) Absence
of Certain Changes or Events.
Except
as disclosed in the FAI S.E.C. Documents, since December 31, 2004, FAI has
conducted its business only in the ordinary course consistent with past practice
in light of its current business circumstances, and there is not and has not
been: (i) any material adverse change with respect to FAI; (ii) any condition,
event or occurrence which, individually or in the aggregate, could reasonably
be
expected to have a material adverse effect or give rise to a material adverse
change with respect to FAI; (iii) any event which, if it had taken place
following the execution of this Agreement, would not have been permitted by
Section 4.02 without the prior consent of the Company; or (iv) any condition,
event or occurrence which could reasonably be expected to prevent, hinder or
materially delay the ability of FAI to consummate the transactions contemplated
by this Agreement.
(g) Litigation;
Labor Matters; Compliance with Laws.
(i) There
is
no suit, action or proceeding or investigation pending or, to the best of FAI’s
or the FAI Shareholders’ knowledge, threatened against or affecting FAI that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect with respect to FAI or prevent, hinder or materially
delay the ability of FAI to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any
Governmental Entity or arbitrator outstanding against FAI having, or which,
insofar as reasonably could be foreseen by FAI, in the future could have, any
such effect.
(ii) FAI
does
not have any employees and is not a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization, nor is it the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment
nor
is there any strike, work stoppage or other labor dispute involving it pending
or, to its the best of its knowledge, threatened, any of which could have a
material adverse effect with respect to FAI.
(iii) FAI
is
not in violation of any material statute, law, regulation, ordinance, rule,
judgment, order, decree or arbitration award applicable to FAI or its
business.
(h) Benefit
Plans.
FAI is
not a party to any collective bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) under which FAI currently has an obligation
to
provide benefits to any current or former employee, officer or director of
FAI.
13
(i) Certain
Employee Payments.
FAI is
not a party to any employment agreement which could result in the payment to
any
current, former or future director or employee of FAI of any money or other
property or rights or accelerate or provide any other rights or benefits to
any
such employee or director as a result of the transactions contemplated by this
Agreement, whether or not (i) such payment, acceleration or provision would
constitute a “parachute payment” (within the meaning of Section 280G of the
Code), or (ii) some other subsequent action or event would be required to cause
such payment, acceleration or provision to be triggered.
(j) Tax
Returns and Tax Payments.
FAI has
timely filed all Tax Returns required to be filed by it, has paid all Taxes
shown thereon to be due and, to the best of FAI’s and the FAI Shareholders’
knowledge, has provided adequate reserves in its financial statements for any
Taxes that have not been paid, whether or not shown as being due on any returns.
No material claim for unpaid Taxes has been made or become a lien against the
property of FAI or is being asserted against FAI, no audit of any Tax Return
of
FAI is being conducted by a tax authority, and no extension of the statute
of
limitations on the assessment of any Taxes has been granted by FAI and is
currently in effect.
(k) Environmental
Matters.
To the
best of its knowledge, FAI is in compliance with all applicable Environmental
Laws.
(l) Material
Contracts.
FAI
does not have any Material Contracts to which it is a party or by which it
is
bound.
(m) Properties.
FAI
neither owns nor leases any real property or other tangible assets.
(n) Intellectual
Property.
Other
than as listed on Section 3.02(n) of the FAI Disclosure Schedule, FAI neither
owns nor uses any Intellectual Property. Neither FAI nor the FAI Shareholders
have any knowledge of any claim that, or inquiry as to whether, any product,
activity or operation of FAI infringes upon or involves, or has resulted in
the
infringement of any Intellectual Property of any other person.
(o) No
Brokers.
Neither
FAI nor the FAI Shareholders have employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, or incurred any liability for
any
investment banking, business consultancy, financial advisory, brokerage or
finders’ fees or commissions in connection with the transactions contemplated
hereby.
(p) Listing
and Maintenance.
FAI has
not received notice from the Over-the-Counter Bulletin Board to the effect
that
FAI is not in compliance with the listing maintenance requirements of such
trading market. FAI is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(q) Board
Recommendation.
The
Board of Directors of FAI has unanimously determined that the terms of the
Merger are fair to and in the best interests of the shareholders of FAI and
has
recommended that the holders of the shares of FAI Stock approve the
Merger.
(r) Required
FAI Shareholder Approvals.
The
affirmative vote or consent of a majority of the issued and outstanding shares
of the FAI Stock is the only vote or consent of the holders of any class of
FAI’s securities required to approve the Merger (the “FAI Shareholder
Approval”).
