SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
-
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential For Use of the
Commission Only (as Permit-
ted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
AMERICAN INDEPENDENT NETWORK, INC.
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee: (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act
Rule 14a-6(I)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
<PAGE>
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of the filing.
(1) Amount Previously Paid:
- -----------------------------------------------------------------------------
(2) For, Schedule or Registration Statement No.:
- -----------------------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------------------
(4) Date Filed:
- -----------------------------------------------------------------------------
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of American
Independent Network, Inc. (the "Company") will be held at 6125 Airport
Freeway, Suite 200, Haltom City, TX 76117 on November 19, 1999, at 6:00 PM
(CST) for the following purposes:
(1) To elect four (4) directors.
(2) To amend the Certificate of Incorporation of the Company to authorize a
total of 200,000,000 shares of common stock, to authorize 20,000,000 shares of
preferred stock and to reset the par value of preferred stock.
(3) To ratify the Board's decision to merge with Hispano Television
Ventures, Inc. And to Ratify the Merger Agreement.
(4) To amend the Certificate of Incorporation to change the name of the
Company to "Hispanic Television Network, Inc.", or such other similar name if
this name is not available.
(5) To ratify the selection of Jack F. Burke, Jr. as the Company's
independent auditor for the fiscal year ending December 31, 1999.
(6) To amend the Bylaws to authorize the Board of Directors to amend the
Bylaws.
(7) To act upon such other business as may properly come before the Annual
Meeting.
Only holders of Common Stock of record at the close of business on Record
date of October 12, 1999, will be entitled to vote at the Annual Meeting or any
adjournment thereof. You are cordially invited to attend the Annual Meeting.
Whether or not you plan to
attend the Annual Meeting, please sign, date and return your proxy to us
promptly. Your cooperation in signing and returning the proxy will help avoid
further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS OF
AMERICAN INDEPENDENT NETWORK, INC.
/s/ Walter Morgan /s/ Randy Moseley
Director, CEO and President Director and Chief Financial Officer
Haltom City, TX Haltom City, TX
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1999
This proxy statement (the "Proxy Statement") is being furnished to
stockholders (the "Stockholders") in connection with the solicitation of proxies
by and on behalf of the Board of Directors of American Independent Network, Inc.
a Delaware corporation (the "Company" or "AIN") for their use at the Annual
Meeting (the "Annual Meeting") of Stockholders of the Company to be held at 6125
Airport Freeway, Suite 200, Haltom City, TX 76117 on November 19, 1999, at 6:00
PM (CST), and at any adjournments thereof, for the purpose of considering and
voting upon the matters set forth in the accompanying Notice of Annual Meeting
of Stockholders (the "Notice"). This Proxy Statement and the accompanying form
of proxy (the "Proxy") are first being mailed to Stockholders on or about
October 29, 1999. The cost of solicitation of proxies is being borne by the
Company.
The close of business on October 12, 1999 has been fixed as the record date
for the determination of Stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of record date, there were
19,007,466 shares of the Company's common stock, par value $.01 per share (the
"Common Stock") issued and outstanding.
The presence, in person or by proxy, of at least a majority of the total
outstanding shares of Common Stock on the record date is necessary to constitute
a quorum at the Annual Meeting.
Each share is entitled to one vote on all issues requiring a Stockholder
vote at the Annual Meeting. Each nominee for Director named in Number 1 must
receive a majority of the Common Stock votes cast in person or by proxy in order
to be elected. Stockholders may not
cumulate their votes for the election of Directors.
The affirmative vote of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting is required for
the approval of Numbers 2 through 7. set forth in the accompanying Notice.
<PAGE>
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Annual Meeting in accordance
with the directions on the proxies. If no direction is indicated, the shares
will be voted:
(I) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN.
(II) FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY TO AUTHORIZE A TOTAL OF 200,000,000 SHARES OF COMMON STOCK, TO AUTHORIZE
20,000,000 SHARES OF PREFERRED STOCK AND TO RESET THE PAR VALUE OF PREFERRED
STOCK.
(III) FOR THE RATIFICATION OF THE BOARD'S DECISION TO MERGE WITH HISPANO
TELEVISION VENTURES, INC.
(IV) FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY TO CHANGE THE NAME OF THE COMPANY TO "HISPANIC TELEVISION NETWORK,
INC.", OR SUCH OTHER SIMILAR NAME IF THIS NAME IS NOT AVAILABLE.
