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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998
REGISTRATION NO. 000-23105
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR
REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
-----------------
AMERICAN INDEPENDENT NETWORK, INC.
(Exact name of small business issuer in its charter)
------------------
DELAWARE 752504551
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
(817) 222-1234
(Address and telephone number of principal executive offices)
-----------------
DR. DONALD W. SHELTON
CHIEF EXECUTIVE OFFICER
AMERICAN INDEPENDENT NETWORK, INC.
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
TELEPHONE (817) 222-1234
FACSIMILE (817) 222-9809
(Name, address and telephone number of agent for service of process)
------------------
Copies to:
ROBERT E. GYEMANT, Esq.
PAMELA HICKS, Esq.
KNAPP, PETERSEN & CLARKE
A Professional Corporation
500 N. Brand Blvd., 20th Floor
Glendale, California 91203
Telephone (818) 547-5000
Facsimile (818) 547-5329
Securities to be issued under Section 12(g) of the Act: COMMON STOCK
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
The Company was incorporated in the State of Delaware on December 11, 1992 under
the name Strictly Business, Inc. On September 16, 1993, pursuant to an amendment
to the Certificate of Incorporation, the Company changed its name to American
Independent Network, Inc. (the "Company" herein). The Company's principal
offices are located at 6125 Airport Freeway, Suite 200, Haltom City, Texas
76117.
From inception through March 1994, the Company engaged in no substantive
business operations, but was actively seeking and pursuing potential business
opportunities. In September 1993, the Company was acquired by Donald Shelton and
Randy Moseley in a stock exchange transaction. Commencing in March 1994, the
Company began providing programming, media production, and syndication services
to television stations.
The Company's initial business strategy focused on entering into agreements with
television and cable stations broadcasting in smaller communities and by 1997,
the Company had affiliate agreements ("Affiliate Agreements") with over 150
broadcast television and cable stations ("Affiliate Stations").
Broadcast Television
Broadcast television stations, which are licensed and regulated by the Federal
Communications Commission ("FCC"), transmit audio and video signals over the
air-waves within a designated signal area on a designated frequency. There are
three (3) basic types of broadcast television stations operating in the United
States today: (1) full-power network affiliates (ABC; NBC; CBS; FOX; WB Network;
and Paramount) ("Network Affiliate"); (2) full-power independent stations, such
as UHF channels ("Full Power Stations"); and (3) low power independent stations
("LPTV"). A Network Affiliate receives its programs from its network provider
and is generally only permitted to air programs of that particular network, with
the exception of FOX, WB Network, and Paramount affiliates who must obtain
additional programming. Network Affiliates may air programs from other sources,
such as local programming, only a few hours per week and may not broadcast
programs of any of the other major networks. Independent Stations include both
full-power and low-power stations which are not affiliated with one of the major
networks and thus, do not have access to network programming. Instead, they must
seek their own programming sources, such as that provided by the Company.
Cable Television
Cable television was first developed in the 1940's primarily to serve rural
communities unable to receive broadcast television signals. Cable television is
defined by the FCC as a cable system
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facility consisting of closed transmission paths and associated signal
generation, reception, and control equipment that is designed to provide cable
service, including video programming, to multiple subscribers within a
designated community. To receive cable transmission, a viewer is required to
feed an outside, dedicated wire or cable directly into their home. By 1995,
there were more than 11,200 cable systems serving over 60 million subscribers in
over 32,000 communities in the United States. Cable system operators range from
large multiple system operators that own many systems, to small independent
systems that serve as few as several thousand households. Each system operates
under a franchise from the local government in the community in which it is
located. Cable television is regulated by local municipalities, as well as the
FCC. In addition to basic, premium and pay-per view programs provided on cable
television, many municipal governments require local cable operators to
originate their own programming, called "Community Access" television or "Local
Origination."
Company Affiliates
The Company originally broadcast its programs in analog signal and, in 1996, had
Affiliate Agreements with over 150 Affiliate Stations. In late 1996, the Company
converted from analog transmission to digital in early compliance with the FCC
mandate that all broadcast stations convert to digital transmission by the year
2006. The Company was the first network to convert to digital with
multi-channels. As a result of the conversion from analog to digital, the
Company's broadcast signal is now transmitted to its Affiliate Stations in
digital format, however, most television stations do not have the capability to
broadcast a digital signal, thus they are required to decode the Company's
digital signal back to analog so that they can broadcast to their viewers
through their analog transmitter. To enable the Affiliate Stations to decompress
the digital signal, the Company was required to furnish each Affiliate Station
with digital decoding equipment. Due to the costs of providing the decoding
equipment, the Company was not able to furnish the necessary equipment to all of
its then existing Affiliate Stations. Accordingly, the Company initially entered
into Affiliate Agreements with thirty-three (33) independent Full Power and LPTV
stations and Local Origination cable television systems to provide programming
services via digital transmission. The Company has since added additional
Affiliate Stations and, to date, has agreements with forty-four (44) Affiliate
Stations. The Company plans to expand its current affiliate base by
concentrating its marketing efforts on the 30 largest broadcast territories in
terms of viewing households and by reassociating with prior Affiliate Stations.
Ten of the Company's current Affiliate Stations are located within the 30
largest designated market areas ("DMA"). The Company is currently evaluating
applications from stations desirous of becoming Affiliate Stations and will
enter into Affiliate Agreements with these stations when it is able to provide
the stations with the necessary decoding equipment.
The following table identifies the Company's current Affiliate Stations, the
Affiliate Station's DMA location and ranking, the location of the Affiliate
Station, the Affiliate Station's title, and the approximate number of households
in such DMA:
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<TABLE>
<CAPTION>
RANK DESIGNATED MARKET AREA DMA LOCATION STATION NAME NO. OF
(DMA) HOUSEHOLDS
--------------------------- ------------ ------------ ----------
<S> <C> <C> <C>
2 Los Angeles Temecula, CA KFMG-TV 67 100,000
4 Philadelphia Winslow Township, NJ WPSJ-TV 8 1,505,000
7 Washington, D.C. Arlington, VA WTMV-TV 14 1,750,000
10 Atlanta LaGrange, GA WGBN-TV 33 100,000
13 Cleveland Cleveland, OH WAX-TV 35 1,260,000
WAOH-TV 29
15 Tampa Sebring, FL WOCX-TV 5 85,000
17 Phoenix Prescott, AZ KUSK-TV 7 1,000,000
17 Phoenix Phoenix, AZ KTVP-TV 56 200,000
20 Sacramento Sacramento, CA KBTV-TV 25 500,000
22 Orlando/Dayton Orlando, FL WNTO-TV 26 1,117,093
Beach/Melbourne
27 Hartford Hartford, CT WHTX-TV 10 120,000
34 Columbus Columbus, OH WLWG-TV 62 505,000
36 Salt Lake City Logan, UT KUTN-TV 12 45,000
38 San Antonio San Antonio, TX KSAA-TV 19 160,000
40 Buffalo West Valley, NY WNGS-TV 67 250,000
40 Buffalo Olean, NY W25AK-TV 17,000
42 Memphis Memphis, TN WBII-TV 20 302,845
43 Oklahoma City Edmond, OK K07TX-TV 40,000
43 Oklahoma City Norman, OK KTOU-TV 22 170,000
43 Oklahoma City Stillwater, OK K19DF-TV 50,000
44 West Palm Beach West Palm Beach, FL WINQ-TV 19 420,000
44 WPB/Ft. Pierce Vero Beach, FL WWCI-TV 10 87,000
58 Tulsa Grove, OK KELF-TV 43 20,000
60 Knoxville Heiskell, TN WFEM-TV 12 39,000
60 Knoxville Oneida, TN Cable Channel 4 3,700
61 Mobile, AL/Pensacola, FL Pensacola, FL WBOP-TV 12 35,000
65 Wichita/Hutchinson Kiowa, KS KDE-TV 36 6,500
66 Toledo Bellevue, OH WBF-TV 21 6,500
71 Lexington East Bernstadt, KY WOBZ-TV 9 125,000
72 Des Moines Marshalltown, IA KDAO-TV 39 35,000
</TABLE>
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<TABLE>
<S> <C> <C> <C>
76 Paducah Union City, TN WOBT-TV 9 5,000
77 Texarkana/Shreveport Hope, AR KTSS-TV 55 25,000
81 Huntsville/Decatur/Florence Florence, AL WBCF-TV 3 30,000
97 Evansville Mt. Carmel, IL WCJ-TV 12 30,000
100 Savannah Ailey, GA W46CA-TV 50,000
103 Ft. Wayne Auburn, IN W07CL-TV 237,090
115 San Luis Obispo San Luis Obispo, CA KSLO-TV 20 180,000
118 Reno Hawthorne, NV KWI-TV 13 9,000
125 Columbus, GA Columbus, GA WCGT-TV 16 86,000
128 Corpus Christi Corpus Christi, TX K07UD-TV 49,000
131 Chico/Redding Redding, CA K04NV-TV 70,000
155 Bangor, ME Banger, ME WBGR-TV 33 50,000
205 Juneau, AK Sitka, AK KSCT-TV 5 2,900
TOTAL STATIONS = 44 TOTAL DMAS COVERED = 35 TOTAL HHS = 10,878,628 (APPROX.)
</TABLE>
In December 1997, the Company entered into an agreement with Dominion Sky
Angels, a satellite direct television digital system, to add the Company as a
separate channel. The channel began broadcasting in February 1998 and can be
seen on the Dominion DBS Television System by persons owning a Dish(TM) NetWork
satellite receiver, as well as in over 1,500 hotel rooms at the Imperial Palace
Hotel and Casino in Las Vegas, Nevada. In addition, Internet users with AudioNet
can view the Company's programs on their computers while it is being aired on
the network. The Company's web site is located at www.aini.com
(see "The Business").
In December 1997, the Company and Media Fund, Inc. ("MFI") entered into an
agreement pursuant to which MFI will receive 1,875,000 shares of the Company's
Common Stock, assets with a book value of $2,818,933 and 20% of the commercial
time slots on the Company's channels for a period of four (4) years commencing
in December 1998 in exchange for the payment of $5,000,000 to be paid in
installments and up to 12 hours per day of network quality programming for the
life of the contract. The agreement is renewable for five (5) years (See
"Exhibit 6.33"). MFI is in the business of helping growing businesses gain
access to media and professional advertising and marketing services by
purchasing the appropriate type and amount of media to bring its client
companies' products and services to its target markets.
The Company has a wholly-owned subsidiary, Eureka Media & Trading, Inc., which
was formed in the State of Nevada on September 6, 1995. To date, the subsidiary
corporation has not conducted operations. The Company is in the process of
changing the name to "Senior Channel, Inc." and anticipates that the name
change will be completed by May 1998.
THE BUSINESS
PRINCIPAL SERVICES
The Company provides family-oriented television to a network of television
stations and cable systems nationwide ("Affiliates" or "Affiliate Stations").
The Company also provides media production and syndication services, as well as
satellite uplink services on behalf of certain cable channels. The Affiliate
Stations serviced by the Company are primarily "independent" stations, meaning
that they have no affiliation with the major network organizations (NBC; ABC;
CBS; FOX;
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WB Network; and Paramount). A station which is affiliated with one of the major
networks is provided programming by the managing network organization, whereas
independent stations must either produce their own programs at a significant
expense, or purchase such programming from an outside source, such as the
Company. The programs provided by the Company cover a wide array of topics and
interests, and include cartoons, sports, sitcoms, movies, news and weather,
comedy, science, health shows, documentaries, and public interest programs. The
Company also offers original programs such as The Junior National Achievers
Awards, National Golden Gloves, The Better Life Show, Television Factory Direct,
Under Sea Adventures, Travel Escapades, celebrity golf tournaments, professional
boxing, fishing expeditions and interactive programming. The Company maintains a
library of over 2,000 licensed and wholly owned programs, including nostalgic
and vintage genre films, as well as newly produced movies.
Program Inventory
The Company amasses its program inventory by various methods, including
licensing the rights from program owners and syndicators, purchasing the rights,
or by producing its own programming.
The vast majority of the Company's programs are procured via license agreements
with program owners and syndicators (collectively referred to herein as "Program
Owners"). The "National Association of Programers and Television Executives"
("NAPTE") is an annual industry convention where broadcasters, such as the
Company, are able to view program offerings, meet with Program Owners, and
negotiate licensing terms. The Company's officers have attended several NAPTE
conventions and have been successful in negotiating licensing rights to many of
its family oriented programs. In addition to contacts generated through the
NAPTE convention, the Company has, on occasion, been contacted at its offices by
Program Owners seeking to license their programs to the Company. Due to the
immense array and amount of programming material available, and the large
numbers of Program Owners, the Company has numerous contacts and a variety of
products from which to choose and is not dependent upon any one party for its
programming selections.
The form of agreement utilized by the Company to secure licensing rights with
program owners and syndicators contains barter terms pursuant to which the
Company obtains broadcasting rights to certain identified programming and in
exchange, the Company gives the Program Owner advertising time during the
broadcast of such programs. In a thirty (30) minute program there are normally
eight (8) minutes of commercial time, which time is allocated as follows: three
(3) minutes to the Program Owner; two (2) minutes to the Affiliate Station; and
three (3) minutes to the Company. The Program Owner can then sell the
advertising time to outside parties, thereby earning income on the licensing of
their program to the Company. The contract is generally for a term of fifty-two
(52) weeks and is cancelable by either party upon two (2) weeks written notice.
The Company has the right to refuse any program without prior notice if the
content, subject matter, or production quality does not meet the Company's
standards.
The Company entered into a License Agreement with All News Channel ("ANC"),
commencing as of January 1, 1998 and ending on December 31, 1998, pursuant to
which the Company has the right to broadcast ANC's national, international,
weather and sports news coverage during specified time slots Monday through
Sunday for a licensing fee of $542 per month. Each news segment is 30 minutes in
length, including commercial time of approximately 7 minutes. Of the available
commercial time, ANC reserves 3 minutes and the Company is allotted 4 minutes
for its own use. The Company is also permitted to preempt certain segments of
the ANC broadcast with its own news material. Currently, the Company airs ANC
approximately 25 times per week. In the event the
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Company fails to pay the licensing fee or any part thereof during the term of
the agreement, ANC may terminate the agreement upon thirty days advance written
notice to the Company.
The Company has purchased the rights to select public-domain movies. These
purchase arrangements are generally done pursuant to oral contract and involve a
one-time payment by the Company. The Company has sole discretion in determining
when and how often to run its wholly owned programs. The Company owns
approximately 2000 shows and movies outright, however the majority of the
Company's current broadcast list continues to be licensed programs.
The Company has the facilities to produce its own programming, but due to the
wide availability and low cost of finished programing and the high cost
associated with producing its own programming, the Company no longer produces
its own programs. However, the Company does lease its production facilities and
certain equipment to third-parties for their production needs.
In 1996, the Company made the conversion from analog to digital transmission of
its programs in early compliance with the Federal Communications Commission
mandate that all broadcast stations convert to digital transmission by the year
2006. Digital technologies enable the cable system to compress multiple digital
channels into the bandwidth currently required for a single analog channel,
thereby permitting a cable system to significantly expand its current channel
capacity with a much lower capital investment than would be required to install
fiber optic cables or to make other major infrastructure upgrades. As a result
of the conversion to digital transmission, the Company was able to expand its
single channel to a total of five (5) channels.
The Company utilizes one of its five channels for broadcast of its own programs.
On April 3, 1997, the Company leased a channel to Lionshead Entertainment, Inc.
to broadcast as the "Senior Channel" with 24 hour programming designed for the
senior citizen market. The agreement was for a term of three years and required
LEI to pay the Company $98,000 per month. LEI failed to pay the accrued amounts
due and was in arrears to the Company and in breach of its contract. In December
1997, the Company and LEI agreed to a Settlement, Compromise and Assignment
pursuant to which LEI assigned to the Company all of its rights, title and
interest in any intellectual property rights relating to the Senior Channel,
including, but not limited to, its rights in the "Senior Channel" name. The
Settlement Agreement and Assignment were executed on February 28, 1998 and are
effective as of December 1998. In exchange for the foregoing, the Company
released LEI from its contract and deemed all amounts owed by LEI to the Company
paid in full.
The Senior Channel was founded to address the interests and needs of the growing
senior population. The Company intends to operate the channel as a wholly owned
subsidiary and is in the process of changing the name of its subsidiary, Eureka
Media & Trading, Inc. to "Senior Channel, Inc." The Company plans to broadcast
on the Senior Channel 24 hours per day and will include applicable programming
currently in the Company's library, as well as new programs geared specifically
for the senior market. The Company is seeking to include Gospel Music, Big Band
Hour, The Low Fat Gourmet, Senior Travel Show, The Washington Spy, Whatever
Happened To ?, and Senior Lifestyles in its Senior Channel programming schedule.
In addition, Dominion Shy Angels has expressed interest in including the Senior
Channel on its direct satellite system.
The Company is negotiating with parties to lease its additional three channels
on the digital compression system uplinking to the satellite. Broadcast Magazine
estimated that there are over 65 new cable channels who have announced that they
are ready to commence broadcasting and are seeking channel space. Accordingly,
the Company believes that it will be able to enter into a lease agreement for
the remaining channels.
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The Company has a website located at www.aini.com. The Company's website
provides information regarding the Company and about future programming. In
addition, the Company's website has live video and audio feeds of the Company's
programs which are only accessible to computers with adequate memory via
AudioNet.
MARKETING STRATEGY; PRINCIPAL MARKETS AND CUSTOMERS
The Company essentially has two products to distribute to generate revenues: (1)
sale of its programming; and (2) sale of the commercial advertising time within
the programming.
(1) Programming:
Marketing Strategy: The Company markets its programming to broadcast and cable
television stations on the strength of its quality family oriented programming
and its attractive barter system pursuant to which the Affiliate Station retains
4 minutes per hour of advertising time. Under this barter system, an Affiliate
Station is not required to spend money to receive programming ("no-cost
programming"). The Nielsen Designated Market Area Television Households
publishes an annual Television Market Rankings which lists the identity of
stations, its market, ranking and estimated number of households. The Company
contacts many of these stations through direct mailings and other
advertisements. In addition, the Company is introduced to potential Affiliate
Stations at industry conventions and through other Affiliates' recommendations.
Stations also hear about the Company at industry conventions and from other
stations, programmers, equipment manufacturers and suppliers, and then contact
the Company to inquire about becoming an Affiliate Station. As the Company
expands into the top 30 markets, it will make personal visits and telephone
calls to the independent stations that it has targeted as good candidates for
affiliation with the Company.
Customers: The Company's potential customers for its programming includes all
television and cable stations. The Company originally broadcast in analog signal
and had Affiliate Agreements with over 150 television and cable stations. In
connection with its conversion to digital transmission and the associated costs
of furnishing its Affiliate Stations with digital decoding equipment, the
Company was not able to furnish the equipment to all of its then existing
Affiliate Stations. The Company has entered into agreements with 44 Affiliate
Stations (for a complete list of the Company's Affiliate Stations, please refer
to Page 4) and is currently evaluating applications from additional stations
desirous of affiliating with the Company. The Company plans to concentrate on
adding stations located in the top 30 DMAs.
A station which has been added as an affiliate of the Company is required to
broadcast a minimum of 12 hours of the Company's broadcast within a 24 hour
period. In general, the terms of the Affiliate Agreement between the Company and
each Affiliate Station provides that the Affiliate Station will receive 24 hours
of television programming, during which the Affiliate Station may use
approximately four (4) minutes per hour for local commercials or other
announcements. The Affiliate Agreement also provides that the Affiliate must
broadcast the Company's programs in their entirety, submit a weekly affidavit of
its broadcast logs showing the number of hours per day that the Company's
programming was broadcast on the Affiliate Station, maintain all necessary
permits and licenses, and may not preempt or disrupt the Company's national
advertisements. Either party may cancel the agreement at any time with thirty
(30) days written notice.
Upon request, the Company also provides its Affiliate Stations with promotional
packages, as well as press releases and recorded audio announcements.
Promotional packages may include: (i) customized station IDs; (ii) Company
Network ID's with a common theme designed to show the distinctiveness of the
Affiliate Station by its association with the Company's network; (iii) 30 second
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generic promotions for each element of Company program content; (iv) 10 second
and 30 second program-specific promotions for the different programs provided by
the Company, including movies and shorts; (v) opening and closing "bumpers" for
all programs (a bumper is a short introduction or closing which provides a
smooth transition from program segments to commercials and vice-versa); (vi)
animated promotions; and (vii) 30 second and 60 second radio commercials
promoting the station's affiliation with the Company.
In exchange for providing the Affiliate Stations with programming and commercial
time, the Company retains the remainder of the advertising time which it sells
to advertising firms and independent advertisers and uses to barter with
third-parties to acquire additional programming. A critical factor in attracting
advertisers is the Affiliate Stations's market since each viewer comprising such
market represents a potential customer for the advertiser's product. Therefore,
the Company's access to the Affiliates' markets is integral to selling the
advertising time.
(2) Advertising:
Marketing Strategy and Customers
The Company markets its advertising time to (i) to Program Owners; (ii)
Affiliate Stations; and (iii) advertising agencies and independent advertisers.
Program Owners: In exchange for licensing rights to select programming, the
Company gives the Program Owner advertising time during the broadcast of such
programming. The Program Owner is then able to sell the advertising to outside
parties. The Company generally contracts with Program Owners at the NAPTE
convention and accordingly, is not required to actively market this segment of
its advertising time.
Affiliate Stations: The Company provides programming and advertising time to its
Affiliate Stations in exchange for retaining advertising time and access to the
Affiliate Stations' markets. In a traditional broadcasting contract, an
affiliate station would retain all available advertising time, which it would
then sell to outside advertisers, and the network would receive a fee from the
affiliate station. However, the Company believes that by selling retained
commercial time to outside advertisers, it is able to generate higher revenues
than it would otherwise receive in fees from its Affiliate Stations. The Company
markets both its family oriented programming and advertising time to Affiliate
Stations. Advertising time is generally a component of the programming contract
with Affiliate Stations, accordingly, the Company does not separately market the
advertising time to Affiliate Stations.
Advertisers: Approximately 25% of the Company's revenues come from sales of
commercial time to advertising agencies and independent advertisers. The
monetary value of this time is based upon the estimated size of the viewing
audience; the larger the audience, the more the Company is able to charge for
the advertising time. To measure the size of a viewing audience, networks and
stations generally subscribe to nationally recognized rating services, such as
Nielsen. Initially, the Company's Affiliate Stations were located in the smaller
market areas of the country. However, the Company's goal is to enter into
Affiliate Agreements with stations located in the top 30 designated market
areas ("DMA") in order to obtain Nielsen ratings to allow the Company to
charge higher rates for their advertising time.
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Presently, the Company has Affiliate Stations in 9 of the top 25 DMAs and 19 of
the top 50 DMAs. Sales of the Company's advertising time to advertising agencies
and to independent advertisers is generally by referrals or by advertisers
contacting the Company. In some instances, the Company has solicited advertising
agencies.
In addition to sales of its programming and advertising time, the Company also
generates revenues through (i) sales of programming time slots to companies
desiring to air their own programs; (ii) leasing of its digital satellite
channels; (iii) direct response marketing of products advertised on the network;
and (iv) leasing of its production facilities.
COMPETITION
The broadcast industry is highly competitive and, as a result of the wide range
of programming available in both the broadcast and cable formats, the Company
competes with a large number of competitors, many of whom may offer similar
programs. The Company competes for available air time, channel capacity,
advertiser revenue, revenue from license fees, number of viewing households, and
programming material. The Company believes its strongest competitive advantages
are (i) the quality of its family oriented programming; (ii) its advertising
rates; (iii) the markets in which its programming is broadcast; and (iv) its
no-cost programming.
Quality Family Oriented Programming: The Company's programming philosophy is
centered on family viewing and it believes that there is strong public support
(as evidenced by Congress' hearings on appropriate programming and the recent
mandate to add the content ratings symbols on the television screens as the
programs are aired) for rated "G" programming which is appropriate for viewing
by the entire family. As major networks are permitting more violence, sexual
content, and offensive language within their programming, the Company believes
that there is a strong and growing contingent of families who will demand
programs that are more aligned with their family values. The Company intends to
position itself as the "family network" to fill this niche. Although the Company
does not believe that its family oriented programming will put it in direct
competition with the larger and more established networks, it does believe that
its programming, in combination with other factors, will establish the Company
as a premiere network.
Advertising Rates: The Company also competes with other networks on the basis of
its advertising rates. The Company's barter system allows it to keep its rates
low, thereby making advertising with the Company a viable alternative for many
companies whose revenues do not permit them to pay the exorbitant fees required
to advertise on the major networks. In addition, as other networks increase the
cost of producing shows, such as the recently announced $13,000,000 per episode
of E.R. on NBC, they must increase the fees charged to advertisers in order to
recoup their expenses. Since the Company does not produce its own shows and has
relatively low overhead, it is able to maintain very competitive advertising
rates.
Markets: The leading networks, based upon total number of affiliated stations,
are ABC, CBS, NBC, and FOX. Each of these competitors are more established than
the Company, have significantly greater name recognition and viewer loyalty, as
well as greater industry, financial, distribution and
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marketing, programming, personnel and other resources than the Company.
Moreover, the television market has seen a continual increase in the number of
networks, including the addition of Warner Brothers Network (WB) and United
Paramount Network (UPN) in 1994. As the number of networks increase, the Company
will face greater competition for available syndicated programs, viewers, and
for affiliates who wish to carry their broadcasts. The Company also believes
that other forms of quasi-networks, including QVC and the Home Shopping Network
and so called "superstations" such as WTBS and WGN, will also be a significant
source of competition. At present, the Company is approximately the tenth
largest network based upon the total aggregate households covered by the
Company's Affiliate Stations. The Company currently broadcasts in 10 of the top
30 DMAs and broadcasts in an aggregate of approximately 10,878,628 households.
The Company intends to increase its household viewership by entering into
additional markets in the top 30 DMAs.
No-Cost Programming: In a typical broadcasting arrangement, the network charges
the affiliate station a fee to broadcast its programs and the affiliate retains
most, if not all, of the advertising time. The fees charged by the networks
generally represent a large portion of the affiliate's expenses and may be
prohibitive to many of the smaller affiliate stations. The Company is able to
compete with the high fees charged by other networks with its no-cost barter
arrangement which enables affiliate stations to broadcast quality programs
without the usual associated costs. Under the Company's barter system, the
Company provides programming and advertising time to its Affiliate Stations and,
in exchange, the Company retains advertising time and gains access to the
Affiliate Stations' viewing market. The Company earns revenues on its
programming by selling the retained advertising time to outside advertisers.
In addition to the foregoing, the Company believes that the recent introduction
of direct satellite services ("DSS") will directly compete with cable systems
and increase the pressure for additional channels and services. DSS systems
offer their subscribers more than twice as many channels as most cable systems,
with better audio and video quality. The price of satellite dishes are
competitive with premium cable fees and industry analysts expect the
approximately 4.5 million DSS subscribers to increase to 19 million by the year
2000. In December 1997, the Company entered into an agreement with Dominion Sky
Angels to add the Company as one of its 16 channels. The channel is delivered
through EchoStar via the small 12-inch dish.
RELIANCE ON CUSTOMERS
The Company currently provides programming services to forty-four (44) Affiliate
Stations. The Company is not dependant upon any one station for its revenues,
however, the loss of several stations could adversely effect the Company's
results of operations.
The Company also sells advertising time slots on its programming to various
advertisers. The revenues generated by sale of the advertising slots represents
approximately 25% of the Company's income, however, taken as a whole, no one
company provides a large portion of such income.
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<PAGE> 12
Accordingly, the Company is not dependent upon one or a few major advertisers,
however, the loss of a significant number of advertisers could adversely effect
the Company's results of operations.
The Company is negotiating to lease its additional channels on the digital
compression system uplinking to the satellite. Broadcast Magazine has estimated
that there are over 65 new cable channels who have announced they are ready to
commence broadcasting and are seeking channel space. Accordingly, the Company
believes that it will be able to enter into lease agreements for the remaining
channels.
ENVIRONMENTAL COMPLIANCE
The Company's business is not subject to any federal, state or local
environmental laws.
PATENTS, TRADEMARKS AND SERVICE MARKS
The Company does not currently hold patents, copyright marks or service marks on
any of its products, however, the Company may apply for such intellectual
property right protections if future conditions indicate that this would be in
the Company's best interests.
On July 18, 1997, the Company was granted a Radio Station Authorization by the
FCC. The Radio Station Authorization, which authorizes the Company to build and
operate a domestic fixed transmit/receive C-band earth station (uplink system)
on the Company's premises, expires July 18, 2007.
The Company has entered into license agreements with several syndicators and
program owners for the use of their programming. Under the agreements, which are
generally non-exclusive, the Company is granted the right to exhibit, distribute
and transmit by means of broadcast or cablecast, a particular program. In
consideration thereof, the Company provides advertising time during such program
to the syndicator. The amount of advertising time, the length, and other terms
of the license agreement vary, depending upon the type of program being
licensed.
The Company has also entered into Affiliate Agreements with each of its
Affiliate Stations pursuant to which the Company provides programming and other
amenities in exchange for advertising time during such programming. The Company
either utilizes such advertising time or sells it to third parties. The terms of
the Affiliate Agreements vary depending upon the type of programming being
provided by the Company, the length of the agreement, as well as other
variables. The Company currently has 44 Affiliate Stations with whom it has
entered into comparable Affiliate Agreements.
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<PAGE> 13
GOVERNMENT REGULATIONS
Broadcasting of the Company's programming, both by the Company and its
Affiliates, is subject to the rules and regulations of various federal, state
and local agencies. The Company believes that it currently complies with
applicable laws and regulations governing cable and television broadcasts,
however, in the event that such laws are subsequently modified, there can be no
assurance that the Company will be able to continue to comply with such laws.