14
ARTICLE
IV
Covenants
Relating to
Conduct
of Business Prior to Merger
4.01 Conduct
of the Company and FAI.
From
the date of this Agreement and until the Effective Time of the Merger, or until
the prior termination of this Agreement, the Company and FAI shall not, without
the prior written approval of the other:
(a) engage
in
any material transaction except for (i) transactions in the normal and
ordinary course of business or contemplated in this Agreement, (ii) the
issuance by the Company of shares of Company Stock as contemplated herein and
the grant by the Company of the Company warrants in connection with such
issuances, and (iii) the acquisition of Broadcast Licenses by the Company,
as determined by its Board of Directors;
(b) sell,
assign or otherwise transfer any of their assets, except for the sale of
Broadcast Licenses by the Company, as determined by its Board of Directors,
or
cancel or compromise any debts or claims relating to their assets, other than
for fair value, in the ordinary course of business, and consistent with past
practice;
(c) fail
to
use reasonable efforts to preserve intact their present business organizations,
keep available the services of their employees and preserve their material
relationships with customers, suppliers, licensors, licensees, distributors
and
others, to the end that its good will and on-going business not be impaired
prior to the Effective Time of the Merger;
(d) incur
any
material liability or create or suffer to exist any lien or other encumbrance
upon any of their respective assets that will not be discharged in full prior
to
the Effective Time of the Merger; or
(e) make
any
material change with respect to their accounting or bookkeeping methods,
principles or practices, except as required by generally accepted accounting
principles.
15
ARTICLE
V
Additional
Agreements
5.01 Shareholder
Approvals.
FAI
will, as promptly as practicable following the execution of this Agreement,
call, give notice of, convene and hold a meeting of its shareholders (the
“Shareholders Meeting”) for the purpose of obtaining the FAI Shareholder
Approval. As soon as practicable after the date of this Agreement, FAI shall
file with the S.E.C. a preliminary and final definitive proxy statement (such
preliminary and final definitive proxy statement, and any amendments or
supplements thereto, collectively, the “Proxy Statement”) pursuant to Rule 14a-3
under the Exchange Act, and shall cause the Proxy Statement to be mailed to
the
holders of the FAI Stock. FAI agrees to provide the Company and its counsel
with
any written or oral comments FAI or its counsel may receive from the S.E.C.
with
respect to such Proxy Statement promptly after the receipt of such comments.
FAI
shall also provide the Company and its counsel a reasonable opportunity to
review each of the filings relating to the Proxy Statement prior to its filing
with the S.E.C. or dissemination to the holders of the FAI Stock and to
participate, including by way of discussions with the S.E.C., in the response
of
FAI to such comments. The Board of Directors of FAI will take all lawful action
to solicit such approval, including, without limitation, the timely mailing
of
the Proxy Statement. At the Shareholders Meeting, the FAI Shareholders will
vote
all FAI Stock held by them in favor of the adoption and approval of this
Agreement, the Merger and the transactions contemplated hereby. The Company
will, as promptly as practicable following the execution of this Agreement,
call, give notice of, convene and hold a meeting of its shareholders, or obtain
the written consent of the holders of at least a majority of the outstanding
Company Stock, for the purpose of obtaining the Company Shareholder
Approval.
5.02 Access
to Information; Confidentiality.
(a) The
Company and FAI, respectively, shall, and shall cause its officers, employees,
counsel, financial advisors and other representatives to, afford to the other
party and its representatives reasonable access during normal business hours
during the period prior to the Effective Time of the Merger to its properties,
books, contracts, commitments, personnel and records and, during such period,
each of the Company and FAI shall, and shall cause its officers, employees
and
representatives to, furnish promptly to the other party all information
concerning its business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably request. For
the
purposes of determining the accuracy of the representations and warranties
of
the Company and FAI set forth herein and compliance by the Company and FAI
of
its obligations hereunder, during the period prior to the Effective Time of
the
Merger, FAI shall provide the Company and its representatives, and the Company
shall provide FAI and its representatives, with reasonable access during normal
business hours to its properties, books, contracts, commitments, personnel
and
records as may be necessary to enable the such party to confirm the accuracy
of
the representations and warranties of the other party set forth herein and
compliance by the Company and FAI with its obligations hereunder, and, during
such period, FAI shall, and shall cause its officers, employees and
representatives to, furnish promptly to the Company upon its request (i) a
copy
of each report, schedule, registration statement or other document filed by
it
during such period pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its business, properties,
financial condition, operations and personnel as the Company may from time
to
time reasonably request. Except as required by law, each of the Company and
FAI
will hold, and will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence.