(V) FOR THE RATIFICATION OF THE BOARD'S SELECTION OF JACK F. BURKE, JR.
AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31,
1999.
(VI) FOR THE PROPOSAL TO AMEND THE BYLAWS TO AUTHORIZE THE BOARD OF
DIRECTORS TO AMEND THE BYLAWS.
The Board of Directors is not aware of any other matters to be presented
for action at the Annual Meeting. However, if any other matter is properly
presented at the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment on such matters.
The enclosed Proxy, even though executed and returned, may be revoked at
any time prior to the voting of the Proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company, or (c) by
voting in person at the Annual Meeting.
DELAWARE APPRAISAL. Stockholders who do not vote in favor of Proposal 4
and who otherwise comply with the provisions of Section 262 of the General
Corporation Law of the State of Delaware (the "DGCL") will, under certain
circumstances if the merger is completed, have the right to dissent and to
demand appraisal of the fair market value of their shares. A copy of Section
262 is attached to this Proxy Statement as Attachment "B".
<PAGE>
This Proxy Statement contains or incorporates by reference information
about the Company as of the date hereof. See "Available Information About the
Company" and "Information About the Company and Incorporation of Certain
Documents by Reference."
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT TO VOTE ON PROPOSALS 1, 2, 3, 4, 5 AND 6. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT
IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED OCTOBER 29,
1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE
MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS NOR THE CONSUMMATION AND
COMPLETION OF THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
Information Regarding and Factors Affecting Forward-looking Statements
The Company is including the following cautionary statement in this Proxy
Statement for any forward-looking statements made by, or on behalf of, the
Company. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements in this Proxy Statement are forward-looking
statements. Words such as "expects", "anticipates","estimates" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
are set forth below. The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitation, management's examination of historical
operating trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that management's
expectation, beliefs or projections will result, be achieved, or be
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause material adverse affects on the Company's financial condition and
results of operations: the impact of mergers: demographic changes; existing
government regulations and changes in, or the failure to comply with government
regulations; the loss of any significant numbers of subscribers or viewers;
changes in business strategy or development plans; technological developments or
obsolescence, and difficulties (including any associated with the Year 2000);
the ability to attract and retain qualified personnel; significant indebtedness
of the Company; the ability of the Company to obtain acceptable forms and
amounts of financing for current operations and expansion; the demand for, and
price level of, the Company's services; competitive factors; evolving industry
and technology standards; dependence on key personnel. The Company has no
obligation to update or revise these forward-looking statements to reflect the
occurrence of future events or circumstances.
<PAGE>
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(1) TO ELECT FOUR (4) DIRECTORS FOR THE ENSUING YEAR
---------------------------------------------------------
NOMINEES FOR DIRECTORS
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the stockholders, the Board's nominees
for Director.
The persons named in the enclosed Proxy have been unanimously selected by
the Board of Directors to serve as proxies (the "Proxies") and will vote the
shares represented by valid proxies at the Annual Meeting of Stockholders and
adjournments thereof. They have indicated that, unless otherwise specified in
the Proxy, they intend to elect as Directors the nominees listed below. Each
duly elected Director will hold office until his successor shall have been
elected and qualified.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed Proxy for the election of the Common Stock Board representatives will
be voted for the election for the nominees listed below. Although the Board of
Directors of the Company does not contemplate that any of the nominees will be
unable to serve, if such a situation arises prior to the Annual Meeting, the
persons named in the enclosed Proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE ELECTION OF EACH OF THE
NOMINEES LISTED BELOW.
The following persons are nominees for Director:
James A. Ryffel, age 40, has been the president of Woodcrest Enterprises,
Inc., a real estate firm for the past 18 years. Mr. Ryffel was a founding
investor and former director of Flashnet Communications, Inc. and a founding
investor in Data Tailor Corporation. Mr. Ryffel is a director of Worth
National Bank in Lake Worth, Texas. Mr. Ryffel hold a B.B.A. Degree, 1981, and
an M.B.A Degree, 1984, from Texas Christian University.