Failure to comply could have serious negative implications for the Company.
EMPLOYEES
The Company has nine (9) full time employees and two (2) part-time
employees. The Company's employees are not represented by any collective
bargaining organization, and the Company has never experienced a work stoppage.
The Company believes that its relations with its employees are satisfactory.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Management's discussion and analysis is designed to provide a better
understanding of the Company's financial condition, results of operations,
liquidity, and capital resources. The discussion should be read in conjunction
with, and is qualified in its entirety by, the financial statements of the
Company and the Notes thereto included elsewhere herein for the Company's fiscal
years ended December 31, 1996 and 1997.
The Company was founded on December 11, 1992 and provides programming, media
production and syndication services to television and cable stations, as well as
satellite uplink services to certain cable channels. The Company has a
wholly-owned subsidiary, Eureka Media & Trading, Inc., formed in the State of
Nevada on September 6, 1995, which has not commenced operations. The Company is
in the process of changing the name of its subsidiary to "Senior Channel, Inc."
and anticipates that the name change will be completed by May 1998.
The Company originally broadcast its programs via analog transmission and, in
1996, had Affiliate Agreements with over 150 Affiliate Stations. However, in
late 1996, the Company converted from analog to digital transmission and in
connection with the conversion, was required to provide digital decoding
equipment to each of its Affiliate Stations. Due to the cost of providing the
decoding equipment, the Company was not able to furnish the equipment to all of
its then existing Affiliate Stations. Accordingly, upon conversion, the Company
initially entered into Affiliate Agreements with 33 Affiliate Stations. The
Company has since entered into Affiliate Agreements to provide family-oriented
television to a network of forty-four (44) television stations and cable systems
nationwide. The stations serviced by the Company are primarily "independent"
stations, meaning that they have no affiliation with the major network
organizations (NBC; ABC; CBS; FOX; WB Network; and Paramount). The Company
maintains a library of over 2,000 programs covering a wide array of topics and
interests, and includes cartoons, sports, sitcoms, movies, news and weather,
comedy, science and health shows, documentaries, and public interest programs.
The Company also offers original programs, celebrity golf tournaments,
professional boxing, fishing expeditions and interactive programming.
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<PAGE> 14
RESULTS OF OPERATIONS
Revenues
Revenues are primarily derived from the Company's programming services, sales of
advertising and programming time, and leasing of digital satellite channels.
Revenues for 1997 were $1,243,145 compared to $1,092,399 for 1996, an increase
of $150,746 or 14%. The increase in revenues resulted from leasing of digital
channels.
Cost of Operations
Costs of operations were $832,577 for the 1997 fiscal year and $987,715 for the
1996 fiscal year, a 16% decrease. The decrease in 1997 was due to a decrease in
uplinking expenses as the Company replaced a rented mobile uplink with its own
permanent uplink as part of the digital system.
Programming expenses, which include costs for program development, editing,
videotapes and other miscellaneous expenses, decreased by approximately $70,000
(85%) for fiscal year ended 1997 as compared to the 1996 fiscal year.
Programming costs decreased as the Company acquired more of its programming
through barter. Net rental expenses, which include office space, office
equipment, and company vehicles increased by 9% in 1997 due to the increase in
office space rental from $4,800 per month to $5,400 per month from June through
December.
General and Administrative
General and administrative expenses for the fiscal year ended December 31, 1997
were $454,232, a decrease of $28,626 or 6% less than administrative expenses of
$482,858 for fiscal year 1996. The general and administrative expenses represent
37% and 44% of revenues for fiscal years 1997 and 1996, respectively. The
Company's general and administrative expenses consist of operating costs for the
Company's headquarters, the salaries of corporate officers and office staff,
travel, accounting, legal and other professional expenses, advertising and
promotional costs.
Interest expense for the fiscal year 1997 was $381,654 and for fiscal year 1996
was $204,757, an increase of $176,897 or 86%. This increase was due to interest
paid on the outstanding balance on various bridge loans and a nine percent (9%)
interest factor payment on Series B Preferred Stock.
During the period November 1997 through March 1998, at the election of the
noteholders, the Company converted an aggregate approximate amount of $203,750
in outstanding debt and accrued interest into common stock of the Company. As a
result of the conversions, the Company expects interest payments to be
correspondingly reduced.
Operating Results
The Company had an operating gain of $336,347 for fiscal year ended December 31,
1997. The gain for 1997 is primarily attributed to gain on the sale of assets.
For fiscal year 1996, the Company had an operating loss of $786,169,
approximately 72% of revenues. The operating loss for 1996 was largely due to an
increase in programming and rental expenses, issue costs and interest on bridge
loans, and interest factor payments to Series B Preferred stock holders.
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<PAGE> 15
Earnings Per Share of Common Stock
The net earnings per common share are based upon the weighted average of
outstanding common stock and convertible preferred stock. The outstanding
warrants that accompany the preferred stock are not dilutive, therefore, they
are not included in the weighted average. In 1997, the net gain per of common
stock was $0.02. The gain is reflective of the gain on the sale of assets and
the decrease in loss from operations.
For fiscal 1996, net loss per share of common stock was $0.08. The loss for
fiscal year 1996 is reflective of the increased debt and other expenses of the
Company resulting from acquisition of a digital compression system and satellite
equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through a combination of the issuance of
equity securities to private investors, issuance of private debt, loans from
affiliates, and cash flow from operations. The Company has cumulative losses of
$501,917 from inception through December 31, 1997.
In December 1997, the Company entered into an agreement with Media Fund,
Inc. ("MFI") pursuant to which MFI will receive 1,875,000 shares of the
Company's Common Stock, assets with a book value of $2,818,933 and 20% of the
commercial time slots on the Company's channels for a period of four (4) years
in exchange for up to 12 hours of network quality programming and $5,000,000 to
be paid to the Company in installments as follows: April 15, 1998 - $800,000;
July 15, 1998 - $300,000; October 15, 1998 - $300,000; December 30, 1998 -
$300,000; March 30, 1999 - $300,000; and December 30, 2002 - $1,700,000.
Current liabilities for fiscal year 1997 were $2,653,286, which exceed current
assets of $1,767,018 by $886,268. For fiscal year ended 1996, current
liabilities exceeded current assets by $1,928,247. The increase in current
assets in 1997 as compared to 1996 was primarily the result of the addition of
the note receivable. The current liabilities for 1997 increased by $511,727 as
compared to 1996 due primarily to increases in notes payable of $600,000 and
equipment lease payments of $36,000 and decreases in accounts payable of
$106,932 and customer deposits of $20,000.
The Company has been able to generate funds from private placements to finance
operations, however, in the event the Company requires additional capital
investments, there can be no assurance that a sufficient amount of the Company's
securities can be sold to fund the continuing operating needs of the Company.
For the twelve months ended December 31, 1997, the Company received the sum of
$1,274,009 from private placements of 176,770 shares of Series B Units and 15%
Promissory Notes with an aggregate face value of $125,000.
During the period November 1997 through December 1997, the Company conducted a
private placement and issued Units consisting of Promissory Notes with an
aggregate face value of $100,000 and 20,000 shares of Common Stock.
During fiscal year 1996, the Company completed private placements for 42,918
Series A Units, 109,854 Units consisting of one share of 9% Convertible
Redeemable Series B Preferred Stock and one Warrant ("Series B Units"), and 15%
Guaranteed Promissory Notes with a face value of $1,000. In addition, Dr.
Shelton and Mr. Moseley exercised options for 2,000,000 shares of the Company's
common stock at $0.10 per share. The Company received total cash proceeds from
the foregoing in the approximate amount of $2,220,764.
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<PAGE> 16
Management believes that anticipated cash flows from operations will be
sufficient to meet the Company's expected cash needs and to finance future
operations, however, in the event that future revenues are not sufficient, the
Company will conduct private and/or public offerings of its equity stock to
raise the necessary capital.
IMPACT OF INFLATION
Management does not believe that general inflation has had or will have a
material effect on operations.
ITEM 3. DESCRIPTION OF PROPERTY
The Company entered into a lease agreement ("Lease Agreement") on June 1, 1995
for its principal offices located at 6125 Airport Freeway, Haltom City, Texas
76117. The premises measure approximately 13,900 square feet and are used for
the Company's general office and administrative purposes, as well as for their
programming services, warehouse needs and full-service production studio. The
Company subleases part of the office space to other companies engaged in the
television and media business.
The initial term of the Lease Agreement was for a period of twenty-four (24)
months commencing on June 1, 1995 and terminating on May 31, 1997. The Company
renewed the lease for an additional twelve (12) months, up to and including May
31, 1998 and intends to extend the lease again at the current expiration date.
The Company believes that the premises are acceptable for their current
operating needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 26, 1998 by (i) each person who is known
by the Company to beneficially own more than five percent of the Company's
Common Stock; (ii) by each of the Company's directors; and (iii) by all
executive officers and directors as a group. Except as otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
all shares beneficially owned, subject to community property laws where
applicable. As of March 26, 1998, there were approximately 16,479,587 shares
of the Company's Common Stock outstanding on a fully diluted basis.
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<PAGE> 17
<TABLE>
<CAPTION>
Number Percent
Name and Address of Beneficial Owner Of Shares of Class
- ------------------------------------ --------- ---------
<S> <C> <C>
Dr. Donald W. Shelton 4,360,000 26.46%
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
Randy J. Moseley 4,360,000 26.46%
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
Charles Coburn 1,450,000 8.99%
10008 Walleye
Knoxville, Tennessee 37822
Jim Hock/Pacific Acquisition Group, Inc.(1) 1,481,433 8.83%
21800 Burbank Blvd., 3rd Floor
Woodland Hills, California 91367
Officers and Directors as a Group(2) 8,720,000 52.92%
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
</TABLE>
- ------------
(1) Jim Hock owns 300,000 shares of the Company's Common Stock and
Pacific Acquisition Group, Inc. ("PAG") owns 1,181,433 shares of
the Company's Common Stock. Mr. Hock is the President of PAG
and owns one hundred percent (100%) of the issued and outstanding
shares of Common Stock of PAG, therefore he is the beneficial owner
of the Company's Common Stock held by PAG.
(2) The "Officer and Director" group is comprised of two (2) persons.
- ------------
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The control of the Company rests in its shareholders who elect a Board of
Directors to oversee the business of the Company. The Board of Directors elect
officers who are charged with carrying out the directions of the Board and
running the day-to-day business affairs of the Company. The following table sets
forth certain information regarding directors and executive officers of the
Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C>
Dr. Donald W. Shelton 54 Chairman of the Board of Directors, Chief Executive
Officer, and Director
Randy J. Moseley 50 President, Chief Financial Officer, Secretary, and
Director
</TABLE>
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<PAGE> 18
MANAGEMENT RESUMES
The Company's executives have significant experience in the television industry
and related businesses. Following are brief resumes of the key personnel for the
Company.
DR. DONALD W. SHELTON - Chairman, Chief Executive Officer and Director.
Dr. Shelton is a co-founder of the Company and has served as its Chairman, Chief
Executive Officer and as a Director since its inception in 1993. Dr. Shelton
holds a doctorate in English Literature from Louisiana Baptist University. He
has also attended Oklahoma University, Kansas University and the Philanthropy
Tax Institute. Dr. Shelton has nine years experience in television station
construction, management and production. He has produced various entertainment
programs, infomercials and commercials. In addition, since 1992, Dr. Shelton has
been part owner and operator of television stations in San Antonio, Phoenix,
Oklahoma City, Bryan/College Station, and Beaumont. Before entering the
broadcasting industry, Dr. Shelton was the Regional Representative of the
Secretary for the U.S. Department of Transportation and Vice Chairman of the
Southwest Regional Council. He also has served as the director of sales and
marketing for a major oil company and national pharmaceutical firm, and has
owned his own real estate school and development corporation.
RANDY MOSELEY - President, Chief Financial Officer, Secretary and Director. Mr.
Moseley is a co-founder of the Company and has served as its President, Chief
Financial Officer, Secretary and as a Director since its inception in 1993. Mr.
Moseley received his Bachelor of Business Administration degree, majoring in
accounting, from Southern Methodist University in Dallas, Texas. Mr. Moseley is
a certified public accountant and worked for a national public accounting firm
for the six years following his graduation from college. Mr. Moseley has over
twenty-five years of fiscal management experience in such industries as
insurance, mortgage and real estate, hospital services and agriculture, as well
as the television broadcasting and media industries. Mr. Moseley has been part
owner and operator of six television stations.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the annual and other compensation of the
Company's Chief Executive Officer and each of the other executive officers whose
total salary and bonus exceeded $100,000 for the Company's fiscal years ended
December 31, 1995, 1996, and 1997. No other executive officers of the Company
had total salary and bonus which exceeded $100,000 for the reported period.
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<PAGE> 19
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
Name Other
Principal Position Year Salary Compensation(3)(4) Stock Options(5)
- ------------------ ---- ------ ------------------ ----------------
<S> <C> <C> <C> <C>
Dr. Donald W. Shelton 1997 $100,000(1) $ 2,132 $0
Chief Executive 1996 $100,000(1) $ 5,805 $0
Officer 1995 $ 25,000(2) $ 10,711 $0
Randy Moseley 1997 $100,000(1) $ 0 $0
Chief Financial 1996 $100,000(1) $ 5,805 $0
Officer 1995 $ 25,000(2) $ 10,711 $0
</TABLE>
- --------------------
1. Pursuant to their respective employment agreements, Dr. Shelton and Mr.
Moseley are each entitled to an annual salary of $100,000, however, in 1997, Dr.
Shelton and Mr. Moseley each deferred $80,000 and in 1996, each deferred $72,220
of their salaries, which amounts have not been accrued. Dr. Shelton and Mr.
Moseley plan to continue to defer portions of their salary until such time as
the Company has sufficient earnings to pay their salaries in full.
2. The employment agreements with Dr. Shelton and Mr. Moseley were effective on
October 2, 1995, accordingly, their salaries for fiscal year ended 1995 were
calculated on a pro rata basis of $8,333 per month, for total salary in 1995 of
$24,999 each.
3. The amounts shown are the aggregate lease payments for the automobiles
provided to Dr. Shelton and Mr. Moseley. Payments in 1997 for Dr. Shelton
equalled $956.
4. In August 1997, the Company purchased a life insurance policy for Dr. Shelton
in the amount of $500,000. The quarterly premium is $588 and payments in 1997
totalled $1,176.
5. On October 2, 1995, in connection with their employment agreements, Dr.
Shelton and Mr. Moseley were each granted the option to purchase 1,000,000
shares of the Company's Common Stock at $0.10 per share. Dr. Shelton and Mr.
Moseley exercised their options in September 1996.
- --------------------
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Dr. Shelton to serve as
its Chairman and Chief Executive Officer for a period of five (5) years,
commencing October 2, 1995. Pursuant to the employment agreement, Dr. Shelton is
entitled to an annual salary of one hundred thousand dollars ($100,000), with
increases, if any, to be determined by the Board of Directors. As additional
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<PAGE> 20
compensation, Dr. Shelton was provided with a leased automobile and was granted
an option to purchase 1,000,000 shares of the Company's common stock at $0.10
per share, which Dr. Shelton exercised in full on September 30, 1996.
The Company entered into an employment agreement with Mr. Moseley effective
October 2, 1995 whereby Mr. Moseley was engaged as President and Chief Financial
Officer of the Company for a period of five (5) years. Mr. Moseley is entitled
to an annual base salary equal to one hundred thousand dollars ($100,000), with
increases, if any, to be determined by the Board of Directors. As additional
compensation, Mr. Moseley was provided with a leased automobile and was granted
an option to purchase 1,000,000 shares of the Company's common stock at $0.10
per share, which Mr.
Moseley exercised in full on September 30, 1996.
COMPENSATION OF DIRECTORS
All non-officer directors are entitled to receive an attendance fee for each
meeting of the Board of Directors at which they attend. Currently, the Company
does not have any non-officer directors. All other directors are entitled to
reimbursement for out-of -pocket expenses related to and arising out of Board of
Directors' meetings. For the fiscal years ended 1995, 1996, and 1997, there were
no such expenses reported.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Shelton and Mr. Moseley have joint ownership interests in six (6) television
stations which have contracted with the Company to broadcast as Affiliates of
the Company. The stations include (the aggregate respective ownership of Dr.
Shelton and Mr. Moseley is shown in parenthesis following the station name): (i)
T.V. 7 (75%); (ii) TV 50, Inc. (50%); (iii) Cleveland Broadcasting Co. (49%);
(iv) ATN Network, Inc. (35%); (v) San Antonio Broadcasting Corp. (52%); and (vi)
Beaumont Broadcasting Corp. (100%). The terms of the Affiliate Agreements with
the foregoing television stations are the same as those with other non-related
Affiliates.
The Company has outstanding loans with various Affiliates of the Company,
including:
In 1995, the Company borrowed $104,500 from Lyn Broadcasting Corporation ("LBC")
at an interest rate of 10%. Dr. Shelton and Mr. Moseley own 100% of LBC. In
September 1996, Dr. Shelton and Mr. Moseley exercised options to purchase
2,000,000 shares of the Company's Common Stock at $0.10 per share, for a
combined purchase price of $200,000. Of this amount, $100,000 was paid directly
to LBC in partial payment of the outstanding debt (the remaining $100,000 was
applied to debt owed to ATN, as further described hereinbelow). In 1997, the
balance of $4,500 was converted to shares of the Company's Common Stock.
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<PAGE> 21
In 1995, the Company borrowed $52,531 from Shelly Media Marketing ("SMM") at an
interest rate of 10%. Dr. Shelton and Mr. Moseley own 100% of SMM. To date, the
Company has paid approximately $1,400 of this obligation. Pursuant to a
Promissory Note Extension Agreement, the maturity date for the remaining balance
of $51,100 has been extended to September 31, 1998.
In 1994, the Company borrowed $141,152 from ATN Network Inc. ("ATN") at an
interest rate of 10%. Dr. Shelton and Mr. Moseley own an aggregate of 35% of
ATN. In September 1996, Dr. Shelton and Mr. Moseley exercised options to
purchase 2,000,000 shares of the Company's Common Stock at $0.10 per share, for
a combined purchase price of $200,000. Of this amount, $100,000 was paid
directly to ATN in partial payment of the outstanding debt. Pursuant to a
Promissory Note Extension Agreement, the maturity date for the remaining balance
has been extended to September 30, 1998. In December 1997, the Company borrowed
an additional $243,090 pursuant to a written Promissory Note. The principal
bears interest at an annual rate of 10%. The principal and all accrued and
unpaid interest is due in full on September 30, 1998. At December 31, 1997 there
remained a balance of approximately $284,242.
The Company borrowed a combined total of $10,257 in 1995 from San Antonio
Broadcasting Corp. ("SABC") and TV Channel 22, Inc. ("Channel 22"), at 10%
interest to be repaid upon demand. Dr. Shelton and Mr. Moseley own 52% and 75%
of SABC and Channel 22, respectively. To date, payment has not been demanded.
In 1994, the Company borrowed $38,274 from Cleveland Broadcasting Co. ("CBC") at
an interest rate of 10%. Dr. Shelton and Mr. Moseley own an aggregate of 49% of
CBC. At December 31, 1997, the Company had a remaining balance of $26,089.
Pursuant to a Promissory Note Extension Agreement, the maturity date has been
extended to September 30, 1998.
The Company believes that the terms of the foregoing loans are comparable to
terms that the Company could have received from nonaffiliate lenders in an
arms-length transaction. In the event the Board of Directors deems it to be in
the Company's best interests to borrow additional monies to fund operating and
other expenses, the Company will seek to enter into agreements on terms
favorable to the Company, which may be with related or non-related parties. Any
agreements entered into by the Company concerning loans with related or
non-related parties will be required to be authorized by a favorable vote of the
Board of Directors.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $0.01 par value and 10,000,000 shares of Preferred Stock, $0.01
par value. Pursuant to Certificates of Designation filed with the Delaware
Secretary of State, the Company designated the rights, preferences, privileges
and restrictions for the establishment of 1,000,000 shares of Convertible
Redeemable Series A Preferred Stock, and 1,000,000 shares of 9% Convertible
Redeemable Series B Preferred Stock.
21
<PAGE> 22
The summary description of the Company's Common Stock, which is covered by this
Registration Statement, is qualified in its entirety by reference to the
Company's Articles of Incorporation, as amended. The summary description of the
Company's Series A and Series B Preferred Stock is qualified in its entirety by
reference to the respective Certificates of Determination.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $0.01 par
value and, as of March 26, 1998, there were approximately 16,479,587 shares
outstanding, on a fully-diluted basis, and approximately 324 holders of record.
Holders of Common Stock are entitled to one vote per share held of record on all
matters requiring a vote of shareholders, including the election of directors.
There is no right to cumulative voting in the election of directors,
accordingly, holders of more than fifty percent (50%) of the Common Stock, if
any, who vote for elections of directors can elect one hundred percent (100%)of
the Company's directors if they so choose. Subject to the prior rights of
holders of Preferred Stock and any contractual restrictions against the payment
of dividends, the holders of Common Stock are entitled to receive dividends on a
pro-rata basis when, if and as declared by the Board of Directors out of funds
legally available therefore. Upon liquidation or dissolution, each outstanding
share of Common Stock will be entitled to share equally in the assets of the
Company legally available for distribution to shareholders after the payment of
all debts, liabilities, and other obligations, including the preferences of any
outstanding shares of Preferred Stock. Shares of Common Stock are not
redeemable, have no conversion rights and carry no preemptive or other rights to
subscribe to or purchase additional shares in the event of a subsequent
offering. All outstanding shares of Common Stock are duly authorized and validly
issued, fully paid and non-assessable and free of preemptive rights.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, as amended, the Company
is authorized to issue 10,000,000 shares of Preferred Stock in one or more
series and is further authorized to (i) determine the number of shares
constituting any such series; and (ii) determine the rights, preferences,
privileges, and restrictions granted to or imposed upon any such series.
CONVERTIBLE REDEEMABLE SERIES A PREFERRED STOCK
The Company filed a Certificate of Determination with the Delaware Secretary of
State designating 1,000,000 shares of Convertible Redeemable Series A Preferred
Stock ("Series A Stock"). The Series A Stock is senior to all warrants and
options to purchase Common Stock of the Company ("Junior Stock") with respect to
dividend rights, rights on redemption, conversion rights, and rights on
liquidation, winding up and dissolution of the Company.
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<PAGE> 23
Holders of outstanding Series A Stock are entitled to receive, in preference to
the holders of any Junior Stock in any fiscal year, when and as declared by the
Board of Directors, dividends in such amounts and payable at such times as the
Board of Directors may determine, out of any assets at the time legally
available therefor. Dividend rights are not cumulative, do not accrue, and do
not bear or accrue interest. The Board of Directors shall not declare and pay,
at any time, dividends (in cash or other property) on its Common Stock without a
prior or concurrent declaration and payment of dividends on Series A Stock,
which dividend on Series A Stock shall be equal on a per-share basis to such
dividend declared or to be declared on the Common Stock.
In the event of a voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of Series A Stock shall be entitled to receive,
out of the assets of the Company, whether those assets are capital or surplus of
any nature, an amount equal to $10.00 per share of Series A Stock, plus all
unpaid dividends on the date of that distribution, before any payment shall be
made or any assets distributed to the holders of Junior Stock, and the remaining
assets shall be distributed ratably to the holders of Junior Stock.
Holders of Series A Stock are not entitled to vote, except as otherwise may be
provided by law.
At the option of the Board of Directors, the Company may, after July 24, 1999,
redeem all or any part of Series A Stock by converting each outstanding share of
Series A Stock into two shares of Common Stock.
At any time following the earlier of (i) the completion of any merger or other
business combination by the Company wherein a controlling interest in the
Company is acquired by another entity; or (ii) July 24, 1999, each holder of
Series A Stock may convert any or all of such Series A Stock into fully paid and
non-assessable Common Stock of the Company, at the rate of two shares of Common
Stock for each share of Series A Stock, subject to certain adjustment
provisions.
9% CONVERTIBLE REDEEMABLE SERIES B PREFERRED STOCK
The Company filed a Certificate of Determination with the Delaware Secretary of
State designating 1,000,000 shares of 9% Convertible Redeemable Series B
Preferred Stock ("Series B Stock"). The Series B Stock shall, with respect to
dividend rights, rights on redemption, rights on conversion and rights on
liquidation, winding up and dissolution, rank senior to all warrants and options
to purchase Common Stock established by the Board of Directors or the
Stockholders (all of such equity securities of the Corporation to which the
Series B Stock ranks senior are collectively referred to herein as "Junior
Stock").
Holders of outstanding Series B Stock are entitled to receive, in preference to
the holders of any Junior Stock in any fiscal year, when and as declared by the
Board of Directors, dividends at the annual rate of $0.585 per share of Series B
Stock, payable in cash quarterly, on the 30th day of March, June, September and
December. Dividends are accruable from the date of issuance and are cumulative.
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In the event of a voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the holders of Series B Stock shall be entitled to
receive, out of the assets of the Company, whether those assets are capital or
surplus of any nature, an amount equal to $10 per share of Series B Stock, plus
all accrued and unpaid dividends on the date of that distribution, before any
payment shall be made or any assets distributed to the holders of Junior Stock,
and the remaining assets shall be distributed ratably to the holders of Junior
Stock.
Holders of Series B Stock are not entitled to vote, except as otherwise may be
provided by law.
At the option of the Board of Directors, the Company may, after July 24, 1999,
redeem all or any part of Series B Stock by converting each outstanding share of
Series B Stock into two shares of Common Stock ("Redemption Shares").
At any time following the earlier of (i) the completion of any merger or other
business combination by the Company wherein a controlling interest in the
Company is acquired by another entity; or (ii) July 24, 1999, each holder of
SerIes B Stock may convert any or all of such Series B Stock into fully paid and
non-assessable Common Stock of the Corporation, at the rate of two shares of
Common Stock for each share of Series B Stock, subject to certain adjustment
provisions.
The Company does not have any current arrangements or understandings to issue
any of its Series A or Series B stock, or to designate additional series of
preferred stock.
STOCK OPTION PLAN
In 1995, the Company implemented its 1995 Stock Option Plan (the "Plan") to
provide employees, officers, directors, consultants and independent contractors
of the Company or any of its subsidiaries incentives to achieve high levels of
performance on behalf of the Company. The Options issued under the Plan may be
Incentive Stock Options under Internal Revenue Code Sections 421 and 422, or
Nonqualified Stock Options. Only officers, employees, and directors who are
also employees are eligible to receive grants of Incentive Stock Options.
Officers, employees, and directors (whether or not they are also employees) of
the Company, as well as consultants and independent contractors of the Company
are entitled to receive grants of Nonqualified Stock Options. Unless previously
terminated by the Company, the Plan terminates on October 1, 2005.
There are 5,000,000 shares of Common Stock reserved under the Plan. The
exercise price per share of Common Stock under a Nonqualified Stock Option may
not be less than 85% of the Fair Market Value of the Common Stock on the date
of grant. The exercise price per share under an Incentive Stock Option may not
be less than the Fair Market Value of the Common Stock on the date on grant. To
date, no Options have been granted under the Plan.
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PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Company is a private company and, at the time of filing this Registration
Statement, there is no established trading market for the Company's Common
Stock.
As of March 26, 1998 the Company had approximately 324 shareholders of record
for its Common Stock and approximately 16,479,587 shares of Common Stock issued
and outstanding. As of the date of this Registration Statement, approximately
286,625 shares of the Company's Common Stock may be issuable upon exercise of
outstanding Warrants. In addition, the Company has outstanding 286,625 shares of
Series B Stock which are eligible for conversion into a cumulative total of
573,250 shares of Common Stock. Approximately 5,308,454 shares of the Company's
Common Stock are eligible for resale pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Act").
Although holders of the Company's Common Stock are entitled to receive
dividends, there can be no assurance that the Company will have sufficient funds
to pay such dividends, or even if such funds are available, that the Company
will be permitted to make such dividend payments under the provisions of the
Delaware General Corporate Law or other applicable laws. Delaware law prohibits
the Company from paying dividends or making other distributions if the Company
would be unable to pay its debts as they become due in the usual course of
business or if the Company's assets would be less than its liabilities after
giving effect to such dividend or distribution. Further, the policy of the Board
of Directors has been and continues to be to retain earnings in order to fund
operations and continue the development and expansion of the Company. To date,
the Company has not declared or paid any dividends with respect to its Common
Stock. Future cash dividends on the Common Stock, if any, will be determined by
the Company's Board of Directors and will be based upon the Company's earnings,
capital requirements, financial conditions and other factors deemed relevant by
the Board of Directors.
None of the Company's current agreements contain restrictions on the payment of
dividends, however, future financing arrangements may contain such restrictions.
ITEM 2. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceeding and is
not aware of any material legal proceeding threatened against it.
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ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company engaged Jack F. Burke, Jr., Certified Public Accountant, as its
principal independent accountant. The Company has never had any disagreements
with its principal independent accountant on any matter related to the Company's
accounting principles or practices, financial disclosure, or auditing scope or
procedure, or any other matter.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
During fiscal years 1994 and 1995, SMM, CBC, and ATN loaned the Company a
cumulative of $332,000. The loans are evidenced by promissory notes, all of
which mature on September 30, 1998. As partial consideration for extending the
loans to the Company, the Company issued the foregoing entities an aggregate of
592,000 shares of Common Stock. The Company did not engage in a public offering
in connection with the foregoing loans and issuances of Common Stock. Dr.