16
(b) No
investigation pursuant to this Section 5.02 shall affect any representations
or
warranties of the parties herein or the conditions to the obligations of the
parties hereto.
5.03 Best
Efforts.
Upon
the terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable the Merger and
the other transactions contemplated by this Agreement. FAI and the Company
will
use their best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, permits or authorizations are required to be obtained (or, which if
not
obtained, would result in an event of default, termination or acceleration
of
any agreement or any put right under any agreement) under any applicable law
or
regulation or from any Governmental Entity or third party, including parties
to
loan agreements or other debt instruments and including such consents,
approvals, waivers, permits or authorizations as may be required to transfer
the
assets and related liabilities of the Company to Public FAI in the Merger,
in
connection with the transactions contemplated by this Agreement, and (ii) in
promptly making any such filings, in furnishing information required in
connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. FAI and the Company shall mutually
cooperate in order to facilitate the achievement of the benefits reasonably
anticipated from the Merger.
5.04 Public
Announcements.
FAI and
the Company will consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement
and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or court
process. The parties agree that the initial press release or releases to be
issued with respect to the transactions contemplated by this Agreement shall
be
mutually agreed upon prior to the issuance thereof. Notwithstanding the
foregoing, Company may disclose the contemplated Merger in letters, proxy
materials, information statements, consents and other documents sent to the
Company’s shareholders and to the holders of the Bridge Notes and the Company
Warrants and FAI may disclose the contemplated Merger and related transactions
in letters, the Proxy Statement, and other documents sent to FAI’s shareholders.
FAI and the Company acknowledge that Public FAI must file with the S.E.C.,
within four days after the Closing Date, a Current Report on Form 8-K describing
the Merger and other information required by the S.E.C. to be included in such
report (the “Super 8-K”). Prior to the Closing Date, FAI and the Company will
cooperate with each other in preparing the Super 8-K.
17
5.05 No
Solicitation.
Except
as previously agreed to in writing by the other party, during the term of this
Agreement neither the Company nor FAI shall authorize or permit any of its
officers, directors, agents, representatives, or advisors to (a) solicit,
initiate or encourage or take any action to facilitate the submission of
inquiries, proposals or offers from any person relating to any matter concerning
any merger, consolidation, business combination, recapitalization or similar
transaction involving the Company or FAI, other than the Merger or other
transaction contemplated by this Agreement, or any other transaction the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or delay the Merger or which would or could be expected to dilute
the benefits to the Company of the transactions contemplated hereby. Company
or
FAI will immediately cease and cause to be terminated any existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any of the foregoing.
ARTICLE
VI
Conditions
Precedent
6.01 Conditions
to Each Party’s Obligation to Effect the Merger.
The
respective obligations of each party under this Agreement are subject to the
satisfaction or waiver on or prior to the Closing Date, of the following
conditions:
(a) Shareholder
Approval.
The FAI
Shareholder Approval and the Company Shareholder Approval shall have been
obtained.
(b) OTCBB
Clearance.
The
shares of Public FAI Common Stock shall have been cleared for quotation on
the
Over-the-Counter Bulletin Board.
(c) No
Litigation.
There
shall be no temporary restraining order, preliminary or permanent injunction
or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be
in
effect and there shall not be in effect, pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other person
any
suit, action or proceeding which has a reasonable likelihood of success), (i)
challenging or seeking to restrain or prohibit the consummation of the Merger
or
any of the other transactions contemplated by this Agreement or seeking to
obtain from FAI any damages that are material, (ii) seeking to prohibit or
limit
the ownership or operation by the Company, FAI or Public FAI of any material
portion of the business or assets of the Company, FAI or Public FAI, or to
dispose of or hold separate any material portion of the business or assets
of
the Company, FAI or Public FAI, as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to prohibit Public
FAI from effectively controlling in any material respect the business or
operations of the Company after the Effective Time of the Merger, or (iv) that
could reasonably be expected to result in criminal or material uninsured or
unindemnifiable personal liability on the part of one or more directors of
the
Company.
(d) Equity
Financing.
The
Company shall have closed the Company Funding with gross proceeds therefrom
of
not less than $6.0 million.