<PAGE>
P. Alan Luckett, age 43, is the control person and President of Hispano
Television Ventures, Inc. ("HTV"), which is a media firm which is the subject of
the merger described in Proxy Proposal (3). From 1988 to 1993, Mr. Luckett was
a hospital CFO and a consultant in the health care industry. From 1989 to
1993, Mr. Luckett was the founder and CFO of Phymed, the first
non-doctor/non-hospital-owned diagnostic imaging center in Dallas. From 1993 to
1998, Mr. Luckett was a financial partner in several Hispanic media ventures.
From 1998 to the present, Mr. Luckett was the founder and director of HTV. The
Company anticipates that Mr. Luckett will be appointed as the Chief Executive
Officer, Chief Operating Officer and President of the Company shortly after the
conclusion of the Annual Meeting. Mr. Luckett holds a B.B.A. Degree, 1979, from
the University of Texas, Austin. Mr. Luckett is the husband of Victoria O.
Luckett.
Douglas K. Miller, age 39, is a director and officer of HTV. From 1992 to
1999, Mr. Miller was a loan officer and an asset manager with G. E. Capital.
From 1999 to the present, Mr. Miller has been a member of Woodcrest Capital,
L.L.C. a real estate firm. From 1984 to 1992, Mr. Miller was a controller for
various real estate firms. The Company anticipates that Mr. Miller will be
appointed as the Chief Financial Officer and the Treasurer of the Company
shortly after the conclusion of the Annual Meeting. Mr. Miller holds a B.B.A.
Degree, 1982, from Baylor University.
Bob J. Bryant, age 60, has been the founder and President of Bryant
Financial Services since 1983. Prior to 1993, Mr. Bryant was the founding
President of Texas Commence Medical Bank in Houston, and Texas Commerce in Ft.
Worth. Mr. Bryant holds a B.B.A. Degree, 1963, from Texas Tech University.
For more than 17 years, Mr. Bryant has been a trustee of Texas Wesleyan
University.
In addition, the Company anticipates that Victoria O. Luckett, the wife of
P. Alan Luckett, will be appointed as the Secretary of the Company shortly after
the conclusion of the Annual Meeting. Victoria O. Luckett, age 43, has been an
officer and control person of HTV, where Ms. Luckett provides managerial control
over media and entertainer relationships. She holds a B.S. Degree, 1980, from
Southwest Texas State University.
The following persons are presently members of the Board of Directors and
Executive Officers of the Company, however, they are not standing for reelection
as Directors nor does the Company anticipate that they will remain as Executive
Officers after the Annual Meeting:
Walter Morgan, age 36, was appointed as a Director, and as the CEO and
President of the Company in August, 1999. From 1991 until 1996, Mr. Morgan was
an entertainment agent with The Agency, representing television and film
creative talent, such as actors, directors, writers and producers. From 1996
until 1999, Mr. Morgan was the owner of Global Entertainment Management, where
he was a talent manager and producer for film and television. Mr. Morgan also
has been a film producer for Interlight Pictures and Film Roman, where he
developed, packaged and sold entertainment media properties for film and
television production. Mr. Morgan has also managed product licensing and
product tie-ins for international retail distribution. Mr. Morgan holds a B.A.
Degree (1985) from Princeton University, and an M.B.A. (1989) from Harvard
University.
<PAGE>
Randy Moseley, age 51, is a Director and the Chief Financial Officer of
the Company. Mr. Moseley is a founder of the Company. In the past, he has
served as the Company's President and Secretary. 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.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held three meetings and took action by unanimous
consent three times during 1998. All directors took part in all of the meetings
and consents. The Board has no committees of any kind, and the nominees for
Director were selected by the entire Board.
Compliance with Section 16(a) of the Exchange Act
The Company believes that Mr. Moseley failed to timely file two Forms 4,
and Mr. Morgan failed to timely file one Form 3.
DIRECTOR COMPENSATION
Directors do not receive compensation except reimbursement for costs of
attending meetings.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the fiscal years ended December 31, 1998, 1997, 1996 of the chief
executive officer of the Company. No other executive officer of the Company
received compensation which exceeded $100,000 during 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
OTHER ALL
NAME AND ANNUAL RESTRICTED SECURITIES OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY(1) BONUS SATION AWARDS OPTIONS/SARS PAYOUTS SATION
- --------------- ---- --------- ----- -------- --------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Walters 1998 -0- -0- -0- -0- -0- -0- -0-
Morgan 1997 -0- -0- -0- -0- -0- -0- -0-
CEO 1996 -0- -0- -0- -0- -0- -0- -0-
<FN>
_____________________
(1) Mr. Morgan became the CEO in August, 1999.