Shelton and Mr. Moseley, officers and directors of the Company, hold an
aggregate of 100%, 49% and 35% of SMM, CBC, and ATN respectively, accordingly,
such investors have complete access to the Company's corporate and financial
records. The principals of SMM, CBC and ATN have extensive experience in the
broadcast industry and are knowledgeable about the associated financial and
business matters and risks of investments in such businesses, therefore, SMM,
CBC, and ATN qualify as sophisticated investors. The foregoing transactions were
effected in reliance upon the exemptions from registration provided by Section
4(2) of the Act and Regulation D promulgated thereunder. There were no
underwriting discounts or commissions in connection with these transactions.
On January 2, 1995, the Company issued 70,000 and 60,000 shares of Common Stock
to Jerry Powell and Judy Bryant, respectively, for no consideration. Mr. Powell
and Ms. Bryant are partners of Dr. Shelton and Mr. Moseley in "Channel 56"
television station in Tucson, Arizona. Prior to investing in the Company,
investors were provided with all available financial information on the Company
and opportunities to ask questions of and receive answers from the Company
regarding the Company, its business, and the Common Stock. As executive officers
of the Channel 56 television stations, Mr. Powell and Ms. Bryant have extensive
experience in the broadcast industry and are knowledgeable about the associated
financial and business matters and risks of investments in such businesses,
therefore, Mr. Powell and Ms. Bryant qualify as sophisticated investors. The
offer and issuance of the foregoing shares did not involve a public offering,
accordingly, such shares were issued by the Company in reliance upon the
exemption provided by Section 4(2) under the Act. There were no underwriting
discounts or commissions in connection with these transactions.
On February 2, 1995, the Company issued 10,000 shares of Common Stock each to
John George and Connie Ross for assisting the Company in negotiating the
broadcast of its channel in over 1,500 rooms at the Imperial Palace Hotel and
Casino, located in Las Vegas, Nevada. Prior to investing in the Company,
investors were provided with all available financial information on the Company
and opportunities to ask questions of and receive answers from the Company
regarding the Company, its business, and the Common Stock. Mr. George has an
extensive background in the media advertising and promotional business and Ms.
Ross formerly owned and operated a securities brokerage firm and is currently
the Advertising and Promotional Vice-President of a large hotel in Las Vegas,
Nevada. Mr. George and Ms. Ross each possess the requisite knowledge and
experience in financial and business matters to evaluate the merits and risks of
an investment in the Company, accordingly, they qualify as sophisticated
investors. The offer and issuance of the foregoing shares did not involve a
public offering, accordingly, such shares were issued by the Company in
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reliance upon the exemption provided by Section 4(2) under the Act. There were
no underwriting discounts or commissions in connection with these transactions.
During the period of July 1995 through March 1996, the Company undertook a
private offering of Units at an offering price of $6.50 per Unit for total gross
proceeds of $589,928.50. Each Unit consisted of one (1) share of Convertible
Redeemable Series A Preferred Stock, which was convertible into two (2) shares
of Common Stock, and one (1) Warrant to purchase one (1) share of the Company's
Common Stock. There were a total of 90,758 Units sold to ( # ) investors, ( # )
of whom were accredited and ( # ) of whom were non-accredited investors, as
those terms are defined under the Securities Act. Prior to investing in the
Company, potential investors were provided with a Confidential Private Placement
Memorandum which contained the Company's most recent audited financial
statements, current information regarding the Company, estimated use of offering
proceeds, and risks associated with an investment in the Company, as well as
other relevant information. Potential investors were also given the opportunity
to ask questions of the Company regarding the Company, the Units, and the
offering. The offer and issuance of the foregoing Units did not involve a public
offering, accordingly, such Units were issued by the Company in reliance upon
the exemption provided by Section 4(2) under the Act. The offering was not
underwritten, and there were no underwriting discounts or commissions.
During March 1996, 100% of the issued and outstanding Series A Preferred Shares
were converted into the Company's Common Stock. The Common Stock was issued
pursuant to an exemption from registration under Section 3(a)(9) of the Act. The
Warrants expired by their terms and were not converted into Common Stock. All
shares of Common Stock issued upon conversion of the Series A Preferred shares
were issued with the appropriate restrictive legend.
During the period from December 1995 through April 1996, the Company sold 15%
Guaranteed Promissory Notes with a face value of $1,000 ("Bridge A Notes") for
an aggregate of $548,750 in gross offering proceeds. The offer and sale of such
Units did not involve a public offering. There were 50 investors, 32 of whom
were accredited and 18 of whom were non-accredited investors, as those terms are
defined under the Securities Act. Prior to investing in the Company, potential
investors were provided with a Confidential Private Placement Memorandum which
contained the Company's most recent audited financial statements, current
information regarding the Company, estimated use of offering proceeds, and risks
associated with an investment in the Company, as well as other relevant
information. Potential investors were also given the opportunity to ask
questions of the Company regarding the Company, the notes, and the offering. The
sales were made in reliance upon exemptions from registration pursuant to
Section 4(2) and Regulation D promulgated under the Act. The offering was not
underwritten, and there were no underwriting discounts or commissions.
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Commencing in October 1997 through January 1998, an aggregate of $71,756 in
Bridge A Notes were converted into 22,078 shares of the Company's Common Stock.
The Common Stock was issued pursuant to an exemption from registration under
Section 3(a)(9) of the Act. All shares of Common Stock issued upon conversion of
the Bridge A Notes were issued with the appropriate restrictive legend.
The Company commenced a private offering of 15% Guaranteed Promissory Notes with
a face value of $1,000 ("Bridge B Notes") in March 1996. From March 1996 through
June 1996, the Company sold 574 notes for an aggregate of $574,000 in offering
proceeds. The offer and sale of the notes did not involve a public offering.
There were a total of 52 investors, 49 of whom were accredited and 3 of whom
were non-accredited investors, as those terms are defined under the Securities
Act. Prior to investing in the Company, potential investors were provided with a
Confidential Private Placement Memorandum which contained the Company's most
recent audited financial statements, current information regarding the Company,
estimated use of offering proceeds, and risks associated with an investment in
the Company, as well as other relevant information. Potential investors were
also given the opportunity to ask questions of the Company regarding the
Company, the notes, and the offering. The sales were made in reliance upon
exemptions from registration pursuant to Section 4(2), Section 4(6), and
Regulation D under the Act. The offering was not underwritten, consequently,
there were no underwriting discounts or commissions.
During the period November 1997 through January 1998, an aggregate value of
$25,000 in Bridge B Notes were converted into 7,691 shares of the Company's
Common Stock. The Common Stock was issued pursuant to an exemption from
registration under Section 3(a)(9) of the Act. All shares of Common Stock issued
upon conversion of the Bridge B notes were issued with the appropriate
restrictive legend.
In 1995, in connection with certain employment agreements for key positions
within the Company, 2,000,000 options were granted to two executive officers of
the Company to purchase 2,000,000 shares of the Company's Common Stock at $0.10
per share. Upon exercise of the options in 1996, the Company received aggregate
proceeds in the amount of $200,000. The offer and sale of the options and the
shares underlying the options did not involve a public offering. The investors
were executive officers and directors of the Company accordingly, they are
accredited investors, as that term is defined under the Securities Act. The
options and shares of Common Stock were issued in reliance upon Section 4(2) and
Regulation D promulgated under the Act.
During the period of July 1996 through May 1997, the Company conducted a private
offering of Units at an offering price of $6.50 per Unit. Each Unit was
comprised of one share of Series B Preferred share and one Investor Warrant. The
Series B Preferred Shares are convertible into two (2) shares of Common Stock
and the Investor Warrants are exercisable into one share of Common Stock upon
the occurrence of certain events. Prior to investing in the Company, potential
investors were provided with a Confidential Private Placement Memorandum which
contained the Company's most recent audited financial statements, current
information regarding the Company, estimated use of offering proceeds, and risks
associated with an investment in the Company, as well as other relevant
information. Potential investors were also given the opportunity to ask
questions of the
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Company regarding the Company, the Units, and the offering. The offer and sale
of the Units did not involve a public offering. There were a total of 286,625
Units sold for a total of $1,863,059 in gross offering proceeds. There were 105
investors, 100 of whom were accredited and 5 of whom were non-accredited, as
those terms are defined under the Securities Act. The Units were sold in
reliance upon the exemptions from registration pursuant to Section 4(2) and
Regulation D under the Act. The offering was not underwritten, consequently
there were no underwriting discounts or commissions.
During the period October 1997 through December 1997, September 1997 through
March 1998, 229,273 shares of the issued and outstanding Series B Preferred
Stock converted were converted into 458,546 shares of the Company's Common
Stock. The Common Stock was issued pursuant to an exemption from registration
under Section 3(a)(9) of the Act. All shares of Common Stock issued upon
conversion of the Series B Preferred shares were issued with the appropriate
restrictive legend. To date, none of the Investor Warrants have been converted
into Common Stock of the Company.
On July 19, 1996, the Company issued 50,000 shares of its Common Stock to Harvey
Huffstetler for pre-incorporation services, including certain administrative
tasks and financial planning services provided to the Company. Mr. Huffstetler
was provided with all financial information regarding the Company, including
audited financial statements as well as the opportunity to ask questions of and
receive answers from the Company regarding its business, the financial
statements and the Common Stock. Mr. Huffstetler has extensive experience in
business management and in insurance, accordingly, Mr. Huffstetler has the
requisite knowledge and experience in financial and business matters to evaluate
the merits and risks of an investment in the Company and qualifies as a
sophisticated investor. The issuance of the shares to Mr. Huffstetler did not
involve a public offering. The shares were issued in reliance upon the exemption
provided by Section 4(2) of the Act. There were no underwriting discounts or
commissions in connection with this transaction.
On July 19, 1996, the Company issued 50,000 shares of Common Stock to Keith
Lowery in consideration for consulting services relating to various engineering
matters and counsel regarding compliance with the rules and regulations of the
FCC. Mr. Lowery was provided with all financial information regarding the
Company, including audited financial statements as well as the opportunity to
ask questions of and receive answers from the Company regarding its business,
the financial statements and the Common Stock. Mr. Lowery has a Juris Doctor
degree from the University of Houston, has worked with the FCC, and provides
compliance assistance with the rules and regulations of the FCC, accordingly,
Mr. Lowery has the requisite knowledge and experience in financial and business
matters to evaluate the merits and risks of an investment in the Company and
qualifies as a sophisticated investor. The issuance of the shares did not
involve a public offering. The shares were issued in reliance upon the exemption
provided by Section 4(2) of the Act. There were no underwriting discounts or
commissions in connection with this transaction.
On November 8, 1996, the Company sold 400,000 shares of Common Stock to Winco
Corporation for $200,000. The equity owners of Winco each individually
represented to the Company that they are accredited investors, as that term is
defined under the Act. The offer and sale of the foregoing shares did not
involve a public offering. The offer and issuance of the shares were effected in
reliance upon the exemptions from registration provided by Section 4(2) of the
Act and Regulation D promulgated thereunder. There were no underwriting
discounts or commissions in connection with this transaction.
During March 1997, the Company sold 15% Guaranteed Promissory Notes with a face
value of $10,000 each ("Bridge C Notes") for an aggregate of $125,000 in gross
offering proceeds. The offer and sale of such notes did not involve a public
offering and were sold only to accredited investors, as that term is defined
under the Act. Prior to investing in the Company, potential
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investors were provided with a Confidential Private Placement Memorandum which
contained the Company's most recent audited financial statements, current
information regarding the Company, estimated use of offering proceeds, and risks
associated with an investment in the Company, as well as other relevant
information. Potential investors were also given the opportunity to ask
questions of the Company regarding the Company, the notes, and the offering. The
notes were sold in reliance upon Section 4(2) and Regulation D promulgated under
the Act. The offering was not underwritten, therefore, there were no
underwriting discounts or commissions.
During the period November 1997 through March 1998, 100% of the Bridge C Notes
in the aggregate value of $125,000 were converted into 38,463 shares of the
Company's Common Stock. The Common Stock was issued pursuant to an exemption
from registration under Section 3(a)(9) of the Act. All shares of Common Stock
issued upon conversion of the Bridge C Notes were issued with the appropriate
restrictive legend.
On May 12, 1997, Frank J. Lyons ("Lyons"), an individual, loaned $100,000 to the
Company. The loan is evidenced by a promissory note of even date therewith, the
terms of which provide for an interest payment of $10,000 on the maturity date,
August 12, 1997. The Company is currently negotiating a conversion of Mr. Lyon's
note and interests into shares of the Company's Common Stock. As partial
consideration for extending the loan to the Company, the Company issued Lyons
20,000 shares of Common Stock. Mr. Lyons represented to the Company that he is
an accredited investor, as that term is defined under the Act. The issuance of
the foregoing shares did not involve a public offering. The foregoing loan and
issuance of Common Stock were effected in reliance upon the exemptions from
registration provided by Section 4(2) of the Act and Regulation D promulgated
thereunder. There were no underwriting discounts or commissions in connection
with this transaction.
On May 12, 1997, Gary Lamberg ("Lamberg"), an individual, loaned $50,000 to the
Company. The loan, which was evidenced by a promissory note of even date
therewith, has been satisfied in full by the Company. As partial consideration
for extending the loan to the Company, the Company issued Lamberg 10,000 shares
of Common Stock. Mr. Lamberg represented to the Company that he is an accredited
investor. The issuance of the foregoing shares to Mr. Lamberg did not involve a
public offering. The foregoing loan and issuance of Common Stock were effected
in reliance upon the exemptions from registration provided by Section 4(2) of
the Act and Regulation D promulgated thereunder. There were no underwriting
discounts or commissions in connection with this transaction.
On July 1, 1997, Super Six, Inc. ("Super Six") loaned $30,000 to the Company.
The loan is evidenced by a promissory note of even date therewith, the terms of
which provide for the accrual of simple interest at the rate of twelve percent
(12%) per annum. All outstanding principal and accrued interest was due and
payable on December 31, 1997, however, the Company is currently negotiating an
extension of the foregoing promissory note. As partial consideration for
extending the loan to the Company, the Company issued Super Six 60,000 shares of
Common Stock. The equity owners of Super Six each individually represented to
the Company that they are accredited investors, as that term is defined under
the Act. The
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offer and sale of the foregoing shares did not involve a public offering. The
foregoing loan and issuance of Common Stock were effected in reliance upon the
exemptions from registration provided by Section 4(2) of the Act and Regulation
D promulgated thereunder. There were no underwriting discounts or commissions in
connection with these transactions.
On August 1, 1997, James Thornbo ("Thornbo"), an individual, loaned $25,000 to
the Company. The loan, which was evidenced by a promissory note of even date
therewith, has been satisfied by the Company in full. As partial consideration
for extending the loan to the Company, the Company issued Thornbo 9,079 shares
of Common Stock. Mr. Thornbo represented to the Company that he is an accredited
investor, as that term is defined under the Act. The issuance of the foregoing
shares did not involve a public offering. The foregoing loan and issuance of
Common Stock were effected in reliance upon the exemptions from registration
provided by Section 4(2) of the Act and Regulation D promulgated thereunder.
There were no underwriting discounts or commissions in connection with these
transactions.
On August 1, 1997, Raji Shah ("Shah"), an individual, loaned $38,000 to the
Company. The loan was evidenced by a promissory note, the terms of which
provided for the accrual of simple interest at the rate of nine percent (9%) per
annum, pro-rated to the maturity date. The Company satisfied its debt to Shah in
full. As partial consideration for extending the loan to the Company, the
Company issued 12,500 shares to Mr. Shah. Mr. Shah represented to the Company
that he is an accredited investor, as that term is defined under the Act. The
issuance of the foregoing shares did not involve a public offering. The
foregoing loan was effected in reliance upon the exemptions from registration
provided by Section 4(2) of the Act and Regulation D promulgated thereunder.
There were no underwriting discounts or commissions in connection with these
transactions.
On August 4, 1997, Logistics Services International, Inc. ("Logistics") loaned
$50,000 to the Company. The loan is evidenced by a promissory note of even date
therewith, the terms of which provide for the accrual of simple interest at the
rate of twelve percent (12%) per annum. All outstanding principal and accrued
interest was due and payable to Logistics on December 31, 1997. The Company is
currently negotiating an extension of the foregoing promissory note. As partial
consideration for extending the loan to the Company, the Company issued
Logistics 4,285 shares of Common Stock. There is one equity owner of Logistics,
who has represented to the Company that he is an accredited investor, as that
term is defined under the Act. The issuance of the foregoing shares did not
involve a public offering. The foregoing loan and issuance of Common Stock were
effected in reliance upon the exemptions from registration provided by Section
4(2) of the Act and Regulation D promulgated thereunder. The offering was not
underwritten, and there were no underwriting discounts or commissions.
On August 28, 1997, Midas Fund Ltd. ("Midas") loaned $100,000 to the Company.
The loan was evidenced by a promissory note of even date therewith and matured
on February 28, 1998. The Company was required to pay a $5,000 interest payment
on November 28, 1997 and on February 28, 1998. The Company was unable to pay the
amounts as due and is currently negotiating an
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extension of the foregoing promissory note. As partial consideration for
extending the loan to the Company, the Company issued Midas 20,000 shares of
Common Stock. The equity owners of Midas each individually represented to the
Company that they are accredited investors, as that term is defined under the
Act. The issuance of the foregoing shares did not involve a public offering. The
foregoing loan and issuance of Common Stock were effected in reliance upon the
exemptions from registration provided by Section 4(2) of the Act and Regulation
D promulgated thereunder. There were no underwriting discounts or commissions in
connection with these transactions.
During November and December 1997, the Company offered and sold 20 Units
("Units") to two accredited investors for a total gross proceeds of $100,000.
Each Unit consisted of (i) a promissory note in the principal amount of $5,000,
bearing interest at the rate of 20% per annum, payable at maturity, and
maturing six (6) months from the date of issuance, and (ii) 1,000 shares of
Common Stock. The offer and sale of the Units did not involve a public
offering. The Units were sold in reliance upon the exemptions from registration
pursuant to Section 4(2) and Rule 506 of Regulation D promulgated under the
Act. The offering was not underwritten, consequently there were no underwriting
discounts or commissions.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is permitted to indemnify its directors and officers in accordance
with and as limited by its Bylaws and Delaware and Federal law.
The above provisions in the Certificate of Incorporation and Bylaws and the
written indemnity agreements may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breach of their
fiduciary duty, even though such an action, if successful, might otherwise have
benefitted the Company and its stockholders. However, the Company believes the
foregoing provisions are necessary to attract and retain qualified persons as
directors and officers.
At present there is no pending litigation or proceeding involving a director or
officer of the Company in which indemnification is required or permitted, and
the Company is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
For liabilities against directors and officers arising under the federal
securities laws, the Securities and Exchange Commission has stated that, in its
opinion, indemnification of directors and officers for such liabilities is
against public policy and is therefore unenforceable.
GENERAL - YEAR 2000 ISSUES
The Company has conducted a comprehensive review of its computer systems to
identify any business functions that could be affected by the "Year 2000" issue.
As the millennium ("Year 2000") approaches, businesses may experience problems
as the result of computer programs being written using two digits rather than
four to define the applicable year. The Company has conducted a comprehensive
review of its computer systems to identify those areas that could be affected by
the "Year 2000" issue. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If not corrected, this could result in extensive miscalculations or a
major system failure.
The Company relies on industry standard software. Certain manufacturers have
already provided the Company with upgraded software to address the "Year 2000"
issue and the Company believes
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that its remaining software manufacturers will modify their programs
accordingly. In the event the remaining manufacturers do not upgrade their
software packages, the Company will replace such software with programs that
address the "Year 2000" issue. The Company believes that by modifying existing
software and converting to new software, the "Year 2000" issue will not pose
significant operational problems and is not anticipated to require additional
expenditures that would materially impact its financial position or results of
operations in any given year.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN INDEPENDENT NETWORK, INC.
Date: April 9, 1998 /s/ Donald W. Shelton
--------------------------------------
Dr. Donald W. Shelton, Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Donald W. Shelton Chairman of the Board of April 9, 1998
- ------------------------ Directors, Chief Executive
Dr. Donald W. Shelton Officer, and Director
/s/ Randy Moseley President, Chief Financial April 9, 1998
- ------------------------ Officer, Secretary, and
Randy Moseley Director
</TABLE>
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PART F/S
The following financial statements are filed as part of this
Registration Statement:
<TABLE>
Financial Statements: Page
----
<S> <C>
Report of Independent Certified Public Accountants F-1
Comparative Balance Sheets at December 31, 1997
and December 31, 1996 F-2
Comparative Analysis of Stockholders' Equity for
the Twelve Months ended December 31, 1997 and 1996 F-4
Comparative Statement of Operations for the
Twelve Months ended December 31, 1997 and 1996 F-5
Comparative Statement of Cash Flows for the
Twelve Months ended December 31, 1997 and 1996 F-6
Notes to Financial Statements F-7
</TABLE>
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Jack F. Burke, Jr.
Certified Public Accountant
P.O. Box 15728
Hattiesburg, MS 39404
Report of Independent Auditor
The Board of Directors
American Independent Network, Inc.
Haltom City, TX 76117
I have audited the accompanying balance sheets of American Independent Network,
Inc., as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of The American Independent Networks
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of American Independent Network, Inc.
at December 31, 1997 and 1996 and the results of its operations and its cash
flows for the years ended in conformity with generally accepted accounting
principles.
Sincerely,
Jack F. Burke, Jr.
March 20, 1998
F-1
<PAGE> 37
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
DECEMBER 31,
<TABLE>
<CAPTION>
Assets 1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash equivalents $ 34,768 $ 59,846
Accounts Receivable 2,250 10,730
Trade Credits Receivable 30,000 30,000
Note Receivable 1,700,000 0
Prepaid Expenses 0 112,736
----------- -----------
TOTAL CURRENT ASSETS 1,767,018 213,312
----------- -----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold Improvements 22,851 22,851
Less Amortization (8,028) (3,458)
Equipment and Furnishings 125,096 88,144
Digital Compression Equipment 831,391 605,000
Accumulated Depreciation (103,954) (49,242)
----------- -----------
TOTAL PLANT, PROPERTY AND EQUIPMENT 867,356 663,295
----------- -----------
OTHER ASSETS
Deferred Tax Benefits 0 207,477
Trade Credits Receivable 387,128 432,128
Other Investments 893,658 2,801,433
Note Receivable 3,300,000 0
----------- -----------
TOTAL OTHER ASSETS 4,580,786 3,441,038
----------- -----------
TOTAL ASSETS $ 7,215,160 $ 4,317,645
=========== ===========
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-2
<PAGE> 38
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
DECEMBER 31,
<TABLE>
<CAPTION>
Liabilities and Stockholder's Equity 1997 1996
----------- -----------
<S> <C> <C>
Current Liabilities
Accounts Payable $ 177,404 $ 284,336
Notes Payable 2,133,930 1,533,867
Accrued Interest - Notes 119,530 142,962
Advances from Affiliates 9,602 5,042
Customer Deposits 0 20,000
Interest Due Preferred Shareholders 37,440 15,972
Equipment Lease Payments 175,380 139,380
----------- -----------
TOTAL CURRENT LIABILITIES 2,653,286 2,141,559
----------- -----------
LONG TERM DEBT
Deferred Income Tax 930,071 0
Equipment Lease Payments 216,407 251,617
Total Long Term Debt 1,146,478 251,617
----------- -----------
TOTAL LIABILITIES 3,799,764 2,393,176
----------- -----------
STOCKHOLDER'S EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1996 107,546 shares issued,
1997 53,427 shares issued 53,427 107,546
Common Stock - 20,000,000 shares $.01 Par
Authorized, 1996 14,045,268 shares issued,
1997 18,325,715 shares issued 182,325 140,453
Additional Paid - In Capital 3,681,561 2,513,734
Retained Earnings (Deficit) (501,917) (837,264)
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 3,415,396 1,924,469
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 7,215,160 $ 4,317,645
=========== ===========
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
<PAGE> 39
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE ANALYSIS OF STOCKHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 47,841 $ 47,841 10,000,000 $ 100,000 $1,664,341 ($ 51,093)
Preferred A Shares Issued 42,918 42,918 229,546
Issued Cost of Preferred A (82,793)
Conversion n of Preferred A
Shares to Common (90,759) (90,759) 181,518 1,815 88,944
Preferred B Shares Issued 107,546 107,546 591,504
Issued Cost of Preferred B (255,808)
Common Issued to Bridge
Loan Investors 212,183 2,122
Issuance of Common Stock
for Contributed Capital 1,451,567 14,516
Issuance of Common Stock
for Exercise of Stock Options 2,000,000 20,000 180,000
Sale of Common Stock 200,000 2,000 98,000
Net Loss for the Year
Ended December 31, 1996 0 0 0 0 0 (786,169)
------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 1996 107,546 107,546 14,045,268 140,453 2,513,734 (837,264)
Preferred B Shares Issued 175,154 175,154 963,347
Issued Cost of Preferred B (547,999)
Preferred Stock Conversions (229,273) (229,273) 458,546 4,585 224,688
Common Issued to Bridge
Loan Investments 1,521,039 15,210
Conversion of Bridge Loans 132,862 1,327 429,791
Sale of Common Stock 200,000 2,000 98,000
Media Fund 1,875,000 18,750
Net Loss for the Year
Ended December 31, 1997 0 0 0 0 0 335,347
------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 1997 53,427 $ 53,427 18,325,505 $ 182,326 $3,681,561 ($ 501,917)
======= ========== ========== ========== ========== ==========
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Parts of These Financial Statements
F-4
<PAGE> 40
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Revenues
INCOME FROM NETWORK OPERATIONS $ 1,243,145 $ 1,092,399
------------ ------------
COST AND EXPENSES
Satellite Rental 581,861 598,590
Uplinking of Programming 0 115,802
Programming Expenses 12,162 81,849
Production Expenses 111,558 110,802
Depreciation 54,692 14,096
Amortization Leasehold 4,590 4,590
Rental Expenses (Net) 67,714 61,986
Administration Expenses 454,232 482,858
------------ ------------
Total Costs and Expenses 1,286,809 1,470,573
------------ ------------
NET INCOME (LOSS) FROM OPERATIONS (43,664) (378,174)
------------ ------------
OTHER INCOME - GAIN ON SALE OF ASSETS 2,162,317 0
------------ ------------
OTHER EXPENSES
Interest Expense (Net) 381,654 204,757
Amortization of Debt Issue Cost 250,135 385,000
Loss on Sale of Assets 13,969 14,238
------------ ------------
TOTAL OTHER EXPENSES 645,758 603,995
GAIN (LOSS) BEFORE INCOME TAXES 1,472,895 (982,169)
INCOME TAX BENEFIT (EXPENSE) (1,137,548) 196,000
------------ ------------
NET GAIN (LOSS) $ 335,347 ($786,169)
============ ============
EARNINGS PER SHARE OF COMMON STOCKS $0.02 ($0.07)
WEIGHTED AVERAGE SHARES 14,834,322 11,628,104
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-5
<PAGE> 41
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF CASH FLOW
FOR THE TWELVE MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows Provided (Used)
by Operating Activities
Net Gain (Loss) $ 335,347 ($ 786,170)
Adjustment to Reconcile Net Income to Net
Cash from Operating Activities
Amortization of Leasehold 4,590 4,590
Depreciation 54,692 14,096
Accounts Receivable 8,480 12,346
Trade Credits Receivable 45,000 31,000
Deferred Tax Benefit 207,477 (196,000)
Note Receivable (1,700,000) 0
Income Tax Deferred 930,071 0
Investment in Stocks 0 52,000
Prepaid Assets 112,736 (112,736)
Accounts Payable (106,932) 4,605
Notes Payable 600,063 624,944
Accrued Interest (1,964) 115,637
Advances from Affiliates 4,561 (5,215)
Customer Deposits (20,000) 20,000
Equipment Lease Payments Capitalized 36,000 139,380
----------- -----------
TOTAL CASH USED BY OPERATING ACTIVITIES 510,121 (81,523)
----------- -----------
Cash Flows from Investing Activities
Investment in Equipment (263,343) (605,000)
Increase in Long Term Equipment
Lease Payments (35,210) 251,617
Investment in Film Library (7,522) (1,000)
Investment in Common Stock 3,543 (200,000)
Decrease in Prepaid Media 1,426,933 0
Increase in Notes Receivable
Due Beyond 12 Months (3,300,000) 0
Decrease in Other Assets 147,320 0
Investment in Prepaid Assets 337,500 (337,500)
----------- -----------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (1,690,779) (891,883)
----------- -----------
Cash Flows Provided by Financing Activities
Preferred Stock Increase (54,119) 59,705
Common Stock Increase 41,872 40,453
Additional Paid-In Capital Increase 1,167,827 849,393
----------- -----------
TOTAL CASH PROVIDED BY FINANCING ACTIVITY 1,155,580 949,551
----------- -----------
Net Cash Increase (Decrease) (25,078) (23,855)
Cash Beginning of Year 59,846 83,701
Cash End of Year $ 34,768 $ 59,846
=========== ===========
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-6
<PAGE> 42
AMERICAN INDEPENDENT NETWORK, INC.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents: Consist of cash balances. Cash equivalents consisted
of highly liquid investments with an original maturity date of ninety days or
less. The Company does not have any cash equivalents.
Trade Credits Receivable: The Company owns trade credits in the amount of
$417,128 at December 31, 1997 and $462,128 at December 31, 1996. As defined by
the International Reciprocal Trade Association, a trade dollar is a unit of
account that denotes the right to receive (receivable) or the obligation to pay
(a payable), one US dollar worth of goods and services within a barter system or
network. While all of the trade credits may be used by The Company at any time,
The Company has shown a pattern of using $25,000 to $30,000 worth of the credits
in each of the past two years. Therefore the company's trade credits are being
classified as current $30,000 and other assets of $387,128 at December 31, 1997.
Accounts Receivable: Allowance for doubtful accounts. The Company has accounts
receivable at December 31, 1997 of $2,250 owed by regular customers. Management
deems this amount to be fully collectable. No allowances for doubtful accounts
is necessary. At December 31, 1996 the accounts receivable total was $10,730.