18
6.02 Conditions
to Obligations of FAI.
The
obligations of FAI under this Agreement are further subject to the following
conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date. FAI shall have received a certificate signed on behalf of the
Company by the chief executive officer of the Company to such
effect.
(b) Performance
of Obligations of the Company.
The
Company shall have performed the obligations required to be performed by it
under this Agreement at or prior to the Closing Date (except for such failures
to perform as have not had or could not reasonably be expected, either
individually or in the aggregate, to have a material adverse effect with respect
to the Company or adversely affect the ability of the Company to consummate
the
transactions contemplated herein or perform its obligations hereunder), and
FAI
shall have received a certificate signed on behalf of the Company by the chief
executive officer of the Company to such effect.
(c) Consents,
etc.
FAI
shall have received prior to the Closing Date evidence, in form and substance
reasonably satisfactory to it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of any Governmental Entity and or
third party as necessary in connection with the transactions contemplated hereby
have been obtained.
(d) Financial
Statements. The
Company shall have delivered to FAI audited balance sheets of the Company as
of
December 31, 2005, and the related statements of operations, changes in
shareholders’ equity and cash flows for the period October 13, 2005 (inception)
through December 31, 2005.
6.03 Conditions
to Obligation of the Company.
The
obligations of the Company under this Agreement are further subject to the
following conditions:
(a) Representations
and Warranties.
The
representations and warranties of FAI and the FAI Shareholders set forth in
this
Agreement shall be true and correct in all material respects, in each case
as of
the date of this Agreement and as of the Closing Date as though made on, and
as
of, the Closing Date. The Company shall have received a certificate signed
on
behalf of FAI by the chief executive officer of FAI to such effect.
(b) Performance
of Obligations of FAI.
FAI and
the FAI Shareholders shall have performed the obligations required to be
performed by them under this Agreement at, or prior to, the Closing Date (except
for such failures to perform as have not had or could not reasonably be
expected, either individually or in the aggregate, to have a material adverse
effect with respect to FAI or adversely affect the ability of FAI to consummate
the transactions contemplated herein or perform its obligations hereunder),
and
the Company shall have received a certificate signed on behalf of FAI by the
chief executive officer of FAI to such effect.
19
(c) Forgiveness
of Excess Liabilities.
FAI and
the FAI Shareholders shall have obtained for the benefit of Public FAI, prior
to
the Closing Date, the forgiveness or satisfaction of (i) sufficient liabilities
or obligations of FAI necessary so that the liabilities and obligations of
FAI
at the Effective Time of the Merger do not exceed the limitation of $100,000
set
forth in Section 3.02(e) of this Agreement.
(d) Consents,
etc.
The
Company shall have received prior to the Closing Date evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of any Governmental Entity
or other third party as necessary in connection with the transactions
contemplated hereby, or for Public FAI to conduct the business of the Company
after the Merger, have been obtained.
(e) Filing
of Merger Agreement.
FAI
shall have filed prior to the Effective Time of the Merger, in the office of
the
Secretary of State or other office of each jurisdiction in which such filings
are required, all applications, certificates and other documents, and pay all
fees, as shall be necessary for the Merger to become effective.
(f) No
Dissent.
The
aggregate number of Dissenting Shares shall be less than five percent (5%)
of
the total number of outstanding shares of FAI Stock.
(g) Cancellation
of Stock.
At
Closing, FAI shall have cancelled 1,665,272 shares of its outstanding restricted
common stock from the FAI Stockholders as provided in Section 1.08 and provide
evidence of cancellation of those shares satisfactory to counsel for the
Company.
(h) Filing
of 2005 10-K.
FAI
shall have filed its 10-KSB for the year ended December 31, 2005 as required
by
the Securities Exchange Act of 1934.