</TABLE>
<PAGE>
EMPLOYEE STOCK OPTION PLAN
The Company believes that its future success will depend in part on its
ability to attract and retain highly qualified personnel. The Company also
believes that equity ownership is an important factor in its ability to attract
and retain skilled personnel, and the Board of Directors of the Company is
presently evaluating the adoption of an employee stock option program. While no
decision has been made as to the type of stock option program which may be
adopted, it is the intention of the Board of Directors that a stock option
program will be established.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 12, 1999,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person who is known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated, each
stockholder has sole voting and investment power with respect to the shares
shown.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF CLASS
NAME SHARES OWNED (1) OF COMMON STOCK
- --------------------------------- ----------------- -----------------
<S> <C> <C>
Hispano Television Ventures, Inc. 11,000,000 57.9%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
James A. Ryffel . . . . . . . . . -0- 0.0%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
P. Alan Luckett . . . . . . . . . 11,500,000 (2) 60.6%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
Douglas K. Miller . . . . . . . . -0- 0.0%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
<PAGE>
Bob J. Bryant . . . . . . . . . . 530,000 2.8%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
Victoria O. Luckett . . . . . . . 11,500,000 (3) 60.6%
125 Airport Freeway
Suite 200
Haltom City, TX 76117
Walter Morgan . . . . . . . . . . -0- 0.0%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
Randy Moseley . . . . . . . . . . 600,000 3.2%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
Pat Peters. . . . . . . . . . . . 1,034,175 5.45%
6125 Airport Freeway
Suite 200
Haltom City, TX 76117
Fred Hoelke . . . . . . . . . . . 992,490 5.3%
1111 Bagby, Suite 2200
Houston, TX 77002
All Directors and Officers
as a group -- 2 persons . . . . . 600,000 3.2%
<FN>
_________________________
(1) Under the rules of the Securities and Exchange Commission (the
"Commission"), a person who directly or indirectly has or shares voting power
or investment power with respect to a security is considered a beneficial owner
of the security. Voting power is the power to vote or direct the voting of
shares, and investment power is the power to dispose of or direct the
disposition of shares. Shares as to which voting power or investment power may
be acquired within 60 days are also considered as beneficially owned under the
Commission's rules and are, accordingly, included as shares beneficially owned.
(2) Includes shares owned by Hispano Television Ventures, Inc. Mr. Luckett
is a control person of Hispano Television Ventures, Inc. Mr. Luckett is the
husband of Victoria O. Luckett.
(3) Ms. Luckett is the wife of P. Alan Luckett. Includes shares owned by
Hispano Television Ventures, Inc.
</TABLE>
<PAGE>
The Company knows of no arrangement or understanding, the operation of
which may at a subsequent date result in a change of control of the Company
except for matters described in Proxy Proposal (3).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors of the Company has adopted a policy that Company
affairs will be conducted in all respects by standards applicable to
publicly-held corporations and that the Company will not enter into any
transactions and/or loans between the Company and its officers, directors and 5%
stockholders unless the terms are no less favorable than could be obtained from
independent, third parties and will be approved by a majority of the
independent, disinterested directors of the Company.
At one time, Mr. Moseley had ownership interests in six television stations
which had have contracted with the Company to broadcast as Affiliates of the
Company. The terms of the Affiliate Agreements with the foregoing television
stations are the same as those with other non-related Affiliates. Mr. Moseley
disposed of his interests in these television stations in 1998.
In 1995, the Company borrowed $52,531 from Shelly Media Marketing ("SMM")
at an interest rate of 10%. Mr. Moseley is a principal of SMM. At October
12, 1999, this loan had a remaining principal balance of $97,229. Mr. Moseley
has agreed to give the Company an indeterminate forebearance on repayment of
this loan.
In 1994, the Company borrowed $141,152 from ATN Network Inc. ("ATN") at an
interest rate of 10%. Mr. Moseley had been a principal of ATN until December,
1998. In September 1996, 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. In December 1997, the Company borrowed an
additional $243,090 pursuant to a written Promissory Note. ATN subsequently
forgave all of these debts.
<PAGE>
P. Alan Luckett is a control person of HTV. As set forth in this Proxy
Statement, the stockholders of the Company will vote on the ratification of the
Board's decision to merge with HTV. As a result of a matter decided in
binding arbitration, the Company had been a judgment debtor in a judgment
styled as Showplace Video v. American Independent Network, Inc., No.