Plant, Property and Equipment: is recorded at cost.
Depreciation: The cost of plant, property and equipment is depreciated over the
estimated useful life of the assets ranging from equipment at 5 years to
leasehold improvements at 20 years. Depreciation is on a straight line basis.
Depreciation and for amortization 1997 was $59,282 and for 1996 was $18,868.
Income Taxes: The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
is an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 general considers all expected
future events other than enactment's of changes in the tax law or rates. Income
tax accounting information is disclosed in Note 3 to the comparative financial
statements.
Use of Estimates: The preparation of financial statements in conformity with
general accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
F-7
<PAGE> 43
OTHER INVESTMENTS - CONSIST OF THE FOLLOWING
<TABLE>
<CAPTION>
1997 1996
-------- ----------
<S> <C> <C>
Prepaid Telephone $ 337,500
Prepaid Media 1,426,933
Investments in Stocks $196,455 200,000
Film Library 7,523 1,000
Investment Senior Channel 689,680
Trade Due Bills 0 836,000
-------- ----------
Total $893,658 $2,801,433
======== ==========
</TABLE>
NOTE 2 NOTES PAYABLE
Notes Payable at December 31, 1997 - Consist of the Following Notes:
<TABLE>
<CAPTION>
Accrued
Creditor Due Date Interest Principal Interest
-------- -------- -------- --------- -------
<S> <C> <C> <C> <C>
Shelley Media Marketing(1) 9/30/98 10% $ 51,100 $ 0
Cleveland Broadcasting Co.(1) 9/30/98 10% 26,089 0
ATN Network, Inc.(1) 9/10/98 10% 284,241 0
Pacific Acquisition Group 12/31/98 11% 250,500 0
Bridge Loan 10/30/97 15% 1,522,000 119,530
---------- ----------
Total $2,133,930 $ 119,530
========== ==========
</TABLE>
- ----------
(1)Affiliated Companies
Notes Payable at December 31, 1996 - Consist of the Following Notes:
<TABLE>
<CAPTION>
Accrued
Creditor Due Date Interest Principal Interest
-------- -------- -------- --------- -------
<S> <C> <C> <C> <C>
Lyn Broadcasting Corporation(1) 8/31/97 10% $4,500 $17,047
Shelley Media Marketing1) 9/30/97 10% 51,100 10,398
Cleveland Broadcasting Co.(1) 9/30/97 10% 38,274 7,654
ATN Network, Inc. 9/30/97 10% 25,366 21,739
Advances from Affiliates(1) Demand 10% 5,042 1,545
Pacific Acquisition Group 12/31/97 11% 485,500 42,476
Bridge Loan 8/30/97 15% 1,122,750 42,103
Less Cost of Bridge
Loan Acquisition (193,623) 0
---------- --------
TOTAL 1,538,909 142,962
Less Amount Classified as
Advances from Affiliates 5,042 0
---------- --------
TOTAL $1,533,867 $142,962
========== ========
</TABLE>
- ----------
(1)Affiliated Companies
F-8
<PAGE> 44
NOTE 3 INCOME TAXES
DEFERRED INCOME TAX LIABILITY CONSIST OF THE FOLLOWING COMPONENTS
<TABLE>
<CAPTION>
1997 1996
Book Tax Book Tax
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net (Loss) from Operations ($ 43,664) ($ 43,664) ($ 378,174) ($ 378,174)
Other (Expense) (645,758) (645,758) (603,995) (603,995)
Other Income
Installment Sale 4,981,250 4,981,250
Asset Basis 2,818,933 120,000
----------- -----------
Net Installment Sales Gain 2,162,317 4,861,250
----------- -----------
Income (Loss) Before Income Tax 1,472,895 4,171,826 (982,169) (982,169)
----------- ----------- ----------- -----------
Tax Benefit (Expense) for Year (1,137,548) (1,137,548) 196,000 196,000
Tax Benefit Carryover Prior Year 207,477 207,477 11,477 11,477
----------- ----------- ----------- -----------
Net Deferred Income Tax ($ 930,071) ($ 930,071) $ 207,477 $ 207,477
=========== =========== =========== ===========
NOTE 4 SUPPLEMENTAL CASH FLOW INFORMATION
Cash Used
Interest $127,861 $91,724
Income Taxes 0 0
Non Cash Investments and Financing Transactions
Trade of Unrecorded Assets
Unrecorded Fine Art was exchanged for prepaid telephone cards with a
FMV of $750,000. This time was recorded at a discount of $300,000 giving a book
value to the asset of $450,000. This amount was recordedas an asset and as
income. The unused portion of the asset ($435,000) was sold in1997. See Note 8
Sale of Assets. $450,000
</TABLE>
NOTE 5 DISBURSEMENTS FROM BRIDGE LOAN PROCEEDS AND PREFERRED STOCK SALES
Financing activities during 1997 and 1996 consisted of bridge loans ($1,795,750)
and preferred stock sales ($1,837,551). The disbursements from the financing
escrow's were $1,837,259 for issue costs and $375,000 for debt repayment.
F-9
<PAGE> 45
NOTE 6 DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument where it is practicable to estimate that
value.
Cash, Accounts Receivable and Current Notes Receivables - The carrying amount
approximates fair value because of the short maturity of those instruments.
Long Term Investments - The fair value of these investments is estimated based
on quoted market prices for those and similar investments and discounted
estimated future cash flows for those instruments for which there are no
relevant quoted prices.
The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and Accounts Receivables $67,018 $67,018 $100,576 $100,576
Notes Receivable Current $1,700,000 $1,700,000 0 0
Long Term Investments $3,717,128 $2,538,798 $1,037,000 $1,037,000
</TABLE>
NOTE 7 LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The Company is obligated on three leases. The leases are as follows:
BUILDING: The Company utilizes the space as both corporate offices and
studios. The lease is $5,400 per month and expires May 31, 1998.
EQUIPMENT: The Company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 1,
1999. The lease has a fair market value purchase option at the end of the lease.
The total lease obligation is $390,996 and the lease has been treated as a
capital lease. In May 1997, the Company entered into a lease for additional
digital compression equipment for a period of 39 months with payments of $4,302
per month. The lease period is from June 1, 1997 to May 1, 2000. The lease has
been capitalized.
SATELLITE: The Company leased satellite transponder space under an
initial operating lease. The lease is for three years ending July 31, 1999 with
a total lease obligation of $2,250,000. The Company modified its lease reducing
its satellite band width from 24 Mhz to 8 Mhz which reduces its future lease
cost from $1,187,500 to $619,848 under the lease modification. The Company pays
the new balance at the rate of $30,000 per month the period January 1, 1998
through July 1, 1999 when the lease terminates.
F-10
<PAGE> 46
DETAILS OF LEASE OBLIGATIONS ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Capitalized Capitalized Operating
Equipment Equipment Transponder
----------- ----------- -----------
Lease #1 Lease #2 Lease
----------- ----------- -----------
<S> <C> <C> <C>
1998 $139,380 $51,624 $360,000
1999 $139,380 $51,624 $210,000
2000 $ 24,237 $21,510
</TABLE>
NOTE 8 SALE OF ASSETS
AIN entered into an agreement with Media Fund, Inc. Dated December 10,
1997. This agreement materially affects the financial statements and AIN daily
operations.
Media Fund, Inc., under the provisions of the above agreement, gave to
AIN a promissory note in the amount of $ 5,000,000 with a financial guarantee to
colateralize the note for their investment into AIN. The agreement has certain
restrictions as to the use of funds received from Media Fund, Inc. ( see below).
AIN exchanged the following assets of the company for the $5,000,000
promissory note:
<TABLE>
<S> <C>
NOTE RECEIVABLE $5,000,000
Common stock 1,875,000 shares @ $.01 18,750
----------
4,981,250
----------
BOOK VALUE OF ASSETS SOLD
Prepaid television inventory 1,426,933
Prepaid telephone cards 435,000
Other long term assets (trade due bills) 837,000
Accounts Receivable (Inet Inc.) 120,000
----------
Total Asset Book Value 2,818,933
----------
GAIN ON SALE $2,162,317
==========
Media Fund, Inc. payment schedule on promissory note:
Due within 12 months
April 15, 1998 800,000
July 15, 1998 300,000
October 15, 1998 300,000
December 30, 1998 300,000
----------
1,700,000
----------
Due beyond 12 months
March 30, 1999 300,000
Undetermined 3,000,000
----------
3,300,000
==========
</TABLE>
F-11
<PAGE> 47
Restrictions on cash received:
1. Eighty (80%) percent of first $2,000,000 or $1,600,000 must be used
to purchase IRD (Digital to Analog Decoders) equipment, and
2. AIN must use the above cash to expand its total households reached
to seventy million (70,000,000) plus nationally.
ADDITIONAL CONDITIONS OF THE ABOVE AGREEMENT:
1. Media Fund, Inc. receives twenty (20%) percent of all spots of AIN,
HTN, and Senior Network for a period of four years beginning December 10, 1998
with three (3) renewal options of five (5) years each.
2. Media Fund, Inc. will receive twelve and one-half (12.5%) percent
equity in AIN, HTN (Hispanic Television Network) and Senior Network.
3. Media Fund, Inc. will provide Twelve (12) hours of air time per day
which AIN must air. The commercial slots due Media Fund, Inc. per the agreement
will be used by Media Fund, Inc. for Media Fund Clients.
NOTE 9 RELATED PARTIES
The Company has engaged in transactions with certain other enterprises that are
affiliated companies. These companies are controlled by the management and
principal stockholders of American Independent Network. The controlled companies
transactions are as follows:
<TABLE>
<CAPTION>
1997 1996
Funds Funds
Borrowed Repaid Borrowed Repaid
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cleveland Broadcasting 12,185
San Antonio Broadcasting 2,200 20,556 19,521
TV Channel 22 12,310 5,500 6,250
Lynn Broadcasting 4,500(1) 100,000(2)
ATN Network 579,250 320,376(2) 115,786(2)
Shelley Media 350
</TABLE>
- ----------
(1) Repaid with common stock issued @ 3.25 per share
(2) Repaid $100,000 with common stock @ 3.25 per share
F-12
<PAGE> 48
NOTE 10 PREFERRED STOCK
Preferred stockholders' may convert one share of preferred stock into two shares
of common. Preferred stockholders' also receive fifteen percent interest per
annum in lieu of dividends. Summary of preferred stock transactions are as
follows:
<TABLE>
<S> <C>
Number of Preferred B Shares sold in 1996
per Comparative Analysis of Stockholders' Equity 107,546
Number of Preferred B Shares sold in 1997
per Comparative Analysis of Stockholders' Equity 175,154
Total Number of Preferred B Shares Sold 282,700
Number of Preferred B Shares converted to Common
Stock at December 31, 1997 at the rate of two Common
for each Preferred B, which would equal 458,546 shares
of Common (229,273)
--------
Number of Preferred B Shares outstanding at
December 31, 1997 53,427
========
</TABLE>
F-13
<PAGE> 49
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit
- -------------- ----------------
<S> <C>
2.1 Articles of Incorporation of the Company, as amended(1)
2.2 Bylaws of the Company, as amended(1)
3.1 Form of Warrant Agreement(1)
6.1 Lease for Offices(1)
6.2 Employment Agreement with Dr. Donald W. Shelton(1)
6.3 Employment Agreement with Randy Moseley(1)
6.4 Stock Option Agreement with Dr. Donald W. Shelton(1)
6.5 Stock Option Agreement with Randy Moseley(1)
6.6 Form of License Agreement (Affiliate Agreement)(1)
6.7 GE Americom Lease Agreement(1)
6.8 Master Lease with Insight Investments(1)
6.9 Promissory Note Extension Agreement with Lyn
Broadcasting Corporation(1)
6.10 Promissory Note Extension Agreement with
Shelly Media Marketing(1)
6.11 Promissory Note Extension Agreement with Cleveland
Broadcasting Co.(1)
6.12 Promissory Note Extension Agreement with ATN
Network, Inc.(1)
6.13 Promissory Note with Super Six, Inc.(1)
6.14 Promissory Note with Jim Thornbo(1)
6.15 Promissory Note with Logistic Services International, Inc.(1)
6.16 Promissory Note with Rajendra Shah(1)
6.17 Promissory Note with Gary Lamberg(1)
6.18 Promissory Note with Frank Lyons(1)
6.19 Loan and Security Agreement with Midas Fund(1)
6.20 United State Federal Communications Commission Radio
Station Authorization(1)
6.21 Form of Programming Agreement
6.22 Promissory Note with ATN Network, Inc.
6.23 "All News Channel Agreement"
6.24 Promissory Note Extension Agreement with Super Six, Inc.
6.25 Promissory Note Extension with Logistics Services, Inc.
6.26 Promissory Note Extension Agreement with Shelly Media Marketing Corporation
6.27 Promissory Note Extension Agreement with Cleveland Broadcasting
Corporation
6.28 Promissory Note Extension Agreement with ATN Network Inc.
6.29 Form of Equipment Agreement
6.30 Channel Use and Programming Agreement with Dominion Sky Angel
6.31 Agreement of Settlement, Compromise and Assignment
6.32 Assignment of Senior Channel
6.33 Agreement with Media Fund, Inc.
6.34 1995 Stock Option Plan
10.1 Consent of Jack F. Burke, Jr., Certified Public Accountant
27.1 Financial Data Schedule
</TABLE>
- -------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form 10-SB (File No. 000-23105), filed with the Securities and Exchange
Commission on September 19, 1997.
<PAGE> 1
EXHIBIT 6.21
[AMERICAN INDEPENDENT NETWORK, INC. LETTERHEAD]
PROGRAMMING AGREEMENT
[DATE]
[CLIENT]
[ADDRESS] Phone:
Fax:
Dear
CONTRACT NO:
CLIENT:
COMPANY: AMERICAN INDEPENDENT NETWORK, INC.
The above mentioned Client and undersigned hereby consents to the use by AIN
(The Company) of and does hereby assign and grant unto the Company the
irrevocable and unconditional power, right, privilege and permission to
exhibit, distribute, publish and transmit by means of broadcast or cablecast,
film, videotape, or any other similar mechanical or electronic method within
the United States and its possessions the Client's name, voice, picture,
likeness, poses, actions and any combination of any of these in connection with
the broadcast of:
" "
Client hereby releases and discharges the Company from any and all liability
arising out of or in connection with the making, producing, reproducing,
exhibiting, distributing, publishing, transmitting by means or otherwise using
the above mentioned production. The Client further agrees at all times and at
its own expense to indemnify and hold harmless the Company, and to defend it
against any and all claims, demands, liabilities, suits, damages, costs or
expenses of any kind resulting from: (1) any false or misleading statements or
presentations contained in any shows presented at the Client's request; (2) any
failure of the Client to deliver any advertised product or service in
compliance with the terms of the applicable advertisement within the period of
time advertised; and (3) any infringement of any rights held by a third party,
including but not limited to actions for copyright or trademark infringement or
actions for unfair competition.
There are no warranties, express or implied (including warranties of
merchantability and fitness for a particular purpose), except to the extent
specifically stated in this contract. All warranties and guarantees shall
survive the expiration, termination or cancellation of this contract. The
Company shall have no liability for consequential and incidental damage.
AIR DATE: Sunday, 6:30pm-7:00pm ET
START DATE: Sunday, October 26, 1997, 6:30pm-7:00pm ET
FEE: 50/50 split on commercial time minus two (2) minutes for affiliates
TOTAL SEGMENTS: 1 - 5 hour segment per week
TOTAL WEEKS: 52
ALL TAPES, PROMOS AND FEED INFORMATION SHOULD GO TO:
AMERICAN INDEPENDENT NETWORK, INC. ATTN: RON TURNER
6125 AIRPORT FREEWAY, SUITE 200, FORT WORTH, TX 76117
PLEASE SEND A PROMO REEL OR SHOW WE CAN USE FOR MAKING A PROMO TO THE SAME
ADDRESS AS SOON AS POSSIBLE.
<PAGE> 2
1
Shipping and/or satellite feed paid one way by Client.
The Client will deliver to Company via satellite, 3/4", 1", or mini beta tape
the Client's program a minimum of five (5) days prior to each scheduled airing.
The Company will deliver via satellite the Client's program as set forth in
the Contract.
Client understands that two-minutes of commercial time will be given to Company
affiliates.
Notwithstanding any provisions of the agreement on delivery to the Company of
prints or tapes physically suitable for telecast, the Company shall not be
required to accept any program/special/motion picture for telecast, that the
Company deems morally unsuitable for free home television viewing. The Company
shall be required to give the Client written notice that a particular
program/special/motion picture is morally unsuitable for telecast within 72
hours (excluding Saturdays and Sundays) following Company's receipt thereof. At
its option, the Client may furnish a morally suitable program/special/motion
picture, a print or tape of substitute program/special/motion picture of
comparable quality, or grant the Company a proportionate credit against the
License Fee.
The Company reserves the right to make changes in the time periods to
accommodate any changes in its program schedule. The Company reserves the
rights to make changes in time placement or deletion. This Agreement may be
cancelled by either party with a thirty (30) day written notice.
THIS IS A NON-EXCLUSIVE AGREEMENT.
The undersigned (a corporate officer) hereby certifies and warrants that the
client has full power, right and authority to enter into this agreement, has
read same in its entirety and understands all the terms and provisions and that
no acceptance thereof shall be valid which modifies said terms and conditions.
NAME (CLIENT):
BY:
------------------------------------
DATE:
----------------------------------
Best regards,
American Independent Network, Inc.
Lyn Snyder
Director of Network Operations
<PAGE> 1
EXHIBIT 6.22
PROMISSORY NOTE
Date as of December 31, 1997
FOR VALUE RECEIVED, the undersigned, AMERICAN INDEPENDENT NETWORK, INC.,
a Delaware corporation ("Maker"), promises to pay to the order of ATN NETWORK,
INC., a Texas corporation ("Lender"), the principal sum of up to Three Hundred
Thousand Dollars ($300,000), or such other sum as shall have been advanced by
Lender pursuant hereto, the "Amount Advanced") on or before September 30, 1998,
which principal sum may be advanced to Maker by Lender in one or more advances
as set forth herein.
1.01 Incremental Advances. Lender shall from time to time, make
advances to Maker. At the time of execution of this Promissory Note, the sum of
$284,241 has been advanced pursuant to the terms hereof.
1.02 Interest Rate. The unpaid Amount Advanced under this Promissory
Note shall bear interest at a rate of ten percent (10%) per annum.
1.03 Computation. Interest chargeable hereunder shall be calculated
from the date each Incremental Advance shall have been made, on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
Interest not paid when due shall be added to the unpaid principal balance and
shall thereafter bear interest at the same rate as principal. All payments
(including prepayments) hereunder are to be applied first to the payment of
accrued interest and the balance remaining applied to the payment of principal.
1.04 Payments. The unpaid Amount Advanced under this Promissory Note
plus all accrued but unpaid interest thereon shall be payable on September 30,
1998 ("Maturity Date").
1.05 Voluntary Prepayment. Maker may, at any time, prepay the unpaid
Amount Advanced evidenced by this Promissory Note, in whole or in part, without
penalty or premium, by paying to Lender, in cash or by wire transfer or
immediately available federal funds, the amount of such prepayment. If any such
prepayment is less than a full prepayment, then such prepayment shall be
applied to the unpaid Amount Advanced hereunder.
1.06 Lawful Money; Designated Places of Payment. All principal and
interest due hereunder is payable in lawful money of the United States of
America, in immediately funds, at Lender's designated address at 6125 Airport
Frwy. #200, Fort Worth, Texas 76117 (or such other location as may be
designated from time to time by Lender) not later than 5:00 p.m., Central time,
on the day of payment.
1.07 Loan and Security. The obligations evidenced by this Promissory
Note are secured by certain collateral as set forth in Exhibit A and all
equipment that at any time hereafter may be acquired by Maker and all proceeds
of the sale or other disposition of any of the Collateral described or referred
to in this Promissory Note.
1.08 Waivers. Except as set forth elsewhere herein, Maker, for
itself and its legal representatives, successors, and assigns, expressly waives
presentment, protest, demand, notice of dishonor, notice of nonpayment, notice
of maturity, notice of protest, notice of intent to accelerate, notice of
acceleration, presentment for the purpose of accelerating maturity, and
diligence in collection.
1.09 Default. The occurrence of one or more of the following events
shall constitute an event of default of this Promissory Note:
1
<PAGE> 2
1.09.01 The nonpayment of any principal and/or interest of
this Promissory Note when the same shall have become due and payable.
1.09.02 The entry of a decree or order by a court having
jurisdiction in the premises adjudging Maker a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Maker under the Federal
Bankruptcy Act or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee or trustee of Maker, or any substantial part if
its property, or if the Collateral, as defined in this Promissory Note, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of sixty (60)
consecutive days.
1.09.03 The institution by the Maker of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Act or any applicable federal or state law, or the consent
by it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee or trustee of the Company, or of any substantial part of
its property, or if the Collateral, as defined in this Promissory Note, shall
become subject to the jurisdiction of a federal bankruptcy court or similar
state court, or if Maker shall make an assignment for the benefit of its
creditors, or if there is an attachment, receivership, execution or other
judicial seizure, or if there is an admission in writing by Maker of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Maker in furtherance of any such action.
1.09.04 Default in the obligation of Maker for borrowed money,
other than this loan, which shall continue for a period of sixty (60) days, or
any event that results in acceleration of the maturity of any indebtedness of
Maker under any note, indenture, contract, or agreement.
1.09.05 Maker fails to comply with any term, obligation,
covenant, or condition contained in this Promissory Note, within 10 days after
receipt of written notice from Lender demanding such compliance.
1.09.06 Any levy, seizure, attachment, lien, or encumbrance of
or on the Collateral which is not discharged by maker within 10 days or, any
sale, transfer, or disposition of any interest in the Collateral, other than in
the ordinary course of business, without the written consent of Lender.
1.10 Acceleration. At the option of the Lender, and without demand
or notice, all principal and any unpaid interest shall become immediately due
and payable upon a default as set forth in Section 1.09 above. Any attorneys'
fees and other expenses incurred by Lender in connection with Maker's
bankruptcy or any of the other events described in Section 1.09 shall be
additional indebtedness of Maker secured by this Promissory Note.
1.11 Maximum Interest Rate. Notwithstanding anything to the contrary
contained in this Promissory Note, Maker shall not be obligated to pay, and the
holder hereof shall not be entitled to charge, collect, receive, reserve, or
take interest ("interest" being defined, for purposes of this paragraph, as the
aggregate of all charges which constitute interest under applicable law that
are contracted for, charged, reserved, received, or paid under this Promissory
Note) in excess of the maximum rate allowed by applicable law. During any
period of time in which the interest rate
specified herein exceeds such maximum rate, interest shall accrue and be
payable at such maximum rate, provided, however, that if the interest rate
declines below such maximum rate, interest shall continue to accrue and be
payable at such maximum rate (so long as there remains any unpaid principal
balance due under this Note) until interest that has been paid on this Note
equals the amount of interest that would have been paid if interest had at all
times accrued and been payable at the interest rate specified in this Note.
2
<PAGE> 3
1.12 Attorneys' Fees. In the event it should become necessary to employ
counsel to collect this Promissory Note, Maker agrees to pay the attorneys'
fees and costs of the holder hereof, irrespective of whether suit is brought.
1.13 Capitalized Terms. Any and all capitalized terms used in this
Promissory Note and not separately defined herein shall have the meaning
ascribed thereto
1.14 Section Headings. Headings and numbers have set forth for
convenience only. Unless the contrary is compelled by the context, everything
contained in each paragraph applies equally to this entire Promissory Note.
1.15 Section Headings. Headings and numbers have set forth for
convenience only. Unless the contrary is compelled by the context, everything
contained in each paragraph applies equally to this entire Promissory Note.
1.16 Choice of Law; Waiver of Trial By Jury. This Promissory Note and
all transactions hereunder and/or evidenced hereby shall be governed by,
construed under, and enforced in accordance with the laws of the state of
Texas. Maker hereby waives, to the extent permitted under applicable law, any
right to trial by jury in any action or proceeding relating to this Promissory
Note.
Made and Executed at
Fort Worth, Texas American Independent Network, Inc.
/s/ RANDY MOSELEY
----------------------------------------
Randy Moseley, President/CFO
<PAGE> 1
EXHIBIT 6.23
ALL NEWS CHANNEL
LICENSE AGREEMENT
AGREEMENT made this 29th day of January, 1998 by and between ALL NEWS CHANNEL,
a Minnesota joint venture comprised of Conus Communications Company, a Minnesota
limited partnership, and Viacom Satellite News Inc., a subsidiary of Viacom
International Inc., 3415 University Avenue, Minneapolis/St. Paul, Minnesota
55414 (herein called "ANC"), and AMERICAN INDEPENDENT NETWORK located at 6125
AIRPORT FREEWAY, SUITE 200, HALTOM CITY, TX 76117 (herein called "Licensee").
ANC hereby grants to Licensee, and Licensee hereby accepts, a license to
broadcast the below-described Daypart on free, over-the-air television during
the term hereof in accordance with the provisions set forth herein and in
accordance with the Terms and Conditions attached hereto and hereby made a part
hereof:
I. NEWS SERVICE ("Service"): ALL NEWS CHANNEL, is a round-the-clock
television news service, available in complete half-hour units, seven
(7) days per week, consisting of national, international, weather and
sports news coverage. Each half-hour unit ("Half-hour Unit") shall be
formatted as indicated on Exhibit A, attached hereto and made a part
hereof, as updated and revised from time to time by ANC. From time to
time ANC may, in its sole discretion, deliver coverage of breaking news
events in lieu of the Licensed Daypart (as below defined) or any
portion hereof.
II. LICENSED DAYPART ("Licensed Daypart") FROM ALL NEWS CHANNEL WHICH MAY
BE RUN: M-F, 0630 - 0700, 1130 - 1200, 1630 - 1730, 0000 - 0030; Friday
2030 - 2100; Saturday 0630 - 0700, 1800 - 1830, 0000-0030; Sunday 0600
- 0700, 1700 - 1800, 2330 - 0000 (0000 - 0030).
III. STATION (Call Letters): American Independent Network.
IV. MARKET (Licensee's Area of dominant Influence as defined by Arbitron):
Various.
V. OTHER LIMITATIONS. American Independent Network will be required to
black out those markets designed by Conus because of A*NC or Conus
conflict.
VI. STARTING DATE: January 1, 1998.
VII. ENDING DATE: December 31, 1998.
VIII. NET LICENSE FEE: $6,500.00 payable in 12 consecutive monthly
installments of $541.66 commencing on January 1, 1998.
ALL NEW CHANNEL RESERVES THE RIGHT TO TERMINATE SERVICE WITHOUT WARNING
IF PAYMENT IS NOT MADE WITHIN 15 DAYS OF INVOICE.
<PAGE> 2
IX. NUMBER OF MINUTES OF COMMERCIAL ANNOUNCEMENTS TO BE RESERVED BY ANC: Three
(3) minutes to be positioned in breaks 2 and 4 in each segment.
X. NUMBER OF MINUTES OF COMMERCIAL ANNOUNCEMENTS TO BE SOLD BY LICENSE: Four
(4) minutes to be positioned in breaks 1, 3, and 5.
XI. INSERTION OF LOCAL NEW: Licensee is authorized to preempt the
below-described segments of ANC news material in each Half-hour Unit in the
Licensed Daypart and insert Licensee's own news material into said time
space. Those segments which may be preempted are segments. A, C, D, E, F,
each of which is described on Exhibit A hereto. Licensee's own news
material, however, shall not preempt any commercial announcements placed by
ANC in the Half-hour Units. In accomplishing such insertions, Licensee may
not edit, rearrange, modify, alter or cut ANC's news materials and Licensee
may only preempt full and complete ANC news segments or features.
XII. ATTACHED RIDERS.
XII. DELIVERY. Via satellite as described in Paragraph 4 of this Agreement.
If this License Agreement involves the payment of a License Fee, Licensee shall
make checks payable to Conus Communications Company, indicating the name "ALL
NEWS CHANNEL" and date of the installment covered by the remittance on the
check itself or one an attachment thereto. This information is necessary in
order for Conus Communications Company to properly discharge its obligations
with its joint venturer, Viacom Satellite News Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first written
Licensee: American Independent Network ALL NEWS CHANNEL
(By its undersigned Managing Venturer)
By: Conus Communications Partnership
By: [Sig Unreadable] By: /s/ CHARLES H. DUTCHER, III
------------------------------- -------------------------------
Its: President/CFO Name: Charles H. Dutcher, III
------------------------------- Title: President and General Manager
CONTACT PERSON, PHONE NUMBER
------------------------------------------------
CONUS/ALL NEWS CHANNEL MASTER CONTROL OPERATOR
612/643-2710
<PAGE> 3
than non-payment of installments of the Net License Fee), and, if ANC shall have
suspended the Licensee's license to use the Licensed Daypart, such suspension
shall automatically terminate effective on the date upon which ANC receives such
payment.
"Termination Event", as used herein, means any one of the following: If
Licensee fails to pay License Fee installments when due, or fails or refuses to
perform any of Licensee's other obligations hereunder and does not cure such
failure to pay, perform or fulfill its obligations hereunder within thirty (30)
days of written notice given by ANC, or if at any time a voluntary petition in
bankruptcy shall be filed by Licensee, or if at any time an involuntary petition
in bankruptcy shall be filed against Licensee and shall not be dismissed within
thirty (30) days thereafter, or if Licensee shall take advantage of any
insolvency law, or if a receiver of trustee of any of Licensee's property shall
be appointed at any time and such appointment shall not be vacated within thirty
(30) days thereafter. Regardless of the occurrence of any Termination Event, or
failure by Licensee to make payment to ANC hereunder, ANC may elect not to
suspend Licensee's license to use the Licensed Daypart without waiving any of
the other rights granted to ANC in this Paragraph 5. No termination or
suspension of this Agreement as provided in this Paragraph 5 shall affect ANC's
right to the payment of all installments of the Net License Fee as provided in
this Paragraph 5. Whenever ANC terminates this Agreement pursuant to the terms
hereof, ANC may, without further authorization from License, immediately
deactivate Licensee's decoding mechanism.