ARTICLE
VII
Termination,
Amendment and Waiver
7.01 Termination.
This
Agreement may be terminated and abandoned at any time prior to the Effective
Time of the Merger:
(a) by
mutual
written consent of FAI and the Company;
(b) by
either
FAI or the Company if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) by
either
FAI or the Company , so long as such party is not in breach hereunder, if the
Merger shall not have been consummated on or before December 31, 2006 (other
than as a result of the failure of the party seeking to terminate this Agreement
to perform its obligations under this Agreement required to be performed at,
or
prior to, the Effective Time of the Merger, in which event such party may not
terminate this Agreement pursuant to this provision for a period of ten days
following such party’s cure of such failure); provided,
however,
that if
either FAI or Company requests an extension of the Closing after this date
and
the other party consents in writing, then neither party may terminate this
Agreement under this provision until the expiration of such extension period;
20
(d) by
FAI,
if there has been a material breach of this Agreement on the part of the Company
of its obligations hereunder or if any of its representations or warranties
contained herein shall be materially inaccurate and such breach or inaccuracy
is
not curable or, if curable, is not cured within ten (10) days after written
notice of such breach is given by FAI to the Company; or
(e) by
the
Company, if there has been a material breach of this Agreement on the part
of
FAI of its obligations hereunder or if any of its representations or warranties
contained herein shall be materially inaccurate and such breach or inaccuracy
is
not curable or, if curable, is not cured within ten (10) days after written
notice of such breach is given by the Company to FAI.
7.02 Effect
of Termination.
In the
event of termination of this Agreement by either the Company or FAI provided
in
Section 7.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of FAI or the Company, other
than the provisions of the last sentence of Section 5.02(a), Section 5.04 and
this Article VII. Nothing contained in this Section shall relieve any party
for
any breach of the representations, warranties, covenants or agreements set
forth
in this Agreement.
7.03 Amendment.
This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties. Such amendment or amendments may be made with the
approval of the Board of Directors of the Company and the Board of Directors
of
FAI and without the further approval of the shareholders of either the Company
or FAI so long as such change does not amend the essential terms of the
Agreement to the material detriment of such stockholders,
respectively.
7.04 Extension;
Waiver.
Subject
to Section 7.01(c), at any time prior to the Effective Time of the Merger,
either party may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the
representations and warranties of the other party contained in this Agreement
or
in any document delivered pursuant to this Agreement, (c) waive compliance
with
any of the agreements of the other party contained in this Agreement, or (d)
waive any of the conditions contained in this Agreement to the performance
of
the waiving party’s obligations hereunder. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.05 Procedure
for Termination, Amendment, Extension or Waiver.
A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver of this Agreement
pursuant to Section 7.04 shall, in order to be effective, require in the case
of
FAI or the Company, the approval thereof by action of not less than a majority
of the members then in office of its Board of Directors.
21
7.06 Return
of Documents.
In the
event of termination of this Agreement for any reason, FAI and the Company
will
return to the other party all of the other party’s documents, work papers, and
other materials (including copies) relating to the transactions contemplated
in
this Agreement, whether obtained before or after execution of this Agreement.
Neither FAI nor the Company will use any information so obtained from the other
party for any purpose other than as contemplated in this Agreement and will
take
all reasonable steps to have such other party’s information kept
confidential.
ARTICLE
VIII
Indemnification
and Related Matters
8.01 Survival
of Representations and Warranties.
The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
the termination of this Agreement.
8.02 Indemnification.
Irrespective
of any due diligence investigation conducted by FAI or the Company with regard
to the transactions contemplated hereby, each party shall indemnify and hold
the
other party, and each of their officers, directors, employees, affiliates,
or
agents harmless from and against any and all liabilities, obligations, damages,
losses, deficiencies, costs, penalties, interest and expenses (collectively,
“Losses”) arising out of, based upon, attributable to, or resulting from, any
and all Losses incurred or suffered by such party resulting from or arising
out
of any breach of a representation, warranty or covenant made by the other as
set
forth herein, provided such breach resulted in the termination of this
Agreement.
8.03 Notice
of Indemnification.
In the
event any legal proceeding (an “Indemnity Claim”) shall be threatened or
instituted or any claim or demand shall be asserted by any person in respect
of
which payment may be sought under the provisions of this Article VIII, (the
“Indemnitee”) shall promptly cause written notice of the assertion of any such
claim of which it has knowledge which is covered by this indemnity to be
forwarded to the other (the “Indemnitor”). Any notice of a claim by reason of
any of the representations, warranties or covenants contained in this Agreement
shall state specifically the representation, warranty or covenant with respect
to which the Indemnity Claim is made, the facts giving rise to an alleged basis
for the Claim, and the amount of the liability asserted against the Indemnitor
by reason of the Indemnity Claim. Within thirty (30) days of the receipt of
such
written notice, the Indemnitor shall notify the Indemnitee in writing of its
intent to contest its obligation to indemnify or reimburse under this Agreement
(a “Contest”) or to accept liability hereunder. If the Indemnitor does not
respond within thirty (30) days to such written notice, the Indemnitor will
be
deemed to accept liability. In the event of a Contest, within ten (10) days
of
the receipt of the written notice thereof, the parties will select arbitrators
and submit the dispute to binding arbitration in Texas. The arbitrators shall
be
selected by the mutual agreement of the parties. If the parties cannot agree
on
the arbitrators, each may select one arbitrator and the two designated
arbitrators shall select the third arbitrator. If the third arbitrator can
not
be agreed upon, the Federal District Court for the Western District of Texas
shall select the third arbitrator. A decision by the individual arbitrator
or a
majority decision by the three arbitrators shall be final and binding upon
the
parties. Such arbitration shall follow the rules of the American Arbitration
Association.