98-2154-E, County Court At Law No. 5, Dallas County, Texas. In 1998, P. Alan
Luckett purchased the judgment and released it in exchange for 500,000 shares
of common stock of the Company, and for access to the digital uplink equipment
of the Company, certain bandwidth of the satellite transponder the Company
leases, and the right of first refusal on the Company's transponder rights and
equipment leases in the event that the Company ceases operations. Also in
connection with the release of judgment by P. Alan Luckett, Randy Moseley
turned over 719,618 shares which he owned to the Company for cancellation in
1999, and, Don Shelton, a former director and executive officer of the
Company, turned over 719,618 shares which he owned to the Company for
cancellation in 1999. Further in connection with the release of judgment,
the Company agreed to issue 150,000 shares of common stock of the Company
to Jonathan Moseley, the son of Randy Moseley.
On July 29, 1999, the Company effectuated an agreement with Field of
Cotton, L.P. whereby Field of Cotton, L.P. purchased 6,500,000 shares of common
stock of the Company for a total consideration of $4,250,000, in the form of a
promissory note in the principal amount of $4,022,600, and $227,400 in cash in
the form of funds previously provided to the Company by Field of Cotton, L.P. in
1999. Of these 6,500,000 shares, Field of Cotton, L.P. owned 1,000,000 shares
outright free and clear, and the remaining 5,500,000 million shares were subject
to an escrow agreement and a security interest agreement in favor of the
Company. Field of Cotton, L.P. did not make any of the payments on the
promissory note. Subsequently, on August 20, 1999, Field of Cotton, L.P.
announced that it would not be able to provide the financing. Field of Cotton,
L.P. turned over the 5,500,000 million shares for cancellation to the Company in
1999, and Field of Cotton, L.P. transferred its remaining shares of common stock
of the Company to an investor of Field of Cotton, L.P. who is Pat Peters.
In August, 1999, the Company entered into an Asset Transfer Agreement (the
"Asset Transfer Agreement") with HTV whereby HTV agreed to pay certain
obligations of the Company totaling $82,500, and the Company agreed to repay
this amount to HTV on or before August 20, 1999 and to give HTV eight months of
free use of the satellite uplink equipment and the satellite transponder, both
of which the Company leases from third parties.
The Asset Transfer Agreement provided that if the Company does not meet the
terms of the Asset Transfer Agreement, then the Company is obligated to
immediately transfer and assign to HTV: (i) the leases to the uplink equipment
and the satellite transponder; and, (ii) the Company's Federal Communications
Commission ("FCC") Radio Station Authorization (the "Earth Station License"),
which was granted to the Company in 1997. The Earth Station License authorizes
the Company to build and operate a domestic fixed transmit/receive C-band earth
station uplink system on the Company's premises. The Earth Station License
expires in July, 2007. The Company has not yet built the earth station uplink
system.
The Asset Transfer Agreement provided that if the asset transfer is
effectuated, HTV would allow the Company to use the transferred assets for a
satellite usage fee of $22,500 per month, with one month of free usage, and the
Company would be able to continue providing its programming to its network
affiliates.
<PAGE>
On September 2, 1999, the Company closed a transaction (the "HTV
Transaction") whereby the Company issued and sold 11,000,000 shares of its
common stock to HTV for $500,000 in cash. The Company believes that HTV issued
convertible debt to pay for the shares. HTV now owns approximately 57.9% of the
presently outstanding shares of common stock of the Company. As set forth in
this Proxy Statement, the stockholders of the Company will vote on the
ratification of the Board's decision to merge with HTV.
The leases to the uplink equipment and the satellite transponder, and the
Earth Station License were material and major assets of the Company. The
Company did not repay HTV. The asset transfer has not been effectuated at this
time. As part of the HTV Transaction, HTV will assist in the operations of the
Company on an interim basis. The merger agreement described in Proxy Proposal
(3) sets forth that upon Effective Date of the merger, the $82,500 owed to HTV
by the Company will be extinguished.
In June, 1999, Mr. Luckett loaned the Company a total of $250,000 on 9
month balloon terms at 10% interest and maturing in March 2000. In November,
1998, Mr. Bryant loaned the Company a total of $150,000 on 90 day terms at 10%
interest. Messrs. Luckett and Bryant have agreed to release the Company from
the $250,000 remaining balance of these debts upon completion of the merger
described in Proxy Proposal (3).