6 WITHDRAWAL. ANC may withdraw from license a Licensed Daypart, or any
portion thereof, when, in its sole and absolute discretion, it determines that
the broadcasting of such programming does or may violate or infringe upon the
rights of others, violates any law, court order, governmental regulation or
other governmental agency ruling, or subject ANC to any liability. In such an
event ANC shall notify Licensee thereof and Licensee's license shall be deemed
revoked thereby with respect to such Licensed Daypart or portion thereof, as the
case may be. Any such withdrawal shall not constitute a breach of this
Agreement.
7. TERMINATION OF PRODUCTION. If at any time during the term of this
Agreement ANC decides to cease production and distribution of the Service, ANC
may terminate this Agreement upon thirty (30) days advance written notice to
Licensee.
8. ADVERTISEMENTS. (a) Each Half-hour Unit will be delivered formatted
for seven (7) minutes of commercials.
The commercials sold by ANC shall be inserted into each Half-hour Unit
by ANC and must be telecast by Licensee within the formatted position and in the
other designated by ANC; except that if ANC and Licensee have agreed otherwise
to split the use of the minutes allotted for commercials, then Licensee shall
have the right to sell and insert local commercials in each Half-hour Unit
within the formatted positions and in the order designated by ANC.
Neither Licensee nor ANC shall share in the revenue realized by the
other from the use of commercials sold to their respective advertisers.
(b) PREEMPTION AND CHANGE OF BROADCAST SCHEDULE:
(1) "MAKE GOODS" IN CASE OF PREEMPTION: In the event that Licensee
preempts the commercials sold by ANC, then Licensee will broadcast any such
preempted commercials within seven (7) days, either within a subsequent Licensed
Daypart, or during another period mutually acceptable to ANC and Licensee.
(ii) RE-INTEGRATION OF PREEMPTED COMMERCIALS: In the event the
preempted commercials are to be "made good" outside the preempted Licensed
Daypart (as provided herein). Licensee shall be responsible for transferring
said commercials from the delivered Licensed Daypart to Licensee's tape stock
for re-integration by Licensee within a subsequent Licensed Daypart or time
period.
(iii) NOTICE OF PREEMPTION AND "MAKE GOOD" PROCEDURE: Licensee shall
notify ANC as soon as practicable of each preemption of a Licensed Daypart of
which Licensee has advance knowledge. Licensee shall notify ANC of each
preemption of a Licensed Daypart of which Licensee did not have advance
knowledge within one (1) day after such preemption occurs and of the "make good"
procedure selected from the alternatives set forth above.
(c) AFFIDAVITS. Licensee shall maintain and if requested by ANC or its
representative, shall furnish ANC or its representative with affidavit(s) of
performance and/or, if requested, a copy of the station log in a form acceptable
in the industry which shall certify the date, time and place of emanation of
each broadcast of a Licensed Daypart and each advertisement contained in such
Licensed Daypart.
(d) PROMOTIONAL REQUIREMENTS. Licensee shall promote the Half-hour
Units in the Licensed Daypart to the extent of insuring that there is an
explanatory listing in the local newspaper and television guide.
(e) EFFECT OF BREAKING NEWS EVENT COVERAGE: In the event that ANC
delivers coverage of breaking news events in lieu of the Half-hour Units, or any
portion thereof, then ANC may, in its sole discretion, alter the formatting of
the Half-hour Units, as described on Exhibit A, so as to preempt or reschedule
commercial breaks. Such omissions or reschedulings shall not constitute a breach
of this Agreement.
-2-
<PAGE> 4
9. EDITING AND LOCAL NEWS: License shall not edit, rearrange, modify,
alter or cut the Licensed Dayparts, except:
(a) Insertion of Local News: If Licensee and ANC have agreed,
pursuant to Article XI hereof, to the insertion of local news into the
Half-hour Units, then Licensee may, but is not obligated to, roll its own local
news programming over the ANC-supplied news material in such a manner that (i)
no commercials placed by ANC in the Half-hour Units shall be rolled-over,
except as expressly permitted by ANC in writing, and (ii) only full and
complete news segments or features shall be rolled-over, such news segments or
features being defined in Exhibit A hereto.
(b) Copyright Notice and Credits: Licensee may not delete or alter
the copyright notice from any Half-hour Unit, but if Licensee and ANC have
agreed to the insertion of local news programming pursuant to Article XI
hereof, then Licensee may add a separate copyright notice relative to its own
local news programming only.
10. INDEMNITY. (a) ANC will indemnify and hold Licensee harmless from and
against any and all claims, damages, liabilities, costs and expenses, including
reasonable attorney fees, arising from the material contained in the Licensed
Daypart (excluding any local news programming inserted by Licensee); provided,
however, that ANC's responsibility pursuant to this Subparagraph (a) shall not
apply to the extent such liability is due to faulty broadcast or improper
editing, deletions or changes in any such material, after delivery by ANC; and
provided, further, that Licensee shall promptly notify ANC of any claim or
litigation to which the indemnity set forth in this Subparagraph (a) applies
and that, at ANC's option, ANC may assume the defense of any such claim or
litigation, in which event ANC's obligations with respect thereto shall be
limited to the payment of any judgment or settlement approved by ANC in
connection therewith.
(b) Licensee will indemnify and hold ANC harmless from and against
any and all claims, damages, liabilities, costs and expenses, including
reasonable attorney fees, arising from any material, other than the material
supplied by ANC, which Licensee may broadcast or authorize to be broadcast in
connection with the Licensed Daypart, including, but not limited to, the
insertion of its local news programming or arising out of any faulty broadcast
or improper deletions from, or any editing of or other changes in, any Licensed
Daypart by Licensee; provided, however, that ANC shall promptly notify Licensee
of any claim or litigation to which the indemnity set forth in this
Subparagraph (b) applies, and that, at Licensee's option, Licensee may assume
the defense of any such claim or litigation, in which event Licensee's
obligations with respect thereto shall be limited to the payment of any
judgment or settlement approved by Licensee in connection therewith.
11. TAXES. Licensee will pay all sales taxes or other taxes or charges
imposed upon Licensee or ANC by any law, ordinance or requirement of any
governmental body in connection with the licensing, delivery, broadcasting,
possession or use, as herein provided, of the Licensed Daypart, or any portion
thereof.
12. NON-PERFORMANCE. If ANC is prevented from producing or delivering a
Licensed Daypart because of any act of God, inevitable accident, fire, flood,
lockout, strike or labor dispute, riot or civil commotion, act of public enemy
, enactment, rule, order or act of government or governmental authority
(whether federal, state or local), satellite failure or delay, a change in
satellite (whether or not such change is made at ANC's direction), or other
cause of a similar to different nature beyond ANC's control, or if Licensee is
unable to broadcast any Licensed Daypart on the day and hour specified herein
due to such a condition or because of the recapture of he broadcast time period
for the purpose of broadcasting on a sustaining basis an event of public
importance, the term of this Agreement shall be automatically extended of one
(1) day with respect to each day of broadcasting so prevented or omitted;
provided, however, that the term of this Agreement shall not in any even be
extended for more than an aggregate period of four (4) weeks; and provided
further that such condition shall be deemed to be a valid excuse for delay of
performance or for non-performance under this Agreement.
13. LIMITATION OF LIABILITY. In no event, and regardless of the
conditions causing a default, shall ANC be liable for economic losses or
consequential damages. Further, in no event shall ANC be liable for any failure
of performance of any satellite to be used in connection with this Agreement.
This limitation includes any loss or damage incurred by reason of or incidental
to any delay or interruption of use of any satellite, or for any failure in or
breakdown of any satellite, or for any mistakes, omissions, delays, errors or
defects in transmission occurring in the course of use of a satellite by ANC to
deliver the Licensed Daypart.
14. ASSIGNMENT. Licensee shall not assign this Agreement in whole or in
part to any third party without the prior written consent of ANC. ANC may
assign its rights hereunder in whole or in part to any person, firm or
corporation; provided, however, that no such assignment shall relieve ANC of
any of its obligations hereunder.
15. OWNERSHIP. All rights and title in and to the Half-hour Units in the
Licensed Dayparts, including, but not limited to, prints thereof and the title
or titles (including, but not limited to, the name "All News Channel"), names,
stories, plots, incidents, ideas, formulas, formats, general content of the
programs and any other literary, musical, artistic or creative material
including therein (other than material in he public domain) shall, as between
ANC and Licensee, remain vested in ANC.
16. GENERAL. (a) The titles of the paragraphs of this Agreement are for
convenience only and shall not in
<PAGE> 5
any way affect the interpretation of any paragraph of this Agreement or of the
Agreement itself.
(b) A waiver by either party of any of the terms or conditions of
this Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or of any subsequent breach thereof.
All remedies, rights, undertakings, obligations and agreement contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either party.
(c) NOTICES: All notices, requests and other communications
hereunder shall be in writing and shall be delivered in person or sent by
overnight courier or certified mail, return receipt requested, and sent to the
may be stipulated in writing by the parties pursuant hereto. Unless otherwise
provided, notice shall be effective on the date it is delivered in person or
officially recorded as delivered by return receipt or equivalent.
(d) This Agreement and all matters or issues collateral thereto
shall be governed by the laws of the State of Minnesota applicable to contracts
performed entirely therein.
(e) This Agreement constitutes the entire agreement between Licensee
and ANC with respect to the subject matter herein contained, and this Agreement
cannot be changed, except by a written instrument executed by both parties.
(f) If any provision of this Agreement, as applied to either party
or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall in no way affect any other provision of this
Agreement, or the validity or enforceability of this Agreement.
-4-
<PAGE> 6
ANC PROGRAM FORMAT
AND TONE SPECIFICATIONS
REVISED FORMAT 6/15/93
<TABLE>
<CAPTION>
RUNNING: SEGMENT TONES
========================================== ======= =====
<S> <C> <C>
00:00 - 00:01 Black 00.01 0.12*
00:01 - 06:00 Program Segment A 05.59 0.12#
06:00 - 06:01 Black 00:01 126*
06:01 - 07:01 Commercial 1 01:00
07:01 - 07:02 Black 00:01 126#
07:02 - 12:00 Program Segment B 04:58 184*
184#
12:00 - 12:01 Black 00:01 237*
12:01 - 14:01 Commercial 2 02:00
14:01 - 14:02 Black 00:01 237#
14:02 - 19:00 Program Segment 04:58 246*
246#
19:00 - 19:01 Black 00:01 403*
19:01 - 21:01 Commercial 3 02:00
21:01 - 21:02 Black 00:01 403#
21:02 - 24:00 Program Segment D 02:58 482*
482#
24:00 - 24:01 Black 00:01 591*
24:01 - 25:01 Commercial 4 01:00
25:01 - 25:02 Black 00:01 591#
25:02 - 27:54 Program Segment E 02:52 670*
670#
27:54 - 27:55 Black 00:01 861*
27:55 - 28:55 Commercial 5 01:00
28:55 - 28:56 Black 00:01 861#
28:56 - 29:55 Program Segment F (headlines) 00:59 351*
29:55 - 29:56 Black 00:01
29:56 - 30:00 ID 00:04 351#
</TABLE>
Note: One second of black precedes and follows all commercials.
Note: If you are using automation cued from our tones, please include on second
of black before and after all commercials for total spot reel times of 1:02 and
2:02.
Note: Tones to begin an event will be sent 08 seconds before the event in
order to allow an 08 second pre-roll. Tones to end the event end time with no
delay.
<PAGE> 7
TERMS AND CONDITIONS
FOR USE OF ALL NEWS CHANNEL DSS EQUIPMENT
1. General Terms
(a) You ("Operator") hereby agree to accept with respect to each of your
systems and/or television stations (each a "System" and collectively, the
"Systems") which distribute and/or otherwise utilize the programming service
known as All News Channel (the "Service"), equipment necessary to receive the
Service in a digitally compressed format, such equipment to consist of a
satellite dish, an integrated receiver decompressor and related electronic
equipment (collectively referred to herein as the "Equipment") subject to the
following terms and conditional
(b) With respect to each System for which Operator has opted to receive the
Equipment, Viacom International Inc. ("Viacom") will instruct the manufacturer
of the Equipment, Thomson Consumer Electronics Corporation ("Thomson"), to
provide and deliver the Equipment to such System at the shipping address
indicated by Operator. As between Viacom and Operator, Viacom will be
responsible for shipping costs, shipping insurance (until delivery to Operator)
and sales taxes on the Equipment that Thomson delivers pursuant to this
subparagraph 1(b).
2. Ownership.
(a) Title to the Equipment shall pass directly from Thomson to Operator at
the time Thomson delivers the Equipment to the shipping carrier, provided
however, that each System's use of the Equipment shall be subject to Operator's
obligations contained herein.
(b) Operator shall obtain and keep in effect all governmental
authorizations and shall comply with all applicable laws and regulations
required to install, own and operate the Equipment.
(c) Operator shall not sell, assign or lease the Equipment nor pledge it
as collateral in any way other than as part of a sale or financing of the
System utilizing such Equipment to receive the Service in the manner
contemplated hereby.
3. Installation and Use of Equipment
(a) Operator represents and agrees that each System receives the Service
as of the date of its receipt of the Equipment, and shall continue to receive
the Service through the date set forth in subparagraph (b) below, pursuant to a
valid written Agreement with the All News Channel Joint Venture ("ANC").
(b) Operator agrees to install the Equipment as soon as practicable after
delivery and to use the Equipment in each of the Systems such that each System
shall continue to receive the Service (but in a digitally compressed format)
through at least the later (the "Applicable Date") of (i) December 31, 1997 and
(ii) the termination of Operator's affiliation agreement for the Service, as
the same may be amended, extended, renewed or replaced with a new affiliation
agreement. The preceding sentence is not intended to and shall not create any
right, license or obligation to carry the Service that Operator may not
otherwise have.
4. Operator's Costs
Operator agrees that it has sole responsibility for all costs, liabilities
and expenses whatsoever relating to the Equipment after delivery of the
Equipment, including installation, maintenance, use, and removal (when and if
required) of the Equipment and any replacements thereof.
5. Disclaimer of Warranties/Limitation of Liability/Indemnities
(a) OWNER AGREES THAT VIACOM IS NOT A DEALER IN, MANUFACTURER, DISTRIBUTOR
OR VENDOR OF THE EQUIPMENT OR AN AGENT OF ANY MANUFACTURER, DISTRIBUTOR, OR
VENDOR OF THE EQUIPMENT. VIACOM SHALL NOT BE DEEMED TO HAVE MADE OR GIVEN, AND
VIACOM HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED AS TO THE VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR ANY PURPOSE OR USE OF THE EQUIPMENT OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER. EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT. The
disclaimer of warranties and agreements set forth in this paragraph shall also
apply to Viacom's and ANC's respective parent corporations, subsidiaries,
affiliates, and agents and to all other entities associated with or related to
the Equipment program pursuant to which the Equipment is provided other than
the manufacturer of the Equipment.
<PAGE> 8
(b) Operator agrees that it will look solely to the manufacturer of the
Equipment with respect to any in- and out-of-warranty claims, and that neither
Viacom nor ANC has any responsibility of any kind in connection with such
claims.
(c) OWNER AGREES THAT VIACOM SHALL HAVE NO LIABILITY OF ANY KIND
WHATSOEVER ARISING OUT OF OR RELATING TO THESE TERMS AND CONDITIONS AND/OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND ALL REMEDIES OF ANY KIND AGAINST VIACOM
ARE EXPRESSLY EXCLUDED. IN NO EVENT SHALL VIACOM BE LIABLE FOR NAY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT
OCCASIONED BY THE NON-DELIVERY OF THE EQUIPMENT, DELAY IN DELIVERY OF THE
EQUIPMENT, DEFECT IN THE EQUIPMENT, FAILURE OF THE EQUIPMENT TO PERFORM OR ANY
OTHER CAUSE WHATSOEVER. The limitation of liability set forth in this paragraph
shall also apply to Viacom's and ANC's respective parent corporations,
subsidiaries, affiliates and agents and to all other entities associated with or
related to the Equipment programs pursuant to which the Equipment is provided,
other than the manufacturer of the Equipment.
(d) Operator shall defend and hold Viacom and Viacom's parent
corporation, subsidiaries and affiliated companies, and the successors, assigns,
agents and representatives of any of them, harmless from and against any claims,
liabilities, losses, legal or other actions, damages, costs or expenses
(including lawyers' fees and expenses) which Viacom may suffer or incur relating
in any way to personal injury, property damage or other injury or other claim
relating to or arising out of these terms and conditions or Operator's
ownership, installation, maintenance, use, repair or removal of the Equipment,
or to Operator's failure or alleged failure to comply with the obligations
imposed on Operator hereunder. The indemnities set forth in this paragraph shall
also apply to Viacom's and ANC's respective parent corporations, subsidiaries,
affiliates and agents and to all other entities associated with or related to
the Equipment program pursuant to which the Equipment is provided, other than
the manufacturer of the Equipment.
6. Liquidated Damages
If, at any time prior to the Applicable Date (as defined in Paragraph 3(b)
above), a System fails to continue to distribute the Service, then Operator
shall immediately notify Viacom in writing of such fact and shall forward to
Viacom the Equipment given to such System within ten (10) days of the
discontinuance of distribution of the Service. Operator and Viacom acknowledge
and agree that the return of the Equipment represents liquidated damages that
are fair and reasonable under the circumstances (and which, to the extent
California law is applicable, are reasonable as liquidated damages under
California Civ. Code, Section 1671). Nothing contained in this Paragraph 6 shall
limit in any way any rights or remedies that may be available to Viacom or ANC
on account of any discontinuance of distribution of the Service, all of which
are hereby expressly reserved by Viacom and ANC (it being understood that the
liquidated damages provided for herein are intended as Viacom's remedy for
discontinuance of the use of Equipment and not for discontinuance of
distribution of the Service).
7. Other Terms.
(a) These terms and conditions constitute the entire and only agreement
between Operator and Viacom relating to the Equipment and supersedes all other
prior agreements or understandings relating to the Equipment, and cannot be
modified, and no provision hereof can be waived, except by a written
modification or waiver signed by Operator and Viacom.
(b) If any part of these terms and conditions shall be determined to be
invalid or unenforceable by a court of competent jurisdiction or by any other
legally constituted body having jurisdiction to make such determination, the
remainder of these terms and conditions shall be unaffected and shall remain in
full force and effect.
(c) Operator may not assign or transfer any of Operator's rights or
obligations hereunder to any other person or entity, except to a person or
entity with which Operator merges or consolidates or which buys one or more
System(s), in which case such successor or purchaser hall be required in writing
to be bound by the provisions hereof. Viacom may assign or transfer any of
Viacom's rights or obligations hereunder to any other person or entity. These
terms and conditions are binding upon and for the benefit of Operator, Viacom
and their respective permitted successors and assigns.
<TABLE>
<CAPTION>
<S> <C>
Licensee: ALL NEWS CHANNEL
(By its undersigned Managing Venturer)
- ----------------------------------
By Conus Communications Company
By: [SIG] A Minnesota Limited Partnership
-----------------------------
By: [SIG]
Its: President/CEO -------------------------------
-----------------------------
Name: [ILLEGIBLE]
-------------------------------
</TABLE>
<PAGE> 9
ALL NEWS CHANNEL
NEWS CONTRIBUTION RIDER
This is a Rider to the All News Channel License Agreement, No. ________
("License Agreement"), between All News Channel, a Minnesota joint venture
comprised of Conus Communications Company, a Minnesota limited partnership, and
Viacom Satellite News, Inc., a subsidiary of Viacom International, Inc., 3415
University Avenue, St. Paul, Minnesota 55114, (herein called "ANC"), and
_______________ in ____________________________ (herein called "Licensee").
1. Licensee-Provided Materials; Grant of Rights. If the Licensee is
not a member of the Conus News Service Cooperative ("Cooperative")
contemporaneously with the term of this Agreement, or if Licensee is such a
member and its participation in said cooperative lapses during the term of this
Agreement, then Licensee is hereby obligated to deliver to ANC, at the request
of ANC.
(a) Footage of available live and taped news reports originated by
Licensee and Licensee hereby grants unto ANC the right to incorporate such news
reports into the All News Channel ("Service") as described on Page 1 of this
License Agreement. Licensee shall be solely responsible for any and all talent
fees to be paid on such reports. Licensee shall not charge ANC a story fee for
any such Licensee-provided news material.
(b) In addition to the rights granted hereinabove to ANC to
incorporate into the Service the news reports provided by Licensee, Conus
Communications Company ("Conus"), a joint venturer in ANC, is hereby granted,
in perpetuity, the non-exclusive, worldwide right and privilege to use and
re-use said news reports, and to license others to use and re-use said news
reports, in visual media of any kind, including, but not limited to, the
Cooperative and the creation, development and syndication of news, public
affairs, sports and informational programming for commercial distribution by
any means anywhere in the world; provided, however, that, if there is in the
Market a member of the Cooperative other than Licensee, Licensee-provided
material shall not be used in or distributed through the Cooperative, which
provides raw and packaged video by satellite delivery to participating members
of the Cooperative; and provided further, that Licensee provided material used
in programming pursuant to this Subparagraph (b) shall not contain either the
appearance or voice of any Licensee anchor, reporter or other talent without
the prior approval of Licensee.
2. Delivery of Licensee-Provided Material.
(a) Without Uplink. In the case of a Licensee who is not in
possession of nor has regular access to a fixed or transportable satellite
uplink operating in the Ku-Band (the "Uplink"), Licensee and ANC shall agree
upon a mutually acceptable alternate method of delivery of the
Licensee-provided news material to ANC. All costs and expenses associated with
such delivery to ANC shall be the responsibility of and shall be paid by ANC in
a timely fashion. Licensee shall cooperate with ANC and reasonably facilitate
the process of delivering the Licensee-provided news material to ANC.
(b) With Uplink. In the case of a Licensee who is in possession of
or has regular access to a fixed or transportable uplink operating in the
Ku-Band (the "Uplink"), Licensee shall deliver Licensee-provided news material
via transmission by said uplink to a satellite transponder on the SBS-3 Ku-Band
satellite or to any other Ku-Band satellite transponder designated by ANC, and
such a Licensee further agrees:
(i) To abide by all of the terms and conditions of the Conus
Operational Manual, a copy of which Licensee acknowledges it has received. ANC
reserves unto itself the right to make reasonable changes from time to time to
any of the terms and conditions of the Conus Operational Manual, but shall
provide Licensee with timely notice of any such change.
(ii) Operators of the Uplink. ANC shall have the sole right to
determine if any Licensee employee has been properly trained and is able to
operate the Uplink in the manner and fashion as ANC deems necessary and
required in order to permit the effective use by Licensee of its Uplink. Any
successor operator or operators of the Uplink owned by the Licensee must at all
times be a trained operator and approved by ANC.
3. Licensee Warranty and Indemnity Relating to Licensee-Provided News
Material. Licensee warrants and represents that it has the right and power,
without any limitation or restrictions whatsoever, to enter into and perform
this Agreement; that the news materials to be provided by Licensee hereunder
are free and clear of all encumbrances of every kind and nature which may be
inconsistent with the rights granted to ANC hereunder; and that none of the
materials to be provided by it contain any material which violates the civil or
property rights, the right of privacy, or any other rights of any person
whatsoever, including, without limitation, any residual payments due any talent
appearing in such materials, except as otherwise provided for herein. Licensee
will indemnify and hold ANC, other licensees of the Service and other
<PAGE> 10
authorized users of Licensee-provided material, harmless from and against any
and all claims, damages, liabilities, costs and expenses, including reasonable
attorney fees, arising out of or based upon any news material provided by
Licensee hereunder; provided, however, that ANC shall promptly notify Licensee
of any claim or litigation to which the indemnity set forth in this Paragraph 3
applies; and provided, further, that at Licensee's option, Licensee may assume
the defense of any such claim or litigation. If Licensee assumes the defense of
any such claim or litigation, Licensee's obligations with respect to such claim
or litigation shall be limited to holding ANC, other participants in the
Service and other authorized users of Licensee-provided material, harmless from
and against any judgment or settlement approved by Licensee in connection with
any such claim or litigation.
In the event ANC or another participant in the Service intercepts program
materials uplinked by Licensee without the consent of Licensee in each instance
to such interception, then Licensee shall have no liability to the intercepting
entity for claims or damages resulting from the uses of such program materials.
4. (a) ANC will not be liable for:
(i) Libel, slander or infringement of copyright arising from
or in connection with the transmission of communications received from
Licensee, unless the libel, slander or infringement results solely from the
willful misconduct of ANC;
(ii) Unlawful or unauthorized use of the Service, or any part
thereof, unless such use results solely from the negligence or willful
misconduct of ANC;
(iii) Any claim arising out of a breach in the privacy or
security of communications transmitted over an ANC satellite, unless such
breach results from the negligence or willful misconduct of ANC.
(b) Licensee will indemnify and save and keep ANC harmless from all
liability disclaimed by ANC, as specified in subparagraph (a) of this Paragraph
4, arising in connection with the satellite delivery of the Service, or any
part thereof, by ANC to Licensee, and will protect and defend ANC from any
suits or claims alleging such liability, and will pay any and all expenses,
including reasonable attorneys fees, and satisfy all claims and judgments which
may be incurred by or rendered against ANC in connection therewith. ANC will
promptly notify Licensee of any such suit or claims against ANC.
5. all other terms and conditions of the License Agreement shall remain
in full force and effect.
Licensee: ALL NEWS CHANNEL
(By its undersigned Managing Venturer)
- ---------------------------
By: Conus Communications Company,
By: [SIG] A Minnesota Limited Partnership
---------------------
By: [SIG]
Its: President/CFO ----------------------------------
----------------------
Name: [ILLEGIBLE]
---------------------------------
Title:
--------------------------
<PAGE> 1
EXHIBIT 6.24
AMENDMENT NUMBER 1
TO THE PROMISSORY NOTE
BY AND BETWEEN
AMERICAN INDEPENDENT NETWORK, INC.
AND SUPER SIX, INC.
This Amendment Number 1 is made to that certain Promissory Note ("Note")
made and entered into by and between American Independent Network, Inc., and
Super Six, Inc.
The provisions set forth herein shall be deemed to modify and replace
those provisions of the Note as specifically set forth. All other provisions
of the Note shall remain in full force and effect.
The parties desire to change the Maturity Date to May 31, 1998.
AGREED and entered into as of December 31, 1997.
AMERICAN INDEPENDENT NETWORK, INC.
a Delaware corporation
By:
-------------------------------------
Randy Moseley
President and Chief Financial Officer
<PAGE> 1
EXHIBIT 6.25
AMENDMENT NUMBER 1
TO THE PROMISSORY NOTE
BY AND BETWEEN
AMERICAN INDEPENDENT NETWORK, INC.
AND LOGISTIC SERVICES INTERNATIONAL, INC.
This Amendment Number 1 is made to that certain Promissory Note ("Note")
made and entered into by and between American Independent Network, Inc., and
Logistic Services International, Inc.
The provisions set forth herein shall be deemed to modify and replace
those provisions of the Note as specifically set forth. All other provisions
of the Note shall remain in full force and effect.
The parties desire to change the Maturity Date to March 31, 1998 and
adjust interest rate to 20% for the extension period.
AGREED and entered into as of December 31, 1997.
AMERICAN INDEPENDENT NETWORK, INC.
a Delaware corporation
By: /s/ RANDY MOSELEY
-------------------------------------
Randy Moseley
President and Chief Financial Officer
<PAGE> 1
EXHIBIT 6.26
PROMISSORY NOTE EXTENSION AGREEMENT
Dated October 3, 1997
FOR VALUE RECEIVED, SHELLEY MEDIA MARKETING CORPORATION, a Texas
corporation agrees to extend the maturity date of the Promissory Note dated
September 6, 1994 and related accrued interest due from American Independent
Network, Inc., a Delaware corporation, to September 30, 1998 on the same terms
and conditions as the original promissory note attached hereto as Exhibit A.
AMERICAN INDEPENDENT NETWORK, INC. acknowledges that the terms and
conditions of the original promissory note per Exhibit A shall continue to
apply during the promissory note extension period as granted by SHELLEY MEDIA
MARKETING CORPORATION.
SHELLEY MEDIA MARKETING CORPORATION
/s/ RANDY MOSELEY
- ----------------------
Randy Moseley, CFO
AMERICAN INDEPENDENT NETWORK, INC.
/s/ DON SHELTON
- ----------------------
Dr. Don Shelton, CEO
<PAGE> 1
EXHIBIT 6.27
PROMISSORY NOTE EXTENSION AGREEMENT
Dated October 3, 1997
FOR VALUE RECEIVED, CLEVELAND BROADCASTING CORPORATION, a Texas
corporation agrees to extend the maturity date of the Promissory Note dated
September 6, 1994 and related accrued interest due from American Independent
Network, Inc., a Delaware corporation, to September 30, 1998 on the same terms
and conditions as the original promissory note attached hereto as Exhibit A.
AMERICAN INDEPENDENT NETWORK, INC. acknowledges that the terms and
conditions of the original promissory note per Exhibit A shall continue to
apply during the promissory note extension period as granted by CLEVELAND
BROADCASTING CORPORATION.
CLEVELAND BROADCASTING CORPORATION
/s/ RANDY MOSELEY
- ----------------------
Randy Moseley, CFO
AMERICAN INDEPENDENT NETWORK, INC.