22
ARTICLE
IX
General
Provisions
9.01 Notices.
All
notices, requests, claims, demands and other communications under this Agreement
shall be in writing and shall be deemed given if delivered personally or sent
by
facsimile, electronic mail, or overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if
to FAI
to:
|
Xxxxx
Xxxxx, President
Filtering
Associates, Inc.
00
Xxxxxxxxxx, Xxxxx 00
Xxxxxx,
Xxxxxxxxxx 00000
|
(b) if
to the
Company, to:
|
MATINEE
MEDIA CORPORATION
0000
Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx,
Xxxxx 00000
Attn:
Xxxxxx Xxxxxx, Chief Executive
Officer
|
9.02 Definitions.
For
purposes of this Agreement:
(a) an
“affiliate” of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person;
(b) “material
adverse change” or “material adverse effect” means, when used in connection with
the Company or FAI, any change or effect that either individually or in the
aggregate with all other such changes or effects is materially adverse to the
business, assets, properties, condition (financial or otherwise) or results
of
operations of such party and its subsidiaries taken as a whole (after giving
effect in the case of FAI to the consummation of the Merger);
(c) “person”
means an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other entity;
and
23
(d) a
“subsidiary” of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which
is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, fifty percent (50%)
or more of the equity interests of which) is owned directly or indirectly by
such first person.
9.03 Interpretation.
When a
reference is made in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”.
9.04 Entire
Agreement; No Third-Party Beneficiaries.
This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement. This Agreement is not intended to confer upon any person other than
the parties any rights or remedies.
9.05 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Texas, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
9.06 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
9.07 Enforcement.
The
parties agree that irreparable damage would occur in the event that any of
the
provisions of this Agreement were not performed In accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of Texas,
this
being in addition to any other remedy to which they are entitled at law or
in
equity. In addition, each of the parties hereto (a) consents to submit itself
to
the personal jurisdiction of the courts of Texas in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement
to the extent such courts would have subject matter jurisdiction with respect
to
such dispute, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave from any
such court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
state
court other than such court.
9.08 Severability.
Whenever possible, each provision or portion of any provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision or portion of any provision of this Agreement is
held
to be invalid, illegal or unenforceable in any respect under any applicable
law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
9.09 Counterparts
and Facsimile Signatures.
This
Agreement may be executed in one or more identical counterparts, all of which
shall be considered one and the same instrument and shall become effective
when
one or more such counterparts shall have been executed by each of the parties
and delivered to the other parties. This Agreement and any documents relating
to
it may be executed and transmitted to any other party by facsimile, which
facsimile shall be deemed to be, and utilized in all respects as, an original,
wet-inked document.
9.10
Schedules.
If
there is any inconsistency between the statements in the body of this Agreement
and those in the schedules (other than an exception expressly set forth in
the
schedules with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
24
IN
WITNESS WHEREOF, the undersigned have caused their duly authorized officers
to
execute this Agreement as of the date first above written.
|
FAI
STOCKHOLDERS:
|
FILTERING
ASSOCIATES, INC.
|
|
/s/
Xxxxx
Xxxxx
Xxxxx
Xxxxx
|
|
|
By:
/s/ Xxxxx
Xxxxx
|
|
|
/s/
Xxxxxx Xxxxxxx
Xxxxxx
Xxxxxxx
|
Name:
Xxxxx Xxxxx
Title:
President
|
|
|
|
|
Attest:
|
|
|
/s/
Xxxxxx Xxxxxxx
Xx
Xxxxxxx, acting secretary
|
|
|
MATINEE
MEDIA CORPORATION
|
|
|
By:
/s/ Xxxxxx Xxxxxx
|
|
|
Name:
Xxxxxx Xxxxxx
|
|
|
Its:
Chief Executive Officer
|
|
25
Schedule
3.01(a)
Articles
of Incorporation attached
Bylaws
attached
26
Schedule
3.01(c)
Capitalization
Authorized
capital stock of the Company consists of 25,000,000 shares of common stock
and
no shares of preferred stock. Capitalization of the Company as of the date
hereof (pro forma for :
|
%
of total
outstanding
shares
|
Fully
Diluted Amount of
Shares
|
|
|
Existing
shareholders
|
67.5%
|
9,375,000
|
|
Investors
(including bridge investors)
|
32.5%
|
4,513,873
|
|
Total
|
100.0%
|
13,888,873
|
The
Company has reserved 2,591,871 shares of Company Stock for issuance upon
exercise of warrants issued pursuant to the Company Funding.