/s/ DON SHELTON
- ----------------------
Dr. Don Shelton, CEO
<PAGE> 1
EXHIBIT 6.28
PROMISSORY NOTE EXTENSION AGREEMENT
Dated October 3, 1997
FOR VALUE RECEIVED, ATN NETWORK, INC., a Texas corporation agrees to extend
the maturity date of the Promissory Note dated September 29, 1994 and related
accrued interest due from American Independent Network, Inc., a Delaware
corporation, to September 30, 1998 on the same terms and conditions as the
original promissory note attached hereto as Exhibit A.
AMERICAN INDEPENDENT NETWORK, INC. acknowledges that the terms and
conditions of the original promissory note per Exhibit A shall continue to
apply during the promissory note extension period as granted by ATN NETWORK,
INC.
ATN NETWORK, INC.
/s/ RANDY MOSELEY
- ----------------------
Randy Moseley, CFO
AMERICAN INDEPENDENT NETWORK, INC.
/s/ DON SHELTON
- ----------------------
Dr. Don Shelton, CEO
<PAGE> 1
EXHIBIT 6.29
EQUIPMENT AGREEMENT
This agreement (the "Agreement") is made and entered into as of this ___ day
of ______________ by and between AMERICAN INDEPENDENT NETWORK, INC. ("AIN"), a
Delaware corporation and _________________ ("Customer"). Customer agrees to
rent equipment from AIN as set forth below.
1. TERMS: The initial term ("Initial Term") of this Agreement shall commence
upon the date of this Agreement and terminate twenty-four (24) months from the
date that the Authorized Location is capable of receiving AIN broadcasts (the
"Termination Date"). This Agreement shall automatically be extended for
successive twelve (12) months terms at the then current subscription rates
unless Customer or AIN provides written notice to the other party of its intent
to terminate this Agreement sixty (60) days prior to the Termination Date, or,
in the case of successive terms, sixty (60) days prior to the anniversary of
the Termination Date.
2. PAYMENT: Customer agrees to pay nine-hundred dollars ($900.00) and agrees
to air a minimum of eighteen (18) hours of AIN programming per day or
one-hundred twenty-six (126) hours per week. This programming can be aired in
any day part, but must be aired in its entirety, less the two (2) minutes per
half hour for Customer commercial insertion. Customer also agrees that they
will return affidavits on Monday of each week.
3. EQUIPMENT: The equipment necessary to receive AIN's broadcast includes a
digital satellite receiver (IRD) (the "Equipment"). Customer hereby acknowledges
that it does not and will not own or have any claim to said Equipment. Customer
agrees that it will maintain the equipment in good operating and repair,
protect the Equipment from deterioration, other than normal wear and tear from
proper use thereof, will use the Equipment in the regular course of business
only, without abuse and in a manner contemplated by AIN; will comply with all
laws, ordinances, regulations and requirements with respect to the use,
maintenance and operation of the Equipment; will not make any modifications,
alterations or additions to the Equipment without the prior consent of AIN;
will not so affix the Equipment to realty as to change its nature to real
property or fixture, and agrees that the Equipment will remain personal
property at all times, no matter how attached or installed; will keep the
Equipment at the Authorized Location and will not remove the Equipment from
said location without the consent of AIN, which shall not be unreasonably
withheld. AIN will have the right during normal business hours, upon reasonable
prior notice to Customer and subject to applicable laws and regulations, to
enter upon the premises where the Equipment is located in order to inspect,
observe or remove the Equipment or otherwise protect AIN's interest therein.
Customer will be liable for any damage to the Equipment, unless such damage is
due solely to the negligence of AIN Customer further agrees that it will not
hold AIN liable for responsible for any Equipment failure, any causes of action
arising under the tortlaws of any state related in any manner to the Equipment
or the installation thereof, or any other causes of action related in any
manner whatsoever to the Equipment or the installation thereof. AIN further
agrees that should the equipment malfunction due to manufacturers difficulty or
any upgrades, AIN will replace the equipment. Customer further agrees that
should equipment replacement be necessary, Customer is responsible for
returning the original equipment in manufacturers shipping carton to AIN.
5. EQUIPMENT DEINSTALLATION/RELOCATION. If Customer ceases to do business at
the Authorized Location during the term of this Agreement, it shall notify AIN
at least thirty (30) days prior to the date that is vacates the Authorized
Location.
1
<PAGE> 2
6. DEFAULT: The occurrence of any one or more of the following events shall
constitute an event of default under this Agreement: (a) Customer fails to air
the required amount of programming or return affidavits within the allotted time
due, and such failure continues for fifteen (15) days; (b) Customer becomes
insolvent or makes an assignment for the benefit of creditors; (c) a receiver,
trustee, conservator or liquidator of Customer is appointed with or without the
application or consent of Customer; (d) a petition is filed by or against
Customer under the U.S. Bankruptcy Code or any amendment thereto, or under any
other insolvency laws or laws providing for the relief of debtors; (e) Customer
fails to pay when due any obligation to AIN arising independently of this
Agreement and such failure continues for fifteen (15) days, or; (f) Customer
breaches any other covenant warranty or agreement hereunder and such breach
continues for ten (10) days after written notice thereof to Customer.
7. REMEDIES: If an event of default as described in paragraph 6 hereof
occurs, AIN may, at its option, at any time; (a) AIN will enter into the main
system a block and Customer will be cut off from receiving any programming; (b)
declare immediately due and payable and recover from Customer, as liquidated
damages, for the loss of a bargain and not as a penalty, an amount equal to
unaired programming commercial loss for the Initial Term, plus interest and any
other amounts hereunder; (c) without demand or legal process, enter into the
premises where the Equipment may be found and take possession of and remove the
Equipment, without liability for such retaking; and (d) enforce this Agreement
in accordance with its terms. All remedies of AIN hereunder are cumulative,
are in addition to any other remedies provided by law, and may, to the extent
permitted by law, be exercised concurrently or separately. No failure by AIN to
exercise and no delay in exercising any right or remedy will operate as a
waiver thereof or modify the terms hereof.
8. RESTRICTIONS ON USE: Customer agrees that during the term of this
Agreement, the installed Equipment shall only be used to receive AIN
programming, unless Customer has received the prior written consent of AIN
permitting it to receive other broadcasts.
9. LIMITATION OF LIABILITY: Customer agrees that it will not hold AIN, or any
company broadcasting programming on AIN, liable for any failure of or
interruptions in service unless such failure or interruptions are due solely to
the negligence of AIN. Customer further acknowledges that AIN is not liable or
responsible for the content of any of the programming broadcast over the AIN
network and agrees to hold AIN harmless from any causes of action relating
thereto.
10. TRIAL PERIOD. Customer has the right to return the IRD within fifteen (15)
days if for any reason dissatisfied with the digital signal. This Agreement
will be considered cancelled and void by both parties upon return of the IRD.
11. ASSIGNMENT. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and assigns, provided,
however, that Customer shall not assign or otherwise transfer this Agreement
without AIN's prior written consent.
12. GOVERNING LAW: This Agreement shall be construed and enforced under, and
governed by, the laws of the State of Texas
13. ARBITRATION: Any action, dispute, controversy or claim between or among the
parties relating to this Agreement, whether sounding in contract, tort, or
otherwise shall at the request of any party be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration proceedings shall be conducted in the State of
Texas.
2
<PAGE> 3
14. ENTIRE AGREEMENT: This Agreement sets forth the entire agreement
between AIN and Customer, the terms of which shall not be modified except as
mutually agreed upon by both parties and expressed in a writing signed by both
parties. This Agreement supersedes all prior or contemporaneous proposals, oral
or written, and all negotiations, conversations, discussions and understandings
between the parties.
15. SEVERABILITY: If any provision of this Agreement is found to be
invalid or unenforceable, he remainder of this Agreement shall remain in full
force and effect as if such invalid provision were never included in this
Agreement.
Dated as of the day, month and year first above written.
BY: _________________________________
Name:
Title:
Company:
American Independent Network, Inc.
By: _________________________________
Name: Lyn Snyder
Title: Director of Network Operations
<PAGE> 1
EXHIBIT 6.30
CHANNEL USE AND PROGRAMMING AGREEMENT
FOR
DOMINION "SKY ANGEL" HIGH POWER DIRECT BROADCAST SATELLITE
TELEVISION AND RADIO SYSTEM
Programmer:
AMERICAN INDEPENDENT NETWORK
Dated: November 19, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Recitals............................................................... -5-
1. Grant of Rights..................................................... -5-
A. Channel Use Allocation....................................... -5-
B. Programming License and Transmission Rights.................. -6-
C. Territory.................................................... -7-
D. Signal Transmission and Delivery............................. -7-
E. Conditions to Broadcast Commencement Date.................... -7-
F. Term of Agreement............................................ -8-
2. Termination of Channel Use Rights................................... -8-
A. Termination Events........................................... -8-
B. Termination Procedure........................................ -8-
3. Subject to Echo Star Agreement...................................... -8-
4. Programming......................................................... -9-
5. No Ownership Rights................................................. -9-
6. Exclusivity......................................................... -9-
7. Promotion........................................................... -9-
A. Promotional Activities........................................ -9-
B. Use of Names and approvals.................................... -10-
8. Restrictions........................................................ -10-
A. Restriction on Transfers..................................... -10-
B. Content Restrictions......................................... -10-
C. Redundancy................................................... -10-
D. Advertising Limitation....................................... -10-
9. Preemption.......................................................... -11-
10. Dominion Spots and Identification................................... -11-
11. Performance and Copyright Royalties................................. -11-
12. Interpretation According to Governing Statutes...................... -11-
13. Technical and Programming Standards............................. ... -11-
</TABLE>
-2-
<PAGE> 3
14. Representations, Warranties, and Covenants .......................... -11-
A. Mutual Representations, Warranties, and Covenants .............. -11-
B. Ministry Programmer Warranties and Covenants ................... -12-
15 Indemnification
A. By the Ministry Programmer ..................................... -12-
B. By Dominion .................................................... -12-
C. Indemnification Procedures ..................................... -13-
D. Survival of Right to Indemnification ........................... -14-
E. Affiliates ..................................................... -14-
16. Termination
A. Termination for Breach or Default .............................. -14-
B. Opportunity to Cure ............................................ -15-
17. Limitation of Liability ............................................. -15-
A. Limitation on Type of Damages .................................. -15-
18. Force majeure Events ................................................ -15-
19. Nondisclosure of Confidential Information ........................... -15-
20. Miscellaneous ....................................................... -16-
A. Satellite Operations ........................................... -16-
B. Satellite Transmissions ........................................ -16-
C. Government Approvals ........................................... -16-
D. Notices ........................................................ -16-
E. Governing Law .................................................. -17-
F. Arbitration .................................................... -18-
G. Headings ....................................................... -19-
H. Assignment ..................................................... -19-
I. Counterparts ................................................... -19-
J. Private Parties ................................................ -19-
K. No Third Party Beneficiaries, etc. ............................. -19-
L. No Implied Waiver .............................................. -19-
M. Entire Agreement ............................................... -20-
N. Ambiguities .................................................... -20-
O. Amendment and Modification ..................................... -20-
P. Further Assurances ............................................. -20-
Q. Relationship of the Parties..................................... -20-
R. Invalidity ..................................................... -20-
S. Conformance to FCC Rules ....................................... -20-
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CHANNEL USE AGREEMENT FOR
HIGH-POWERED DIRECT BROADCAST SATELLITE
This Agreement is entered into this 1st day of August, 1997, by and between
American Independent Network, (hereafter "Programmer" or from time to time
"AIN"), 6125 Airport Freeway, Suite 200, Forth Worth, TX 76117, and Dominion
Foundation, Inc. (hereinafter "DFI" and from time to time "Dominion") located
at 3050 North Horseshoe Drive, Suite 290, Naples, Florida 34104.
Recitals
A. Dominion Foundation, Inc. is an IRC 501(c)(3) Florida religious
non-profit corporation having a sublease of high-powered direct broadcast
satellite (DBS) transmission spectrum, identified as the "Sky Angel DBS
Television System," from Dominion Video Satellite, Inc., an FCC licensed
high-powered DBS licensee.
B. The fully licensed DBS transmission spectrum of Dominion Video
Satellite, Inc., is known and referred to herein as the "Dominion DBS
Television System" and operates pursuant to a DIRECT BROADCAST SERVICE
TRANSPONDER LEASE, CHANNEL USE AND PROGRAMMING AGREEMENT, by and between
EchoStar Satellite Corporation and Dominion Video Satellite, Inc. dated July
18, 1996, and referred to herein as the "EchoStar Agreement."
C. The EchoStar Agreement provides for the use of EchoStar's frequencies
licensed from the Federal Communications Commission (FCC) on the EchoStar II
Satellite until the launch and operation of EchoStar III (expected to be
November 1997), and thereafter on EchoStar III with Dominion Video Satellite's
frequencies licensed from the FCC for the life of the satellite.
D. Dominion Foundation wishes to make broadcast time available to certain
religious ministries and family oriented programmers, pursuant to the Dominion
ministry purposes, in consideration, among other things, of those ministries
committing to promote the Dominion project to their constituency.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for other good and sufficient consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Rights
A. Channel Use Allocation. Subject to the terms and conditions of
this Agreement, Dominion hereby allocates to the Programmer and the Programmer
hereby accepts the following high-powered DBS broadcast time:
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(1) Upon the commencement of Dominion's broadcasting from
EchoStar III, located at 61.5 degrees W.L., one (1) twenty-four (24) hours per
day, seven days per week high powered direct broadcast satellite digital
channel shall be allocated to AIN on Echo-Star III for DBS transmission to the
continental United States.
(2) Once the digital channel is initiated on Echo-Star III, the
term of this Channel Use Agreement shall be an initial trial period of six
months followed by successive one year renewals as set froth in paragraph 1 F,
and continuing for the life of the satellite or any replacement satellite in
the event of any launch or post launch failure of Echo-Star III.
(3) Dominion reserves the right to use any orbital position and
any available satellite to provide the Continental U.S. DBS transmission
contemplated hereunder.
(4) The digital channels shall be used for Christian and family
programming as follows:
(a) Christian Programming shall be defined as audio and/or
video programming which has as its overriding focus, Christian religious
content, and which is only marketed to appeal to the Christian theme and
content.
(b) Family programming shall be defined as audio and/or
video programming which has or would meet the criteria for a "G" rating
(General Audience) under the United States audio and video rating system.
(c) The one channel shall have the same format and
programming as the currently existing AIN broadcast on Spacenet 3, channel 2,
and as changed or modified in the normal course of business by the Ministry
Programmer from time to time. Additionally, the existing AIN satellite
broadcast may be modified at the Programmer's facility or at the Dominion
network center specifically for Sky Angel broadcast by mutual consent of the
parties (hereinafter "the Programming").
(5) The digital channel shall be included in the Dominion DBS
Sky Angel Television System programming which is made available to households
for a Dominion Sponsorship Program Activation, as established in Dominion's
sole discretion, with no other charges or costs to the individual households
receiving Dominion programming (such households are referred to as "Dominion
Households"). Unless expressly provided for in this agreement, or in the event
Dominion creates a monthly charge for individual channel programming in the
future, no programming on these channels shall have a pay-per-view, or
additional cost of any kind whatsoever, charged by the Ministry Programmer, to
such Dominion Programmer, to such Dominion Households in order to receive such
programming; provided, however, that nothing shall prevent the sale of goods
and services or other paid advertising which are compatible with the "G" rating
criteria and/or the overriding Christian and ministry purposes of Dominion.
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(6) When the Sky Angel audience reaches 500,000 sponsor
households, the parties hereto agree to negotiate in good faith a mutually
agreeable revenue sharing formula to be applied to paid advertising revenues
and over the air DBS sales revenues based on the Sky Angel audience compared to
the total Programmer's audience.
B. Programming License and Transmission Rights. For purposes of
direct broadcast satellite transmission (DBS), the Ministry Programmer hereby
grants to Dominion the right and license to:
(1) receive the Programmer's programming, as set forth in
paragraph 1A(5), via the Programmer's transmission or tape method in a
descrambled form;
(2) transmit the signal of the Programming in a digitally
compressed, encrypted format via satellite at a compression rate and picture
quality determined in the sole discretion of Dominion, which compression rate
and picture quality determined in the sole discretion of Dominion, which
compression rate may be changed from time to time;
(3) activate and deactivate consumer or commercial equipment
Integrated Receiver Descramblers (IRDs) for unencrypted exhibition of the
Programming as transmitted via the satellite;
(4) solicit, directly or through its agent or assignee, Program
Activation Fees for the Programming as a part of the Sky Angel DBS Television
System, which amounts shall be established in the sole discretion of Dominion
and may be changed from time to time, and conduct certain customer service
functions for Dominion sponsors.
(5) contract with broadcast and cable system affiliates and
non-affiliates of the Programmer to use the Sky Angel DBS signal as a
"back-haul" signal for retransmission of the Programmer's programming, in whole
or part, over local terrestrial broadcast, cable outlets, or closed cable-type
systems such as prisons and hospitals. Any such retransmission shall require
written authorization from the Programmer granting appropriate consent to the
retransmission, and the retransmitting entity shall be required to abide by
any and all of the policies, procedures, fees, and agreements of Dominion, as
established or modified from time to time, for such retransmission purposes.
C. Territory. The license and transmission rights granted herein
shall be exclusive for DBS in North America and non-exclusive for the rest of
the world. Dominion's DBS transmission of the Programmer's programming pursuant
to this agreement shall be for the geographic boundaries of the United States,
its territories, possessions and commonwealth (the "Territory"). Dominion
makes no commitment to carry any of the Programming on international
transmissions, however, the Programmer agrees to allow Dominion, in Dominion's
sole discretion, to use any or all of the Programming for inclusion of the
Programming in any international broadcast that may be initiated in the future.
It is understood and agreed that the satellite signal will spill over outside or
beyond such geographic boundaries, e.g., into Canada, Mexico, the Caribbean and
Central America, and, such
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spillover, in and of itself, does not and shall not create a violation of this
provision nor derive any rights on behalf of the Programmer by virtue of this
circumstance for inclusion in Dominion international broadcasts.
D. Signal Transmission and Delivery. The Programmer shall, at their
sole cost and expense, deliver a readily retransmittable broadcast signal,
within industry quality standards, to Dominion's transmission and origination
center, designated by Dominion from time to time, via satellite or fiber optic
line. The Programmer reserves the right to change signal delivery technology and
shall use reasonable efforts to provide Dominion with ninety (90) days prior
written notice of such change. Any additional costs, expense, or equipment
required by Dominion to accommodate said change shall be paid for by the
Programmer.
E. Conditions to Broadcast Commencement Date. The Programmer agrees
that the conditions set forth in Attachment I, which is attached hereto and
incorporated herein by reference, must be fulfilled by the Programmer to the
reasonable satisfaction of Dominion prior to the start of broadcasting the
Programming.
F. Term of Agreement. The term of this Agreement shall be initially
for six months on a trial basis and thereafter on a yearly renewal which will
automatically renew without action by either party. Any non-renewal shall be
communicated in writing ninety days prior to the renewal date.
2. Termination of Channel Use Rights.
A. Termination Events. The Programmer's rights to the allocation of
the channel under this Agreement shall terminate in Dominion's reasonable
discretion in the event of the occurrence of any of the following:
(1) the Programmer fails to provide programming for the channel
for greater than 24 hours, unless the failure is due to natural catastrophe,
such as hurricanes, tornados and floods, fire, solar disturbances, sun outages,
externally caused interference, satellite component failure or other similar
technical failures beyond the reasonable control of the Programmer, and which
the Programmer could not have prevented by adhering to common industry
practices, or as a result of Dominion's breach of this Agreement;
(2) the use operating life of the satellite ends;
(3) the Programmer is in breach of a material term of this
Agreement and all applicable cure periods have expired, and if no cure period
is specified, such breach remains unremedied for 30 days after written notice
thereof; and
(4) the failure of the Programmer to reasonably follow through
with the intended and agreed upon promotional activities, specified in
paragraph 7, to promote the SKY ANGEL DBS TELEVISION SYSTEM to their
constituency and/or audience.
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B. Termination Procedure. Termination shall occur upon written
notification to the Programmer indicating the reason for termination, any cure
periods that are applicable, and the exact date of termination at which time
Dominion shall have no further responsibility to allocate time to the Programmer
and both parties shall be released from any further liability to each other,
unless expressly stated elsewhere in this Agreement.
3. Subject to EchoStar Agreement. The Programmer acknowledges that this
Agreement is subject to the EchoStar Agreement dated July 18 1996, and agrees
that the use of the one (1) digital channel allocated to the Programmer
hereunder is subject to all of the provisions of that confidential Agreement,
in particular the Christian program content limitation. Dominion reserves the
absolute and sole right to make such decisions under said agreement as are
necessary and proper to maintain the Dominion's consumer programming
responsibilities while giving, to the fullest extent possible, proportionate
consideration to the Programmer for broadcast spectrum allocation in relation
to all other programmers in the event of such things as transponder or
satellite failure. In the event of any change in the amount or location of DBS
spectrum controlled by Dominion, Dominion agrees to continue the Programmer's
allotted time, under the same terms and conditions as this agreement, using any
DBS spectrum that Dominion is able to secure and if less time is available then
previously allotted to all ministry and family programmers, then on a prorata
basis, to the degree technically and reasonably possible, of the
Programmer's allotment compared to the total available time just prior to the
reduction.
4. Programming. The Programmer, or their affiliates, shall, at their
sole cost and expense, create or secure programming for the one (1) digital
channel allocated hereunder which is fully compatible with the overriding
Christian and family mission and purpose of Dominion. It is understood that the
channel is to have family entertainment, family enrichment, sports and cultural
content with a predominant inclusion of movies with a "G" rating. At no time
shall there be any overt liquor commercials, psychic services, "love lines" type
services, or programming that would highlight the occult or satanic subjects.
Dominion reserves the right, immediately or upon 30 days written notice when
possible, to preempt any programming whatsoever, that would materially violate
the ministry purpose or statement of faith of Dominion, that results in a
material number of subscriber complaints, or that would be in violation of any
provision of the EchoStar Agreement.
5. No Ownership Rights. The Programmer agrees that no ownership
rights are being transferred to the channels, but only the right to program the
channels in accordance with this Agreement. Accordingly, no further programming
rights shall be transferred, leased, assigned, gifted, sold or in any other
manner transferred to any other third party or entity and any attempted
transfer shall be void.
6. Exclusivity. Subject to any statutorily imposed mandatory
transmissions (such as "must carry"), the Programmer shall use Dominion
exclusively for any direct to home DBS satellite broadcast transmission
utilizing a one meter or smaller satellite receiving antennae. Any use of the
Dominion DBS satellite signal for backhaul purposes of the Programmer's
programming, in whole or in part, shall be solely by written mutual consent of
the parties and pursuant to the Dominion DBS
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Sky Angel Retransmission Agreement, fee schedules, policies, and procedures as
may be established from time in the sole discretion of Dominion.
7. Promotion.
A. Promotional Activities. The Programmer shall cooperate to the
fullest extent possible with the promotion of the Dominion "SKY ANGEL DBS
TELEVISION SYSTEM" project to the constituency and audience of the Programmer.
This would include, but not be limited to, one or more, or in combination of,
the following: inclusion of Dominion literature and brochures in Programmer
mailings, endorsements, TV and/or radio promotion spots, use of the Programmer's
name in national promotions, inclusion of a Sky Angel identifying "bug" on the
air, etc. The amount of air time required pursuant to this paragraph shall be
mutually agreed on by the parties, and the amount of mailings at the
Programmer's expense shall not exceed two (2) per twelve (12) month period.
Additional specific promotional efforts are detailed on Attachment 3, attached
hereto and hereby incorporated by reference.
B. Use of Names and Approvals. The Programmer agrees to permit
Dominion to use the Programmer's name, trade names and trademarks to market the
Programming.
8. Restrictions. The broadcast time and channel allocation stated above
shall be for the life of the satellite subject to the following restrictions:
A. Restriction on Transfers. The DBS Sky Angel air time shall not
be sold, gifted, assigned or transferred to any third party, nor used for any
unrelated non-commercial and/or commercial purpose without the express written
permission of Dominion. Notwithstanding the foregoing, this paragraph shall not
be construed to preclude sponsorships for programming, short-form advertising,
underwriting or promotional or other such costs, or joint ventures
(collectively referred to as "subprogrammers" of the Programmer), so long as
there is not direct payment for DBS Sky Angel air time which has been gifted to
the Programmer that would be other than subprogrammers, over which the
Programmer has supervision and content oversight, and other such relationships
that already exist or are developed in the future in the normal course of
business and by which the Programmer programs their existing AIN 24-hour
broadcast. Any attempted transfer shall be void.
B. Content Restrictions. The DBS Sky Angel air time shall have
program content that is supportive of and compatible with the ministry
statement and purpose of Dominion and be fully consistent with Biblical
Christianity as expressed in the Dominion Statement of Faith (Attachment 2).
C. Redundancy. In the event of substantial redundancy of programs
among the various channels of the Sky Angel DBS Television System, and upon
written notice to the Programmer, the parties hereto agree to cooperate in
reducing the redundancy or shifting the program schedule, if at all possible,
for the benefit of the entire Sky Angel System.
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D. Advertising Limitation. The Programmer shall be allowed sole
discretion for purposes of advertising and promotions, however, all program
content and advertising content shall be in accordance with the program content
criteria specified herein and shall be reasonable subject to review and mutual
agreement based on viewer response.
9. Preemption. In addition to other preemption provisions contained
herein, Dominion reserves the right to preempt the broadcast time during any
period that the Programmer fails to deliver the acceptable quality signal to
the Dominion uplink facility.
10. Dominion Spots and Identification. Dominion reserves the right, at
Dominion's sole expense, to include an identification "bug" on the Programmer's
DBS channel, permanently, or from time to time, in order to identify the
broadcast as a Sky Angel transmission. Reasonable efforts shall be made by
Dominion to use and locate the "bug" so as not to conflict with other
identifiers from the Programmer. The Programmer agrees to insert Dominion Sky
Angel spots, station identifications, and promotional programs in an amount and
frequency to be determined by mutual agreement of the parties, using the
Programmer's best efforts to gain wide exposure of Sky Angel in all day parts
and through all available transmission outlets.
11. Performance and Copyright Royalties. For any DBS retransmission of
an existing program, television channel or portion thereof, originated by the
Programmer, the Programmer shall be fully responsible for all statutorily
required performance royalties to be paid to any licensing agency for video and
audio performances. The parties agree and acknowledge that, to the fullest
extent allowed by law, any retransmission shall be on a non-royalty basis for
any applicable satellite carrier compulsory licensing for delivery of the
programming to the consumer. The Programmer shall comply with all statutory and
regulatory matters, such as closed captioning, etc., existing or propagated in
the future by the FCC, congress or other governmental body.
12. Interpretation According to Governing Statutes. This agreement and
all of its provisions shall be interpreted consistent with and be subject to
the Federal Communications Commission, the Internal Revenue Service and all
other applicable Federal, State and local laws, statutes, rules, regulations,
and ordinances.
13. Technical and Programming Standards. All programming shall conform
to industry standards, and all Dominion generated program criteria, for quality
of content, production, and transmission signal.
14. Representations, Warranties, and Covenants.
A. Mutual Representations, Warranties, and Covenants.
Each of the parties represents, warrants, and covenants to the
other that:
(1) it has and will continue to have the right to enter
into and fully perform this Agreement;
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(2) it has not and will no during the Term enter into an
agreement or arrangement which might tend to limit the full performance of its
obligations hereunder;
(3) it is and will remain in full compliance with all
applicable local, state and federal laws and regulations;
(4) it is under no obligation and will not become subject to
any obligation that might interfere with its performance of this Agreement;
(5) it will comply with all of its representations, warranties,
obligations, covenants, and responsibilities herein contained.
B. Programmer Warranties and Covenants.
(1) The Programmer warrants and covenants that it has the legal
right to offer the identified programming for broadcast by Dominion on the Sky
Angel Television System, that the Programming will not be defamatory nor will
it contain any material which violates any copyright, right of privacy or
literary or dramatic right of any person or entity. The Programmer warrants
that all applicable use fees, license fees, or fees for music performance
rights have been paid by the Programmer and will continue to be paid by the
Programmer to the applicable music performance societies (i.e. ASCAP, BMI,
SESAC) or other third parties during the term of this Agreement.
(2) The Programmer represents and agrees that it will not take,
authorize or permit to be taken, or fail to take, any action which would or
might in any way impair any of the rights licensed or sub-licensed to Dominion
hereunder.
(3) Nothing contained in this Agreement, nor any exercise of
the rights granted to Dominion hereunder in accordance with the terms of this
Agreement, will violate, infringe or conflict with any rights of any person or
entity, including, without limitation, any copyright, literary, musical,
artistic, trademark, contract, privacy or publicity rights, or the rights to be
free from unfair competition or defamation, or any other property or personal
rights or result in any liability, monetary or otherwise, to Dominion or
Dominion's affiliates.
15. Indemnification.
A. By the Programmer. Dominion and its affiliates, and its and
their respective officers, directors, shareholders, employees and agents, and
its and their respective successors, assigns, heirs and legal representatives
("Dominion" for purposes of this Section), shall be indemnified and saved
harmless by the Programmer from and against all loss, liability, damage and
expense, including reasonable counsel fees and disbursements, due to:
(1) the gross negligence or willful misconduct by the
Programmer, its officers, directors, shareholders, employees or agents in
connection with any provision or the intent
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of this Agreement;
(2) any willful violation by the Programmer of FCC regulations
relating to the use of the Dominion DBS Rights;
(3) the content of the programming or other material
transmitted or supplied by the Programmer pursuant to this Agreement; or
(4) any claim by any third party against Dominion arising out
of the breach of any representation, warranty, covenant or agreement made by
the Programmer to Dominion in this Agreement.
(5) any claim by any third party against Dominion resulting
from the operation by the Programmer of any backhaul facilities, equipment, or
contracts related to the backhaul and entered into by the Programmer and other
third parties.
(6) the distribution or transmission of any Programming
supplied by the Programmer which violates or requires payment for use or
performance of any copyright, right of privacy, or literary, music performance
or dramatic right.
B. By Dominion. The Programmer and its affiliates, and any and all
of its and their respective officers, directors, shareholders, employees and
agents, and any and all of its and their respective assigns, successors, heirs
and legal representatives ("Programmer" for purposes of this Section), shall be
indemnified and saved harmless by Dominion from and against all loss,
liability, damage and expense, including reasonable counsel fees and
disbursements, due to:
(1) the gross negligence or willful misconduct by Dominion or
its officers, directors, employees, agents and shareholders in connection with
any provision or intent of this Agreement;
(2) any violation by Dominion of FCC regulations relating to
the Dominion DBS Rights; or
(3) any claims by any third party against Dominion arising out
of the breach of any representation, warranty, covenant or agreement made by
Dominion to the Programmer in this Agreement.
(4) the distribution by Dominion of the Programming (except
with respect to claims relating to the content of the Programming for which the
Programmer is responsible.
C. Indemnification Procedures. The party required to provide
indemnification hereunder (the "Indemnifying Party") shall promptly defend any
claims against the party entitled to
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indemnification hereunder (the "Indemnified Party") with counsel of the
Indemnifying Party's choosing at its own cost and expense. The Indemnified Party
shall cooperate with, and assist as reasonably requested by, the Indemnifying
Party in the defense of any such claim, including the settlement thereof on a
basis stipulated by the Indemnifying Party (with the Indemnifying Party being
responsible for all costs and expenses of defending such claim or making such
settlement); provided, however, that:
(1) the Indemnifying party will not, without the Indemnified Party's
consent, settle or compromise any claim or consent to any entry of judgment
which does not include the giving by the claimant or the plaintiff to the
Indemnified Party of an unconditional release from liability with respect to
such claim;
(2) the Indemnified Party shall be entitled to participate in the
defense of any such claim and to employ counsel to assist in the handling of
such claim; and
(3) the Indemnified Party shall have the right to pay, settle or
compromise any such claim as to itself, provided that in such event the
Indemnifying Party shall be relieved of any liability or obligation which would
otherwise then or thereafter have existed or arisen under this paragraph in
respect of such claim.
D. SURVIVAL OF RIGHT TO INDEMNIFICATION. The provisions of this
Section 15 shall survive any termination of this Agreement.
E. AFFILIATES. As used herein, "affiliates" shall mean, as to any person
or entity, any other person or entity directly or indirectly controlling,
controlled by or under common control (i.e., the power to direct the affairs by
reason of ownership of voting stock, by contract, interlocking Directors, or
otherwise) with such person or entity and any member, director, officer,
employee, attorney, or agent of such person or entity.
16. TERMINATION.
A. TERMINATION FOR BREACH OR DEFAULT. Subject to "B" below and paragraph
2 herein, upon thirty (30) days prior written notice either party may, in
addition to any other rights or remedies it may have, terminate this Agreement
in the event:
(1) the other party has made any material misrepresentation;
(2) the other party has breached any of its material warranties,
covenants or material obligations; or
(3) the other party becomes insolvent or seeks relief under any
insolvency statute, is placed in receivership or liquidation, or makes any
assignment for the benefit of creditors.
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B. Opportunity to Cure. Upon receiving written notice of termination
due to breach or default as specified herein, the notified party shall use its
reasonable efforts to immediately commence to cure such breach or default;
provided however, that the notified party shall have up to a maximum of thirty
(30) days, if needed, from the receipt of such notice to cure the breach or
default or if such cure cannot be reasonably completed in such period, but the
defaulting party has commenced and is diligently pursuing such cure, then for
such longer period necessary to complete such cure, in no event to exceed
ninety (90) days in total, unless extended by the parties by written consent.
If such breach or default is timely cured, the notice of termination shall be
null and void.
17. Limitation of Liability.
A. Limitation on Type of Damages. Neither party shall be liable to
the other party, for any direct, indirect, incidental, consequential, special
or other similar damages, including, but not limited to, damages resulting from
loss of actual or anticipated revenues or profits, or loss of business,
customers, or goodwill, delay in the commencement of performance hereunder, or
failure of any of the EchoStar or DVS Satellites to perform.
18. Force Majeure Events. Dominion shall not be liable for any failure or
delay in performance or unavailability due to Force Majeure as defined in this
Article. The term "Force Majeure" as used in this Agreement shall mean events
beyond the commercially reasonable control and without the fault or negligence
of Dominion, and includes without limitation the following: acts of God; acts
of Dominion's contractors, subcontractors, suppliers or satellite lessors;
fire, flood, natural catastrophe; acts of any Government, including the FCC, in
its sovereign and regulatory capacity; national emergencies; riots; war;
strikes; labor disputes; solar disturbances; sun outages; externally caused
interference; the unavailability of service to Dominion pursuant to the FCC
Rules and Regulations published at 47 CFR 64.401 during emergency conditions
such as major natural or man-made disasters and emergencies involving United
States national defense and security; Satellite component failure including
failure or interruption of satellite propulsion, electrical or other common
systems; the unavailability to Dominion of the facilities or services used to
provide service such as may result from the repointing, removal from service or
relocation of any of the Satellites in order to meet the requirements of the
U.S. Government.
19. Nondisclosure of Confidential Information. Except as contemplated in
the promotional support by the Programmer, each of the parties to this
Agreement covenant and agree that from and after the date hereof, it will hold
as strictly confidential, and will not, without the prior written consent of
each of the other parties, disclose to any party (except directors, officers,
employees and financial, legal or other advisors who need to know such
information in connection with the actions contemplated by the Agreement):
(a) the fact that the parties have entered into this Agreement or
any information regarding the existence, terms and conditions or status of the
transactions provided for herein or any discussions or negotiations with
respect thereto; or
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(b) any proprietary information of any of the parties obtained by
the other parties in connection with this Agreement or the transactions
contemplated hereby, including without limitation, business plans, financial
information or projections, research and/or scientific information or know-how,
products, services, customers, suppliers, prices, discoveries, inventions or
trade secrets of any nature.
Any violation of this section by any party to this Agreement shall constitute a
breach of this Agreement by such party. Notwithstanding the above, any party to
this Agreement shall have the right to disclose the fact of the existence of
this Agreement, together with the minimum amount of other information deemed
necessary by securities or FCC counsel to such party, if securities or FCC
counsel in good faith determines that public disclosure of the information is
necessary under U.S. federal securities laws, or FCC laws, rules or
regulations, applicable to such party. Disclosure of such information shall be
coordinated in advance with all other parties. Further, Dominion shall be
permitted to disclose the existence of this Agreement, and the general terms
thereof, to potential strategic partners, to its investment bankers, and in
promotional efforts.
20. Miscellaneous.
A. Satellite Operations. During the Term of this Agreement, the
technical operations of the Satellites may require occasional interruption of
service in order to protect the health and performance of the Satellites, to
act in accordance with the Satellite's operational procedures, or otherwise to
comply with contractual obligations. To the extent practicable and technically
feasible, the Programmer shall be given at least forty-eight (48) hours'
written notice of such interruption. Dominion will use its reasonable efforts
to minimize the disruption of the Dominion transponders on the Satellites.
There shall be no liability to Dominion for such interruptions.
B. Satellite Transmissions. If during the term of this Agreement,
Dominion is directed by the FCC or any other governmental agency to cease or
modify its satellite transmissions, Dominion shall immediately notify the
Programmer of such order and the Programmer shall hold Dominion harmless for
compliance with such order.
C. Government Approvals. Notwithstanding any provision of this
Agreement to the contrary, the execution and delivery of this Agreement is
subject to receipt by the parties hereto of all authorizations, consents and
approvals of all federal, state and local governmental agencies and authorities
which may be required to be obtained in order to permit the consummation of the
transactions contemplated by this agreement, including without limitation
those of the FCC if so required, now or in the future.
D. Notices. All notices hereunder shall be in writing and shall be
deemed to have been duly given:
(1) on actual receipt, if personally delivered or sent by
overnight courier;
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(2) on the date received by facsimile if received by 5:30 p.m.
Eastern time on such date, or on the next day if received after 5:30 p.m.
Eastern time; or
(3) on the fourth (4th) business day following mailing by
registered or certified United States mail, postage prepaid, addressed to the
parties at the following addresses or such other addresses as shall be
specified in writing in accordance with Section of this Agreement:
If to Dominion:
Dominion Foundation
Pelle Karlsson, President
3050 North Horseshoe Drive, Suite 290
Naples, Florida 34104
(941) 403-9130
FAX (941) 403-9104
With a copy to:
Randy Swanson, Esquire
3050 North Horseshoe Drive, Suite 290
Naples, Florida 34104
(941) 403-9130
FAX (941) 403-9104
If to the Programmer:
American Independent Network
Attn: Dr. Don Shelton, CEO
6125 Airport Freeway, Suite 200
Fort Worth, TX 76117
(817) 222-1234
FAX (817) 222-9809
E. Governing Law. The relationship between the parties including
all disputes and claims under this Agreement shall be interpreted, enforced and
construed in accordance with the laws of the State of Florida without giving
effect to its conflicts of law provisions. Any and all disputes arising out of
or in connection with the interpretation, performance or the nonperformance of
this Agreement, and any and all disputes arising out of or in connection with
transactions in any way related to this Agreement and/or the relationship
between the parties shall be litigated solely and exclusively before the United
States District Court for the District of Florida, and if the arbitration
provisions of this Agreement are found to be applicable, such arbitration shall
be interpreted, enforced and construed in accordance with the laws of the State
of Florida. The parties agree and voluntarily consent to the exclusive personal
jurisdiction and venue
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<PAGE> 17
of such Courts for such purposes, and waive, fully and completely, any right to
dismiss and/or transfer any action pursuant to 28 U.S.C. Section 1404 or 1406
(or any successor statute). The Programmer hereby waives any other jurisdiction
and venue to which it may be entitled by virtue of domicile or otherwise.
Further, should the Programmer bring a suit or action in any state other than
the State of Florida, the Programmer admits and agrees that upon application by
Dominion such suit shall be dismissed without prejudice and filed in a Court in
the State of Florida. In the event the United States District Court for the
District of Florida, does not have subject matter jurisdiction of said matter,
such matter shall be litigated solely and exclusively before the appropriate
state court of competent jurisdiction located in Collier County, State of
Florida.
F. Arbitration. At the election of either party, any matter not
resolved amicably between the parties to the satisfaction of both parties,
shall be subject to mandatory binding arbitration of the Christian Conciliation
Service of the Christian Legal Society. If said Christian Conciliation Service
is unable or unwilling to perform the arbitration, then within ten (10) days of
receipt of notice from the electing party, each party shall select a Christian
arbitrator, and within five (5) days thereafter the two (2) selected
arbitrators shall select a third (3rd) Christian arbitrator. The parties hereby
express their desire that the arbitration be concluded on an expedited basis.
The decision of a majority of the arbitrators shall be considered the decision
of all. Such arbitration shall proceed in accordance with the Arbitration Rules
of the Christian Conciliation Service, or if they are unable to perform said
arbitration, then according to the Commercial Rules of the American Arbitration
Association then pertaining (the "Rules"), except to the degree that the
parties mutually agree otherwise or that the Christian arbitrators decide to
modify to better carry out the Christian intention of Biblical dispute
resolution, and pursuant to the following procedures:
(1) The minimum amount of discovery deemed necessary by the
arbitrators shall be allowed in arbitration.
(2) All proceedings before the arbitrators shall be held in
Naples, Florida.
(3) The costs and fees of the arbitration, including attorneys'
fees, shall be allocated by the arbitrators, as they deem reasonably
appropriate.
(4) No award or decision by the arbitrators shall extend beyond
the scope of the dispute submitted to arbitration as provided herein, or
constitute a revision of other terms of this Agreement.
(5) The award rendered by the arbitrators shall be binding on
the parties, shall be final, and judgment may be entered in accordance with
applicable law and in any court having jurisdiction thereof.
(6) The existence and resolution of the arbitration shall be
kept confidential by the parties in the same manner as confidential information
is required to be kept
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<PAGE> 18
under this Agreement, and shall also be kept confidential by the arbitrators.
G. Headings. The headings of the Sections of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular, or plural, as the identity
of the person may require.
H. Assignment. This Agreement is binding upon the heirs, legal
representatives, successors and permitted assigns of the Programmer and
Dominion. This Agreement shall not be assigned by either party without the
express written consent of the non-assigning party. Any other attempted
assignment shall be void.
I. Counterparts. This Agreement may be executed in two or more
counterparts by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
J. Private Parties. The parties hereto acknowledge that the terms
of this Agreement offered hereunder have been privately offered and will be
privately furnished on a non-common carrier basis. Neither the Programmer nor
Dominion regard any representations, offers or undertakings made by the other
hereunder to be in the nature of offers of common carriage. Neither the
Programmer nor Dominion shall attempt, now or in the future, to assert through
legal process, directly or indirectly, that the relationship hereunder between
themselves involves common carriage.
K. No Third Party Beneficiaries, etc. Nothing contained in this
Agreement shall be deemed or construed to create any rights, obligations, or
interests in or any benefits for third parties, or to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the parties.
L. No Implied Waiver. Neither the waiver by a party of a breach of
or a default under any of the provisions of this Agreement, nor the failure of
a party, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right, remedy, or privilege hereunder, shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any such provisions, rights, remedies, or
privileges hereunder. No failure or delay on the part of a party in exercising
any right, power, or privilege hereunder, and no course of dealing between the
parties, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. No change, waiver or discharge hereof shall be valid unless in
writing and signed by an authorized representative of the party against whom
such change, waiver or discharge is sought to be enforced. A waiver by any
party of any of the covenants, conditions, or contracts to be performed by the
other or any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other covenant, condition, or contract
herein contained. No change, waiver, or discharge hereof shall be valid unless
in writing and signed by an
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<PAGE> 19
authorized representative of the party against such change, waiver, or
discharge is sought to be enforced.
M. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the transactions contemplated herein, and
supersedes and merges herein all prior oral or written agreements, commitments,
or understandings with respect to the matters provided for herein and therein.
Each party acknowledges that it has read, understands and agrees to the terms
and conditions of this Agreement. Each party represents that it has the full
power and authority to enter into this Agreement, and intends to be bound by
all of the terms and conditions of this Agreement. Further, each party
acknowledges that the delivery of this Agreement by that party has not been
induced by any representations, statements, warranties, or agreements other
than those expressly set forth herein.
N. Ambiguities. This Agreement and the Exhibits hereto have been drafted
jointly by the parties and in the event of any ambiguities in the language
hereof, there shall be no inference drawn in favor of either party.
O. Amendment and Modification. Except as otherwise specifically provided
in this Agreement, this Agreement may be amended or modified only by a writing
executed by the parties hereto which, by its terms, expressly modifies, alters
or amends any term or provision contained herein. The parties agree to make
best efforts to amend this Agreement as may be necessary to comply with the
rules, regulations, or policies of the FCC.
P. Further Assurances. Each of the parties hereby agrees to take or cause
to be taken such further actions, to execute, acknowledge, deliver, and file or
cause to be executed, acknowledged, delivered, and filed such further documents
and instruments, and to use best efforts to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms, and conditions of this Agreement, whether before, at, or after
the occurrence of the transactions contemplated by this Agreement.
Q. Relationship of the Parties. Each of the parties to this Agreement
have borne their own expenses in the preparation and negotiation of this
Agreement, including but not limited to legal, accounting, fees and expenses
(if any), and other costs (except as provided elsewhere in the case of breach
of, or default under, this Agreement by a party). Each of the parties to this
Agreement represent and warrant that they are aware of no brokers or finders
fees which might be payable by either of them and that nothing in this
Agreement shall be deemed to create, and the parties hereto do not intend to
create, any relationship of partnership, joint venture, agency or
employer/employee, nor shall any similar relationship be deemed to exist
between them.
R. Invalidity. If any provision of this Agreement or any attachment
hereto is held by a court of competent jurisdiction to be illegal or invalid,
said provision shall be deemed to be severed and deleted; and neither such
provision, its severance, or deletion shall affect the validity of the
remaining provisions of this Agreements and attachments.
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<PAGE> 20
S. Conformance to FCC Rules. To the extent that any provision of this
Agreement is in violation of any FCC rule, regulation, decree, order or
otherwise, such provision shall automatically be rewritten, to the minimum
extent necessary, consistent with the FCC Rules so that the principal benefits
of the provision continue to accrue to the benefit of the affected party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Programmer
American Independent Network
Date: November 19, 1997
-----------------------------
by: [SIG]
-----------------------------
Corporate Officer CEO
Dominion Foundation, Inc.
Date: 12-1-97
-----------------------------
by: [SIG]
-----------------------------
Corporate Officer
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<PAGE> 21
ATTACHMENT 1
CONDITIONS
1. The Programmer shall give evidence of a valid and enforceable contract for
transmission of their broadcast signal over Spacenet 3 Channel 2 for reception
at the designated Dominion uplink facility, for the term of this Agreement.
2. The Programmer shall execute a conformed copy of the Dominion Statement of
Faith indicating their acceptance of said statement as the one of the basis of
evaluation of all program content, in addition to the "G" rating under the
United States audio and video rating system.
3. The Programmer shall supply evidence of its legal corporate existence and
most recent SEC information filing.
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<PAGE> 22
ATTACHMENT 2
STATEMENT OF FAITH
DOMINION SKY ANGEL TELEVISION SYSTEM
STATEMENT OF FAITH
DOMINION FOUNDATION, INC.
WE BELIEVE:
THE BIBLE IS THE INSPIRED AND ONLY INFALLIBLE AND AUTHORITATIVE
WRITTEN WORD OF GOD.
THERE IS ONE GOD, ETERNALLY EXISTENT IN THREE PERSONS; GOD THE FATHER, GOD
THE SON, AND GOD THE HOLY SPIRIT.
IN THE DEITY OF OUR LORD JESUS CHRIST, IN HIS VIRGIN BIRTH, IN HIS SINLESS
LIFE, IN HIS MIRACLES, IN HIS VICARIOUS AND ATONING DEATH, IN HIS BODILY
RESURRECTION, IN HIS ASCENSION TO THE RIGHT HAND OF THE FATHER, IN HIS
PERSONAL FUTURE RETURN TO THIS EARTH IN POWER AND GLORY.
IN THE SANCTIFYING POWER OF THE HOLY SPIRIT BY WHOSE INDWELLING THE
CHRISTIAN IS ENABLED TO LIVE A HOLY AND VICTORIOUS LIFE.
THE ONLY MEANS OF BEING CLEANSED OF SIN AND RECEIVING THE FREE GIFT OF
ETERNAL LIFE IS THROUGH REPENTANCE AND FAITH IN THE PRECIOUS SHED BLOOD OF
JESUS CHRIST AND ACCEPTING HIM AS PERSONAL SAVIOR AND LORD.
Date: 11/19/97 Programmer Acknowledgment: [SIG]
-------- --------------------
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<PAGE> 23
ATTACHMENT 3
SPECIFIC PROMOTIONAL ACTIVITIES
(Yet to be determined, please give us a more complete list of what you are
prepared to do)
1. Airline magazines.
2. Christian periodicals.
3. Bartered radio spot time.
4. Chicago Tribune TV Guide coverage.
5. National on air 30 sec and 60 sec Sky Angel spots transmitted to 150+
stations.
6. Web page hot links.
7. Mailing list use for Sky Angel mailings.
8. Etc.?????
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<PAGE> 1
EXHIBIT 6.31
AGREEMENT OF SETTLEMENT, COMPROMISE AND ASSIGNMENT
This Agreement of Settlement, Compromise and Assignment ("Agreement") is
made and entered into effective as of February 28, 1998 ("Effective Date"), by
and among American Independent Network, Inc., a Delaware corporation ("AIN")
and Lionshead Entertainment, Inc., a Nevada corporation.
This Agreement is entered into based on the following:
RECITALS
A. AIN is in the business of providing programming, media production and
syndication services to television and cable stations, as well as satellite
uplink services on behalf of certain cable channels.
B. Lionshead has all right, title and interest to the name "Senior
Channel" by virtue of its use.
C. On April 3, 1997, Lionshead and entered into a Video Service
Agreement (the "Service Agreement") with AIN, whereby AIN provided Lionshead a
satellite uplink service for the Senior Channel. The terms of the Service
agreement provided, among other things, that Lionshead would pay to AIN the sum
of* per month for the services set forth in the Service Agreement. A true and
correct copy of the Service Agreement is attached as Exhibit A and incorporated
herein by this reference.
D. Lionshead has breached the terms of the Agreement by failing to pay
the monthly obligation. The amount presently due is $*.
E. The parties have decided to resolve this matter without litigation
and consequently enter into this Agreement pursuant to the terms and conditions
set forth below.
NOW THEREFORE, in consideration of the mutual promises set forth below, he
parties agree as follows:
1
<PAGE> 2
1. Terms of Settlement.
a. Lionshead agrees to assign any and all right, title and interest in
any and all intellectual property rights it owns, adopted, used or is using,
relating to the Senior Channel, including, but not limited to the Senior
Channel name.
b. Lionshead further agrees to cooperate, execute, and/or take whatever
action is necessary, both now and subsequent to the execution of this
Agreement, to assign, perfect, convey, or transfer, any and all right, title
and interest in any and all intellectual property owned, adopted, used or
presently owned by Lionshead to AIN, including, but not limited to the rights
to the Senior Channel.
c. Concurrently with the execution of this Agreement, Lionshead shall
execute an Assignment of the name of the Senior Channel in favor of AIN,
substantially in the form attached hereto as Exhibit B.
d. Subject to the terms and conditions of this Agreement, AIN shall deem
the amounts owed by Lionshead to be paid in full.
2. Releases Upon the Effective Date.
a. AIN and all respective agents, servants, employees, officers,
directors, shareholders, successors, partners, joint venturers, permitted
assigns, executors, heirs, and anyone else who may purport to claim any
interest (the "Agents") by or through the company, releases Lionshead and its
Agents from any and all claims of every kind and description whatsoever which
may reasonably be determined to have arisen from, or as a result of, any fact,
act or omission, including, but not limited to, all claims set forth in the
Recitals, and any and all other claims of any kind or nature which AIN, and its
Agents, could ever assert as a result of any act or omission occurring on or
before the date of this Agreement except all claims to enforce the provisions of
this Agreement and to enforce a claim that arises under this Agreement.
b. As consideration for the execution of this Agreement by Lionshead,
AIN, on behalf of itself and its respective Agents, covenants and agrees that
it shall not file or maintain, or permit to be filed or maintained, any suit,
proceeding, administrative proceeding, or action, civil or otherwise, against
Lionshead and its respective Agents, arising from any matter, act, fact, or
omissions occurring on or before the date of this Agreement, except to enforce
a claim that arises under this Agreement.
2
<PAGE> 3
c. Accordingly, Lionshead and its respective Agents, releases AIN
and its Agents from any and all claims of every kind and description whatsoever
which may reasonably be determined to have arisen from, or as a result of, any
fact, act or omission, whether now known or unknown, including but not limited
to, any and all claims of any kind or nature which Lionshead and its Agents,
could ever assert as a result of any act or omission occurring on or before the
date of this Agreement except all claims to enforce the provisions of this
Agreement.
d. As consideration for the execution of this Agreement by AIN,
Lionshead, on behalf of itself and its respective Agents, covenant and agree
that it shall not file or maintain, or permit to be filed or maintained, any
suit, proceeding, administrative proceeding, or action, civil or otherwise,
against AIN, and its respective Agents, arising from any matter, act, fact, or
omissions occurring on or before the date of this Agreement, except to enforce
the provisions of this Agreement.
3. Reliance Upon Representations, Warranties and Covenants.
The parties represent and warrant that they have conducted their own
investigation, analysis, and review of all matters pertaining to the
transactions contemplated under this Agreement and are not relying on any
representations, warranties or covenants of the other Parties, except for those
representations, warranties and covenants contained in this Agreement.
4. Representations, Warrants and Covenants of AIN.
AIN represents and warrants to Lionshead that the following are now true
and correct:
a. AIN does not have any knowledge of any litigation, arbitration,
or pending governmental administrative proceeding between the parties.
b. AIN has not assigned, hypothecated, sold or transferred any
interest that he may have in the hereinabove described matters, any claims that
are the subject of the herein Agreement, or any matter related hereto to any
person or entity that is not a party to the herein Agreement.
c. AIN is authorized and empowered to sign and enter into this
Agreement and does so willingly, voluntarily and knowingly.
d. By executing this Agreement, AIN, to its knowledge, is not
violating any duty, contract, statute, ordinance or law.
3
<PAGE> 4
5. Representations, Warranties and Covenants of Lionshead.
Lionshead represents and warrants to AIN that the following are now true
and correct:
a. Lionshead will not be rendered insolvent as a result of this
Agreement.
b. Lionshead has not assigned, hypothecated, sold or transferred
any interest that it may have in the hereinabove described matters, any claims
that are the subject of the herein Agreement, or any matter related hereto to
any person or entity that is not a party to the herein Agreement.
c. Lionshead is authorized and empowered to sign and enter into
this Agreement and does so willingly, voluntarily and knowingly.
d. Lionshead has no other assets of value (defined as any assets
with a value, as of the Effective Date, greater than $250.00) other than the
trademark rights to the Senior Channel.
e. Lionshead holds all rights whatsoever in the name of the Senior
Channel, and has not assigned, conveyed, hypothecated, sold or transferred the
rights in the aforementioned name.
f. Lionshead will not file or maintain any action against any party
which results in a claim by said party against AIN to defend or indemnify said
party.
g. Lionshead does not have any knowledge of any litigation,
arbitration, or pending governmental administrative proceeding between the
parties.
h. By executing this Agreement, Lionshead, to its knowledge, is not
violating any duty, contract, statute, ordinance or law.
4
<PAGE> 5
6. Indemnification by Lionshead.
Lionshead shall, as of and after the Effective Date, indemnify, defend and
hold harmless AIN and its Agents against and in respect of the following:
a. Any and all damages, losses, costs, liabilities, or deficiencies
resulting from any misrepresentations, breach of warranty, representation
or obligations, or failure to perform any covenant on the part of the
Lionshead under this Agreement including but not limited to any and all
judgments or orders of an administrative agency or agencies or arbitration
awards rendered against AIN as a result of the conduct or omissions of
Lionshead in failing to perform or violating this Agreement.
b. Any and all actions, suits, proceedings, demands, assessments,
judgments, costs, legal and other expenses, including reasonable attorneys'
fees, expert or other witness fees, investigation costs, penalties, costs
and the like incident to any matter under paragraph 6.a. above.
7. Notices.
All notices, consents, or demands required or permitted to be given under
this Agreement shall be in writing, and shall be deemed duly delivered when
served on the service party noted below, or shall be deemed duly delivered five
(5) days after posting if sent to the party at the address indicated below by
registered or certified mail with first class postage prepaid:
If to Lionshead: 2950 E. Flamingo Rd., Ste G
Las Vegas, NV 89121
with a copy to: Max C. Tanner
2950 East Flamingo Road, Suite G
Las Vegas, NV 89121
5
<PAGE> 6
If to AIN: American Independent Network
Attn: Randy Moseley
6125 Airport Freeway, Suite 200
Halton City, TX 76117
with a copy to: Knapp, Petersen & Clarke
Attn: Jeffrey S. Leung, Esq.
500 N. Brand Blvd., 20th Floor
Glendale, CA 91203
Any party may change the address or service party from time to time
by notice under this paragraph.
8. Miscellaneous Provisions.
a. Other Documents and Acts. Each party agrees to execute
documents of further assistance and other documents as are necessary
or appropriate to carry out the terms and conditions of this
Agreement, and to do everything that may be reasonably required to
carry out the obligations of that party and to consummate the
transactions contemplated under this Agreement provided that any such
requests shall be directed to the party's legal counsel in the case of
Lionshead.
b. No Admission of Liability. Notwithstanding anything to the
contrary, no party hereto is admitting, or has admitted, the
commission of any wrongful act or the failure to perform an act that
may have been required of said party or any Agent thereof. Further, no
interference may be raised as and against any party hereto, or any
Agent thereof, that, by entering into this Agreement any party hereto,
or any Agent hereof, is guilty of the commission of a wrongful act or
is guilty of failing to perform any act required of said party, or any
Agent thereof.
c. Entire Agreement. This Agreement constitutes the entire
agreement between the parties pertaining to its subject matter and
supersedes all prior agreements, writings or understandings of the
parties. There are no warranties, representations, covenants, or other
agreements between the parties in connection with the subject matter
of this Agreement except as specifically set forth in this Agreement
and in the Exhibits.
d. Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original.
6
<PAGE> 7
e. Modifications. No amendment or modification of this Agreement shall
be valid unless in writing and signed by all the parties.
f. No Third Party Beneficiaries. Nothing in this Agreement, whether
expressed or implied, is intended to confer upon any person, other than the
parties and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement. Nevertheless, all the terms and
provisions of this Agreement shall be binding upon, an inure to the benefit of,
and be enforceable by the respective successors and permitted assigns of the
parties.
g. Attorneys' Fees. The prevailing party in any dispute under this
Agreement shall be entitled to recover from the other party the reasonable
costs and expenses (including reasonable attorneys' fees) incurred by the
prevailing party.
h. Controlling Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
i. Exhibits. All Exhibits called for under this Agreement shall be
deemed to be attached to this Agreement and incorporated into this Agreement by
reference and made a part of this Agreement as though set forth in full in this
Agreement.
j. Survival. All representations, covenants, warranties and
obligations of the parties contained in this Agreement, or in any Exhibit,
shall survive the execution of this Agreement and performance hereunder.
k. Counsel. Lionshead acknowledges that it has had a reasonable
opportunity to examine and discuss the terms of this Agreement with its
attorneys, and it warrants and represents that it has read, understood and
agreed with each and all of the provisions of this Agreement, and has knowingly
executed the Agreement. AIN acknowledges that it has had a reasonable
opportunity to examine and discuss the terms of this Agreement with counsel of
his choosing, warrants that he has read, understood and agreed with each and
all of the provisions of this Agreement, and has knowingly executed the
Agreement.
l. Headings. The headings contained int this Agreement are for
convenience only and shall not affect in any way the meaining or interpretation
of this Agreement.