The
Company intends to approve a Long Term Incentive Plan pursuant to which the
Company could grants awards to employees, consultants and directors of up to
2,500,000 shares of Company Stock.
The
Company has the obligation to register the resale of all of the Company Stock
issued in the Company Funding, and the shares of Company Stock underlying the
warrants issued in the Company Funding, pursuant to a Registration Rights
Agreement with the investors therein.
Arabella
Securities has the right to become a party to the Registration Rights Agreement
to have the 334,934 shares of Company Stock underlying its warrants issued
in
connection with the Company Funding registered.
The
Company is not required, but has agreed, to include 2,812,500 shares of Company
Stock held by the founders of the Company and up to 150,000 shares of Common
Stock held by certain shareholders of Filtering after the merger in the
Registration Statement.
27
Schedule
3.01(h)
Material
Contracts
On
April
3, 2006, the Company entered into a Securities Purchase Agreement with certain
investors in the Company Funding, under which the investors invested $8,535,550,
and the holders of the Bridge Notes converted all of their principal and accrued
interest. In connection with the execution of that agreement, the Company
entered into a Registration Rights Agreement with such investors, and executed
Common Stock Warrants for the benefit of each such investor.
In
March
2006, Matinee Media Corporation entered into option agreements for the exclusive
right to purchase 12 FCC FM radio station construction permits from Ace Radio
Corporation (“ACE”). ACE was the winning bidder in the January, 2006 FCC Auction
of FM Broadcast Construction Permits (Auction No. 62) for the 12 construction
permits. The option exercise prices vary, but are generally based on the auction
winning bid price, plus direct expenses incurred to complete the licensing
process. These construction permits include the following:
|
City
of License
|
Frequency
MHz
|
Class
|
Target
Market
|
Winning
Bid/
Base
Option Price
|
|
Erie,
IL
|
105.5
|
A
|
Quad
Cities, IA-IL
|
$118,300
|
|
Jenner,
CA
|
106.3
|
A
|
Santa
Rosa, CA
|
$172,900
|
|
Xxxxxxx,
XX
|
00.0
|
X0
|
Xxxxxxx,
XX
|
$1,452,100
|
|
Gallop,
NM
|
101.5
|
C1
|
Gallop,
NM
|
$78,000
|
|
Mertzon,
TX
|
101.1
|
C3
|
San
Angelo, TX
|
$309,400
|
|
Coalinga,
CA
|
97.3
|
A
|
Fresno,
CA
|
$309,400
|
|
Dunkerton,
IA
|
103.9
|
A
|
Waterloo/Cedar
Falls, IA
|
$295,750
|
|
Waynesboro,
GA
|
92.9
|
A
|
Augusta,
GA
|
$130,000
|
|
Lost
Hills, CA
|
105.7
|
X0
|
Xxxxxxxxxxx,
XX
|
$248,950
|
|
New
Albany, MS
|
101.5
|
A
|
Tupelo,
MS
|
$190,450
|
|
Santa
Xxxx, TX
|
105.5
|
C3
|
Brownwood,
TX
|
$127,400
|
|
New
Augusta, MS
|
101.7
|
A
|
Hattiesburg,
MS
|
$407,550
|
NOTE:
The
winning bid/base option price is net of a 35% bidding credit ($2,067,800),
all
of a portion of this credit may be reimbursable to the FCC upon sale based
on
buyer profile.
On
February 9, 2006 the Company entered into a line of credit with ACE in order
for
ACE to fund FCC winning bid prices as the above construction permits are granted
by the FCC. The principal amount of the line of credit is $4,500,000 and bears
interest at 7% per annum. The maturity date of the line of credit is February
9,
2007. As of March 31, 2006, the outstanding principal amount of the line of
credit is $1,120,255.14, plus accrued interest of $10,891.37.
28
The
Company has entered into exclusive option agreements with Matinee Radio LLC
to
purchase five construction permits acquired by Matinee Radio LLC in FCC Auction
No. 37. The option exercise prices vary, but are generally based on the auction
winning bid price, plus direct expenses incurred to complete the licensing
process. These option agreements include the following signals and target
markets:
|
City
of License
|
Frequency
MHz
|
Class
|
Target
Market
|
Winning
Bid/
Base
Option Price
|
|
Albany,
TX
|
98.9
|
A
|
Abilene,
TX
|
$219,050
|
|
Xxxxxxxxx,
TX
|
94.7
|
A
|
Midland/Odessa,
TX
|
$300,950
|
|
Groveton,
TX
|
98.1
|
A
|
Lufkin,
TX
|
$292,500
|
|
Xxxxxxxxx,
NM
|
95.9
|
C1
|
Albuquerque,
NM
|
$278,200
|
|
Marfa,
TX
|
93.5
|
X0
|
Xxx
Xxxx Xxxxx
|
$186,550
|
NOTE:
The
winning bid/base option price is net of a 35% bidding credit ($687,750), all
of
a portion of this credit may be reimbursable to the FCC upon sale based on
buyer
profile.
In
addition, the Company has funded $298,100.00 to Matinee Radio, LLC for a portion
of the winning bid prices of the permits noted above and related fees and
expenses for Matinee Radio to obtain those construction permits from the FCC.
If
not repaid sooner this amount is expected to be repaid with proceeds from the
sale(s) of the permits.
The
Company has entered into exclusive option agreements with Xxxxx Xxxxxx to
purchase eight construction permits acquired by Xx. Xxxxxx in FCC Auction No.
37. The option exercise prices vary, but are generally based on the auction
winning bid price, plus direct expenses incurred to complete the licensing
process. These option agreements include the following signals and target
markets:
|
City
of License
|
Frequency
MHz
|
Class
|
Target
Market
|
Winning
Bid/
Base
Option Price
|
|
Rio
Grande City, TX
|
95.1
|
A
|
McAllen,
TX
|
$838,500
|
|
Seymour,
TX
|
92.3
|
X0
|
Xxxxxxx
Xxxxx, XX
|
$107,250
|
|
Xxxx
City, TX
|
107.3
|
A
|
N/A
|
$87,100
|
|
Seymour,
TX
|
98.7
|
A
|
Wichita
Falls, TX
|
$80,600
|
|
Olney,
TX
|
104.3
|
X0
|
Xxxxx
Xxxx Xxxxx, XX
|
$95,550
|
|
Eden,
TX
|
104.5
|
C3
|
San
Angelo, TX
|
$222,300
|
|
Wellington,
TX
|
98.5
|
C3
|
Childress,
TX
|
$102,700
|
|
Eldorado,
OK
|
96.9
|
A
|
N/A
|
$102,700
|
NOTE:
The
winning bid/base option price is net of a 35% bidding credit ($881,300), all
of
a portion of this credit may be reimbursable to the FCC upon sale based on
buyer
profile.
Marfa
Public Radio Corporation is a non-profit organization created to operate a
radio
station on FM frequency 93.5 MHz in Marfa, TX. The station has been designed
as
a public radio station serving far west Texas. The construction permit for
the
station is licensed to Matinee Radio LLC and the Company has the exclusive
right
to purchase the station from Matinee Radio. In order to assist in the
construction and initial launch of the Marfa station, the Company has provided
services and funding. The Company also assisted Marfa Public Radio in obtaining
a grant from the U.S. Department of Commerce to assist in the construction
of
the station. The grant in the amount of $432,000 was awarded on September 22,
2005, and is expected to fund in Q2 2006. As of March 31, 2006, the Company
had
accounts receivable from Marfa Public Radio of $29,080.60 and a note receivable
of $350,000, of which $312,225.00 is currently outstanding.
29
Schedule
3.01(m)
Intellectual
Property
The
Company owns the following Internet domain names:
|
xxxxxxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxx.xxx
|
|
xxxxxxxxxxxxxxxxxx.xxx
|
|
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30
Schedule
3.02(a)
Articles
of Incorporation attached
Bylaws
attached
31
Schedule
3.01(n)
Intellectual
Property
FAI
owns the Internet domain name xxx.xxxxxxxxxxx.xxx.
32