7
<PAGE> 8
m. Invalid Provision. If a provision of this Agreement or Exhibit to
this Agreement shall be adjudged by a court to be invalid or unenforceable, the
provision shall in no way affect the validity or enforceability of any other
provision of this Agreement.
n. Separate Costs. All parties to pay their own costs and attorney's
fees and expenses related to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
Lionshead Entertainment Corporation,
a Nevada Corporation
By:________________________________
NAME: Jacques Verhaak
Its: President
American Independent Network,
A Delaware corporation
By:_________________________________
Randy Moseley
President
8
<PAGE> 1
EXHIBIT 6.32
ASSIGNMENT OF SENIOR CHANNEL
WHEREAS, LIONSHEAD ENTERTAINMENT, INC., a Nevada corporation, having its
principal offices at 2950 E. Flamingo Rd., Las Vegas NV, has adopted, used, is
using and is the owner of the "Senior Channel" name.
WHEREAS, AMERICAN INDEPENDENT NETWORK, INC., a Delaware corporation,
having its principal offices at 6125 Airport Freeway, Suite 200, Halton City,
TX 76117, is desirous of acquiring all right, title, and interest in any and
all intellectual property owned, adopted, used or presently owned by Lionshead
Entertainment, Inc., including, but not limited to the rights to the Senior
Channel name, and any and all rights associated with the name.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, LIONSHEAD ENTERTAINMENT, INC. hereby assigns to
AMERICAN INDEPENDENT NETWORK, INC. all right, title and interest to the Senior
Channel name, and any and all rights associated with the name.
Signed at Thursday, this 5th Day of March, 1998.
LIONSHEAD ENTERTAINMENT CORPORATION
By:
-----------------------------------
Name: Jacques Verhaak
---------------------------------
Its: President
----------------------------------
<PAGE> 1
EXHIBIT 6.33
AGREEMENT
This Agreement is mutually made and entered into this 10th day of December,
1997 by and between MEDIA FUND, INC. of 2510 South Germantown Road, Memphis, TN
38138 (hereinafter referred to as "MFI") and AMERICAN INDEPENDENT NETWORK, INC.
of 6125 Airport Freeway, Suite 200, Halton City, TX 76117 (hereinafter referred
to as "AIN"). This contract will begin upon signature by both parties.
MFI and its management team have over 20 years experience and demonstrated
highly successful expertise in packaging, positioning and promoting unique
products and services through synergistic mass media driven Direct Response
Marketing Programs and Retail Sell-Thru Programs and packaging and positioning
media companies marketing departments and recruiting and training their sales
people to become Media Marketing Specialists within the Media Marketing System
developed by Media Fund, Inc. MFI desires to participate in this Agreement
under the below stated Terms and Conditions.
AIN is a 24 hour per day independent family network that delivers quality
programming via satellite to AIN Affiliates on a national basis. AIN desires to
participate on this contract under the following Terms and Conditions.
TERMS AND CONDITIONS
I MFI to pay AIN $2,000,000.00 in cash with $800,000.00 to be paid on
approximately March 15, 1998 and four additional payments of $300,000.00
each at 90 day intervals from first payment until the total $2,000,000.00
is paid. It is explicitly agreed by both MFI and AIN that 80% of this
$2,000,000.00 payment will be used to purchase IRD equipment and expand the
total household reached by AIN to 70 million plus nationally.
II MFI will receive 20% of all spots for 4 years of AIN-HTN and senior
channels beginning December 10, 1998 with all renewal options to this
Agreement for 5 years.
III MFI will receive 12.5% equity in AIN, HTN and Senior Network as partial
payment for the $2,000,000.00 investment.
IV MFI will provide to AIN and AIN will air up to 12 hours per day of Network
quality programming for the life of the contract. The commercial slots due
MFI, per contract, will be used by MFI for MFI clients.
MFI will deliver a $5,000,000.00 Note Payable with Financial Guaranty to AIN
for the payment in full of all components of this Agreement.
<PAGE> 2
MFI $5,000,000.00 Note Payable and Financial Guarantee to AIN will be reduced
proportionately as each payment is made to AIN either directly from MFI or from
MFI Affiliate Companies.
MFI will receive prepaid media contracts from six (6) stations group for
$1,400,000.00 and $1,100,000.00 at current street price rate card.
MFI will receive $1,000,000.00 of prepaid phone card credit at .45 cents per
minute and MFI accepts the fact that it is the phone companies responsibility
to deliver the phone air time and AIN cannot guarantee phone companies
performance.
MFI will pay the actual additional cost (approximately $35,000.00 per month)
for the 3 full time TV satellite channels plus sharing the fourth back up
channel and AIN will receive their HTN channel at no additional satellite cost.
This expense will begin when channels are activated thru mutual agreement.
AIN will deliver the stock it owns in INET and its receivable to assist MFI in
acquiring INET in the future if desire by MFI.
MFI will have three (3) consecutive five (5) year option contracts by providing
the "Media Marketing Specialist Consulting Service" of Sam Cooper payment in
full for each five (5) year contract closing for 20% of all spots on AIN, HTN
and Senior Network.
MISCELLANEOUS
I NOTICES AND ADDRESSES. All notices, offers, acceptances, waivers, and
other communications under this agreement shall be in writing, and shall
be deemed to have been both given and received when delivered to the
party in person or, if mailed, when deposited in the U.S. Mails, by
certified mail, postage prepaid, with return receipt requested to the
party at the address of each set forth herein, or to such other address
as any party by notice to all others may designate from time to time.
II PARTIES IN INTEREST. This agreement shall inure to the benefit of and be
binding upon the parties, and their respective heir, executors,
administrators, successors, and promised assigns.
III LAW TO GOVERN. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Tennessee without regard to
principles or conflicts of laws. MFI and AIN hereby agree to binding
arbitration in the event that there is a dispute as to terms, conditions
or financial obligations as disclosed herein.
<PAGE> 3
IV SECTIONS AND OTHER HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect the
interpretation of this Agreement.
V COUNTERPARTS. this agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
VI FINANCIAL RECORDS. AIN and MFI mutually agree to open the part of their
books and records that pertain to this Agreement with 48 hours written
notice and inspected with accounting professional present from either or
both parties.
VII ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of
the parties and supersedes all other representatives, agreements and
understandings, oral or otherwise, between or among the parties or
their affiliates with respect to the matters contained herein.
The above Terms and Conditions of this Agreement are mutually Agreed Upon and
Accepted this 10th day of December, 1997. A facsimile transmitted contract is
mutually accepted as legal and binding. This contract will be governed under
the Laws and Statutes of the State of Tennessee.
AMERICAN INDEPENDENT NETWORK, INC.
By: Randy Moralez
-----------------------------
Title: President/CFO
-----------------------------
MEDIA FUND, INC.
By: Sam Gooden
-----------------------------
Title: President
-----------------------------
<PAGE> 1
EXHIBIT 6.34
AMERICAN INDEPENDENT NETWORK, INC.
1995 STOCK OPTION PLAN
1 PURPOSE. The purpose of the American Independent Network, Inc. 1995 Stock
Option Plan (the "Plan") is to provide to employees, officers, directors,
consultants and independent contractors of the American Independent Network,
Inc., a Delaware corporation ("Corporation"), or any of its subsidiaries
(including dealers, distributors, and other business entities or persons
providing services on behalf of the Corporation or any of its subsidiaries)
added incentive for high levels of performance and unusual efforts to increase
the earnings of the Corporation. The Plan seeks to accomplish this purpose by
enabling specified persons to purchase shares of the common stock of the
Corporation, thereby increasing their proprietary interest in the Corporation's
success and encouraging them to remain in the employ or service of the
Corporation.
2 CERTAIN DEFINITIONS. As used in this Plan, the following words and
phrases shall have the respective meanings set forth below, unless the context
clearly indicates a contrary meaning:
2.1 "Board of Directors": The Board of Directors of the Corporation.
2.2 "Committee": The Committee which shall administer the Plan shall
consist of no fewer than two outside Directors of the Corporation, or,
alternatively, an independent, third-party Plan Administrator retained by the
Corporation.
2.3 "Fair Market Value Per Share": The fair market value per share of the
Shares as determined by the Committee in good faith. The Committee is
authorized to make its determinations as to the fair market value per share of
the Shares on the following basis: (i) if the Shares are traded only otherwise
than on a securities exchange and are not quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ"), but are also quoted
in the "pink sheets" published by the National Daily Quotation Bureau, the
greater of (a) the average of the mean between the average daily bid and
average daily asked prices of the Shares during the thirty (30) day period
preceding the date of grant of an Option, as quoted in the "pink sheets"
published by the National Daily Quotation Bureau, or (b) the mean between the
average daily bid and average daily asked prices of the Shares on the date of
grant, as published in such "pink sheets;" (ii) if the Shares are traded
only otherwise than on a securities exchange and are quoted on NASDAQ, the
greater of (a) the average of the mean between the closing bid and closing
asked prices of the Shares during the thirty (30) day period preceding the date
of grant of an Option, as reported by the Wall Street Journal and (b) the mean
between the closing bid and closing asked prices of the Shares on the date of
grant of an Option, as reported by the Wall Street Journal; (iii) if the Shares
are admitted to trading on a securities exchange, the greater of (a) the average
of the daily closing prices of the Shares during the ten (10) trading days
preceding the date of grant of an Option, as quoted in the Wall Street Journal;
or (b) the daily closing price of the Shares on the date of grant of an Option,
as quoted in the Wall Street Journal; or (iv) if the Shares are traded only
otherwise than as described in (i), (ii) or (iii) above, or if the Shares are
not publicly traded, the value determined by the Committee in good faith based
upon the fair market value as determined by completely independent and well
qualified experts.
2.4 "Option": A stock option granted under the Plan.
2.5 "Incentive Stock Option": An Option intended to qualify for treatment
as an incentive stock option under Code Section 421 and 422, and designated as
an Incentive Stock Option.
2.6 "Nonqualified Option": An Option not qualifying as an Incentive Stock
Option.
2.7 "Optionee": The holder of an Option.
1
<PAGE> 2
2.8 "Option Agreement": The document setting forth the terms and
conditions of each Option.
2.9 "Shares": The shares of common stock of the Corporation.
2.10 "Code": The Internal Revenue Code of 1986, as amended.
2.11 "Subsidiary": Any corporation of which fifty percent (50%) or
more of total combined voting power of all classes of stock of such corporation
is owned by the Corporation or another Subsidiary (as so defined).
3 ADMINISTRATION OF PLAN.
3.1 In General. This Plan shall be administered by the Committee.
Any action of the Committee with respect to administration of the Plan shall
be taken pursuant to (i) a majority vote at a meeting of the Committee (to be
documented by minutes), or (ii) the unanimous written consent of its members.
3.2 Authority. Subject to the express provisions of this Plan, the
Committee shall have the authority to: (i) construe and interpret the Plan,
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan and to define the terms used therein; (ii)
prescribe, amend and rescind rules and regulations relating to administration of
the Plan; (iii) determine the purchase price of the Shares covered by each
Option and the method of payment of such price, individuals to whom, and the
time or times at which, Options shall be granted and exercisable and the number
of Shares covered by each Option; (iv) determine the terms and provisions of the
respective Option Agreements (which need not be identical); (v) determine the
duration and purposes of leaves of absence which may be granted to participants
without constituting a termination of their employment for purposes of the Plan;
and (vi) make all other determinations necessary or advisable to the
administration of the Plan. Determinations of the Committee on matters referred
to in this Section 3 shall be conclusive and binding on all parties howsoever
concerned. With respect to Incentive Stock Options, the Committee shall
administer the Plan in compliance with the provisions of Code Section 422 as the
same may hereafter be amended from time to time. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option.
4. ELIGIBILITY AND PARTICIPATION.
4.1 In General. Only officers, employees and directors who are also
employees of the Corporation or any Subsidiary shall be eligible to receive
grants of Incentive Stock Options. Officers, employees and directors (whether or
not they are also employees) of the Corporation or any Subsidiary, as well as
consultants, independent contractors or other service providers of the
Corporation or any Subsidiary shall be eligible to receive grants of
Nonqualified Options. Within the foregoing limits, the Committee, from time to
time, shall determine and designate persons to whom Options may be granted. All
such designations shall be made in the absolute discretion of the Committee and
shall not require the approval of the stockholders. In determining (i) the
number of Shares to be covered by each Option, (ii) the purchase price for such
Shares and the method of payment of such price (subject to the other sections
hereof), (iii) the individuals of the eligible class to whom Options shall be
granted, (iv) the terms and provisions of the respective Option Agreements, and
(v) the times at which such Options shall be granted, the Committee shall take
into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Section 1. An individual
who has been granted an Option may be granted an additional Option or Options if
the Committee shall so determine. No Option shall be granted under the Plan
after April 21, 2004, but Options granted before such date may be exercisable
after such date.
4.2 Certain Limitations. In no event shall Incentive Stock
Options be granted to an Optionee such that the sum of (i) aggregate fair
market value (determined at the time the Incentive Stock Options are granted)
of the Shares subject to all Options granted under the Plan which are
exercisable for the first time
2
<PAGE> 3
during the same calendar year, plus (ii) the aggregate fair market value
(determined at the time the options are granted) of all stock subject to all
other incentive stock options granted to such Optionee by the Corporation, its
parent and Subsidiaries which are exercisable for the first time during such
calendar year, exceeds One Hundred Thousand Dollars ($100,000). For purposes of
the immediately preceding sentence, fair market value shall be determined as of
the date of grant based on the Fair Market Value Per Share as determined
pursuant to Section 2.3.
5 AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
5.1 Shares. Subject to adjustment as provided in Section 5.2 below, the
total number of Shares to be subject to Options granted pursuant to this Plan
shall not exceed 5,000,000 Shares, Shares subject to the Plan may be either
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Corporation; the Committee shall be empowered to take any
appropriate action required to make Shares available for Options granted under
this Plan. If any Option is surrendered before exercise or lapses without
exercise in full or for any other reason ceases to be exercisable, the Shares
reserved therefore shall continue to be available under the Plan.
5.2 Adjustments. As used herein, the term "Adjustment Event" means an
event pursuant to which the outstanding Shares of the Corporation are
increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise. Upon the occurrence of an Adjustment Event, (i)
appropriate and proportionate adjustments shall be made to the number and kind
of shares and exercise price for the shares subject to the Options which may
thereafter be granted under this Plan, (ii) appropriate and proportionate
adjustments shall be made to the number and kind of and exercise price for the
shares subject to the then outstanding Options granted under this Plan, and
(iii) appropriate amendments to the Option Agreements shall be executed by the
Corporation and the Optionees if the Committee determines that such an
amendment is necessary or desirable to reflect such adjustments. If determined
by the Committee to be appropriate, in the event of an Adjustment Event which
involves the substitution of securities of a corporation other than the
Corporation, the Committee shall make arrangements for the assumptions by such
other corporation of any Options then or thereafter outstanding under the Plan.
Notwithstanding the foregoing, such adjustment in an outstanding Option shall
be made without change in the total exercise price applicable to the
unexercised portion of the Option, but with an appropriate adjustment to the
number of shares, kind of shares and exercise price for each share subject to
the Option. The determination by the Committee as to what adjustments,
amendments or arrangements shall be made pursuant to this Section 5.2, and the
extent thereof, shall be final and conclusive. No fractional Shares shall be
issued under the Plan on account of any such adjustment or arrangement.
6 TERMS AND CONDITIONS OF OPTIONS.
6.1 Intended Treatment as Incentive Stock Options. Incentive Stock
Options granted pursuant to this Plan are intended to be "incentive stock
options" to which Code Sections 421 and 422 apply, and the Plan shall be
construed and administered to implement that intent. If all or any part of an
Incentive Stock Option shall not be an "incentive stock option" subject to
Sections 421 or 422 of the Code, such Option shall nevertheless be valid and
carried into effect. All Options granted under this Plan shall be subject to
the terms and conditions set forth in this Section 6 (except as provided in
Section 5.2) and to such other terms and conditions as the Committee shall
determine to be appropriate to accomplish the purpose of the Plan as set forth
in Section 1.
6.2 Amount and Payment of Exercise Price.
6.2.1 Exercise Price. To exercise price per Share for each Share
which the Optionee is entitled to purchase under a Nonqualified Option shall be
determined by the Committee but shall not be less than eighty-five percent (85%)
of the Fair Market Value Per Share on the date of the grant of the Nonqualified
3
<PAGE> 4
Option. The exercise price per Share for each Share which the Optionee is
entitled to purchase under an Incentive Stock Option shall be determined by the
Committee but shall not be less than the Fair Market Value Per Share on the
date of the grant of the Incentive Stock Option; provided, however, that the
exercise price shall not be less than one hundred ten percent (110%) of the
Fair Market Value Per Share on the date of the grant of the Incentive Stock
Option in the case of an individual then owning (within the meaning of Code
Section 424(d) more than ten percent (10%) of the total combined voting power
of all classes of stock of the Corporation or of its parent or Subsidiaries.
6.2.2 Payment of Exercise Price. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee and may consist of promissory
notes, shares of the common stock of the Corporation or other consideration and
method of payment for the Shares as may be permitted under applicable state and
federal laws.
6.3 Exercise of Options.
6.3.1 Each Option granted under this Plan shall be exercisable
at such times and under such conditions as may be determined by the Committee
at the time of the grant of the Option and as shall be permissible under the
terms of the Plan; provided, however, in no event shall an Option be exercisable
after the expiration of ten (10) years from the date it is granted, and in the
case of an Optionee owning (within the meaning of Code Section 424(d)), at the
time an Incentive Stock Option is granted, more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation or of
its parent or Subsidiaries, such Incentive Stock Option shall not be
exercisable later than five (5) years after the date of grant.
6.3.2 An Optionee may purchase less than the total number of
Shares for which the Option is exercisable, provided that a partial exercise of
an Option may not be for less than One Hundred (100) Shares and shall not
include any fractional shares.
6.4 Nontransferability of Options. All Options granted under this
Plan shall be nontransferable, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by such Optionee.
6.5 Effect of Termination of Employment or Other Relationship.
Except as otherwise determined by the Committee in connection with the grant of
Nonqualified Options, the effect of termination of an Optionee's employment or
other relationship with the Corporation on such Optionee's rights to acquire
Shares pursuant to the Plan shall be as follows:
6.5.1 Termination for Other than Disability, Cause or Death. If
an Optionee ceases to be employed by, or ceases to have a relationship with,
the Corporation for any reason other than for disability, cause, or death, such
Optionee's Options shall expire not later than six (6) months thereafter. During
such six (6) month period and prior to the expiration of the Option by its
terms, the Optionee may exercise any Option granted to him, but only to the
extent such Options were exercisable on the date of termination of his
employment or relationship and except as so exercised, such Options shall
expire at the end of such six (6) month period unless such Options by their
terms expire before such date. The decision as to whether a termination for a
reason other than disability, cause or death has occurred shall be made by the
Committee, whose decision shall be final and conclusive, except that employment
shall not be considered terminated in the case of sick leave or other bona fide
leave of absence approved by the Corporation.
6.5.2 Disability. If an Optionee ceases to be employed by, or
ceases to have a relationship with, the Corporation by reason of disability
(within the meaning of code Section 22(e)(3)), such Optionee's Options shall
expire not later than one (1) year thereafter. During such one (1) year period
and prior to the expiration of the Option by its terms, the Optionee may
exercise any Option granted to him, but only to the extent such Options were
exercisable on the date the Optionee ceased to be employed by, or ceased to
have a relationship
4
<PAGE> 5
with, the Corporation by reason of disability and except as so exercised, such
Options shall expire at the end of such one (1) year period unless such Options
by their terms expire before such date. The decision as to whether a termination
by reason of disability has occurred shall be made by the Committee, whose
decision shall be final and conclusive.
6.5.3 Termination for Cause. If an Optionee's employment by, or
relationship with, the Corporation is terminated for cause, such Optionee's
Option shall expire immediately; provided, however, the Committee may, in its
sole discretion, within thirty (30) days of such termination, waive the
expiration of the Option by giving written notice of such waiver to the Optionee
at such Optionee's last known address. In the event of such waiver, the Optionee
may exercise the Option only to such extent, for such time, and upon such terms
and conditions as if such Optionee had ceased to be employed by, or ceased to
have a relationship with, the Corporation upon the date of such termination for
a reason other than disability, cause, or death. Termination for cause shall
include termination for malfeasance or gross misfeasance in the performance of
duties or conviction of illegal activity in connection therewith or any conduct
detrimental to the interests of the Corporation. The determination of the
Committee with respect to whether a termination for cause has occurred shall be
final and conclusive.
6.5.4 Death of an Optionee. If the Optionee ceases to be employed
by, or ceases to have a relationship with, the Corporation by reason of death,
such Optionee's Options shall expire not later than six (6) months thereafter.
During such six (6) month period and prior to the expiration of the Option by
its terms, such Option may be exercised by his executor or administrator or the
person or persons to whom the Option is transferred by will or the applicable
laws of descent and distribution, but only to the extent such Options were
exercisable on the date Optionee ceased to be employed by, or ceased to have a
relationship with, the Corporation by reason of death.
6.6 Withholding of Taxes. As a condition to the exercise, in whole or in
part, of any Options the Board of Directors may in its sole discretion require
the Optionee to pay, in addition to the purchase price of the Shares covered by
the Option an amount equal to any Federal, state or local taxes that may be
required to be withheld in connection with the exercise of such Option.
6.7 No Rights to Continued Employment or Relationship.
Nothing contained in this Plan or in any Option Agreement shall obligate the
Corporation to employ or have another relationship with any Optionee for any
period or interfere in any way with the right of the Corporation to reduce such
Optionee's compensation or to terminate the employment of or relationship with
any Optionee at any time.
6.8 Time of Granting Options. The time an Option is granted, sometimes
referred to herein as the date of grant, shall be the day the Corporation
executes the Option Agreement; provided, however, that if appropriate
resolutions of the Committee indicate that an Option is to be granted as of and
on some prior or future date, including the date of execution of an employment
agreement between an optionee and the corporation, the time such Option is
granted shall be such prior or future date.
6.9 Privileges of Stock Ownership. No Optionee shall be entitled to the
privileges of stock ownership as to any Shares not actually issued and delivered
to such Optionee. No Shares shall be purchased upon the exercise of any Option
unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws or governmental or regulatory agencies
having jurisdiction and of any exchanges upon which the stock of the Corporation
may be listed shall have been fully complied with.
6.10 Securities Laws Compliance. The Corporation will diligently endeavor
to comply with all applicable securities laws before any Options are granted
under the Plan and before any Shares are issued pursuant to Options. Without
limiting the generality of the foregoing, the Corporation may require from the
Optionee such investment representation or such agreement, if any, as counsel
for the Corporation may
5
<PAGE> 6
consider necessary or advisable in order to comply with the Securities Act of
1933 as then in effect, and may require that the Optionee agree that any sale
of the Shares will be made only in such manner as is permitted by the
Committee. The Committee in its discretion may cause the Shares underlying the
Options to be registered under the Securities Act of 1933, as amended, by the
filing of a Form S-8 Registration Statement covering the Options and Shares
underlying such Options. Optionee shall take any action reasonably requested by
the Corporation in connection with registration or qualification of the Shares
under federal or state securities laws.
6.11 Option Agreement. Each Incentive Stock Option and Nonqualified
Option granted under this Plan shall be evidenced by the appropriate written
Stock Option Agreement ("Option Agreement") executed by the Corporation and the
Optionee, and shall contain each of the provisions and agreements specifically
required to be contained therein pursuant to this Section 6, and such other
terms and conditions as are deemed desirable by the Committee and are not
inconsistent with the purpose of the Plan as set forth in Section 1.
7. PLAN AMENDMENT AND TERMINATION
7.1 Authority of Committee. The Committee may at any time discontinue
granting Options under the Plan or otherwise suspend, amend or terminate the
Plan and may, with the consent of an Optionee, make such modification of the
terms and conditions of such Optionee's Option as it shall deem advisable;
provided that, except as permitted under the provisions of Section 5.2, the
Committee shall have no authority to make any amendment or modification to this
Plan or any outstanding Option thereunder which would; (i) increase the maximum
number of shares which may be purchased pursuant to Options granted under the
Plan, either in the aggregate or by an Optionee (except pursuant to Section
5.2); (ii) change the designation of the class of the employees eligible to
receive Incentive Stock Options; (iii) extend the term of the Plan or the
maximum Option period thereunder, (iv) decrease the minimum Incentive Stock
Option price or permit reductions of the price at which shares may be purchased
for Incentive Stock Options granted under the Plan; or (v) cause Incentive Stock
Options issued under the Plan to fail to meet the requirements of incentive
stock options under Code Section 422. An amendment or modification made pursuant
to the provisions of this Section 7 shall be deemed adopted as of the date of
the action of the Committee effecting such amendment or modification and shall
be effective immediately, unless otherwise provided therein, subject to approval
thereof (1) within twelve (12) months before or after the effective date by
stockholders of the Corporation holding not less than a majority vote of the
voting power of the Corporation voting in person or by proxy at a duly held
stockholders meeting when required to maintain or satisfy the requirements of
Code Section 422 with respect to Incentive Stock Options, and (2) by any
appropriate governmental-agency. No Option may be granted during any suspension
or after termination of the Plan.
7.2 Ten (10) Year Maximum Term. Unless previously terminated by the
Committee, this Plan shall terminate on October 1, 2005, and no Options shall
be granted under the Plan thereafter.
7.3 Effect on Outstanding Options. Amendment, suspension or termination
of this Plan shall not, without the consent of the Optionee, alter or impair
any rights or obligations under any Option theretofore granted.
8. EFFECTIVE DATE OF PLAN. This plan shall be effective as of _________ 1995,
the date the Plan was adopted by the Board of Directors, subject to the
approval of the Plan by the unanimous written consent of the Shareholders or
the affirmative vote of a majority of the issued and outstanding Shares of
common stock of the Corporation represented and voting at a duly held meeting
at which a quorum is present within twelve (12) months thereafter. The
Committee shall be authorized and empowered to make grants of Options pursuant
to this Plan prior to such approval of this Plan by the stockholders; provided,
however, in such event the Option grants shall be made subject to the approval
of this Plan and such Option
6
<PAGE> 7
grants by the stockholders in accordance with the provisions of this Section 8.
9 MISCELLANEOUS PROVISIONS.
9.1 Exculpation and Indemnification. The Corporation shall indemnify
and hold harmless the Committee from and against any and all liabilities, costs
and expenses incurred by such persons as a result of any act, or omission to
act, in connection with the performance of such persons' duties,
responsibilities and obligations under the Plan, other than such liabilities,
costs and expenses as may result from the gross negligence, bad faith, willful
conduct and/or criminal acts of such persons.
9.2 Governing Law. The Plan shall be governed and construed in
accordance with the laws of the State of Texas and the Code.
9.3 Compliance with Applicable Laws. The inability of the Corporation
to obtain from any regulatory body having jurisdiction authority deemed by the
Corporation's counsel to be necessary to the lawful issuance and sale of any
Shares upon the exercise of an Option shall relieve the Corporation of any
liability in respect of the non-issuance or sale of such Shares as to which
such requisite authority shall not have been obtained.
7
<PAGE> 1
JACK F. BURKE, JR.
CERTIFIED PUBLIC ACCOUNTANT
MEMBER
2010 OAK GROVE ROAD MISSISSIPPI SOCIETY OF
BLDG. 3 SUITE 113 CERTIFIED PUBLIC ACCOUNTANTS
HATTIESBURG, MISSISSIPPI 39402
AMERICAN INSTITUTE OF
TELEPHONE 601-264-1988 CERTIFIED PUBLIC ACCOUNTANTS
FAX 601-261-1901
DIVISION FOR CPA FIRMS
SEC PRACTICE SECTION
TAX DIVISION
April 7, 1998
Consent of Inclusion
I, Jack F. Burke, Jr., hereby consent to the inclusion of the financial
statements of American Independent Network, Inc. (the "Company") for year ended
December 31, 1996 and December 31, 1997 into the Company's Pre-Effective
Amendment No. 2 to the Registration Statement on Form 10-SB to be filed with
the Securities and Exchange Commission.
/s/ JACK F. BURKE, JR.
- -----------------------------
Jack F. Burke, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH PRE-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT ON FORM 10-SB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 34,768
<SECURITIES> 0
<RECEIVABLES> 1,702,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,767,018
<PP&E> 979,338
<DEPRECIATION> 103,954
<TOTAL-ASSETS> 7,215,160
<CURRENT-LIABILITIES> 2,653,286
<BONDS> 0
0
53,427
<COMMON> 182,235
<OTHER-SE> 3,179,644
<TOTAL-LIABILITY-AND-EQUITY> 7,215,160
<SALES> 1,243,145
<TOTAL-REVENUES> 1,243,145
<CGS> 0
<TOTAL-COSTS> 1,286,809
<OTHER-EXPENSES> 645,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 381,654
<INCOME-PRETAX> 1,472,895
<INCOME-TAX> (1,137,548)
<INCOME-CONTINUING> 335,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335,347
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
</TABLE>