---------------------------------------------------------
(2) TO AMEND THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO AUTHORIZE A
TOTAL OF 200,000,000 SHARES OF COMMON STOCK, TO AUTHORIZE 20,000,000 SHARES OF
PREFERRED STOCK AND TO RESET THE PAR VALUE OF PREFERRED STOCK.
---------------------------------------------------------
DESCRIPTION AND EFFECT OF THE AMENDMENT
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the stockholders for approval, a
proposal to amend the Certificate of Incorporation.
The Board of Directors of the Company recommends the approval of the
proposed amendment to increase the number of authorized shares of the Company's
common stock par value $.01 to 200,000,000 authorized shares par value $.01 per
share, to authorize 20,000,000 shares of preferred stock and to reset the par
value of preferred stock at $.01 per share of preferred stock. The proposed
Amendment would amend the Fourth Article of the Certificate of Incorporation as
amended of American Independent Network, Inc. to authorize 200,000,000 shares of
common stock par value $.01 and to the par value of preferred stock at $.01 per
share of preferred stock. Such an Amendment requires the affirmative vote of a
majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting.
<PAGE>
PRINCIPAL REASONS FOR THE AMENDMENT
The Board of Directors believes it is desirable to increase the number of
authorized shares of the Company's common stock to 200,000,000 shares.
Currently, the Company has 20,000,000 shares of common stock authorized. The
Board of Directors believes that the business expansion plans of the Company,
including the proposed merger between the Company and HTV, will be furthered by
an increase in the number of authorized shares of common stock. As set forth in
Proxy Proposal (3), the stockholders of the Company will vote on the
ratification of the Board's decision to merge with HTV. The Shareholders of HTV
will receive a total of 70,000,000 shares of common stock of the Company if the
merger is approved, and the Company will then own 100% of HTV.
The Board of Directors believes it is desirable reset the par value of
preferred stock at $.01 per share of preferred stock as a way of reducing the
Company's Delaware franchise taxes. Currently, the preferred par value is $1.00
per share.
The Board of Directors believes it is desirable to increase the number of
authorized shares of the Company's preferred stock to 20,000,000 shares.
Currently, the Company has 10,000,000 shares of preferred stock authorized. The
Board of Directors believes that the business expansion plans of the Company
will be furthered by an increase in the number of authorized shares of preferred
stock.
THE AMENDMENT TO CERTIFICATE OF INCORPORATION
The proposed Amendment to the Fourth Article will be as follows:
FOURTH:
(a) This Corporation is authorized to issue two classes of capital stock
designated respectively "Common Stock" and "Preferred Stock" and referred to
either as Common Stock or Common shares and Preferred Stock or Preferred shares,
respectively.
(b) The number authorized of shares of Common Stock is 200,000,000 shares of
common stock, par value $.01 per share. No share of common stock shall be
issued until it has been paid for and it shall thereafter be non- assessable.
(c) The number authorized of shares of Preferred Stock is 20,000,000 shares
of preferred stock, par value $.01 per share. The Preferred shares may be issued
from time to time in one or more series. The Board of Directors is authorized to
fix the number of shares of any series of Preferred shares and to determine the
designation of any such series. The Board of Directors is also authorized to
determine or alter the rights, preferences, privileges and restrictions granted
or imposed upon any wholly unissued series of Preferred shares and, within the
limits and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, to
increase or decrease (but not below the number of shares then outstanding) the
number of shares in any such series subsequent to the issue of shares of that
series.
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR AMENDING THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF THE COMPANY'S COMMON STOCK TO 200,000,000 AUTHORIZED SHARES, TO
AUTHORIZE 20,000,000 SHARES OF PREFERRED STOCK AND TO RESET THE PAR VALUE OF
PREFERRED STOCK.
Description of the Company's Common Stock. The Company's Certificate of
--------------------------------------------
Incorporation presently authorize 20,000,000 shares of common stock. The
holders of common stock are entitled to one vote per share with respect to all
matters required by law to be submitted to stockholders of the Company,
including the election of directors. The common stock does not have any
cumulative voting, preemptive, subscription or conversion rights. The election
of directors and other general stockholder action requires the affirmative vote
of a majority of shares represented at a meeting in which a quorum is
represented, except that pursuant to the Bylaws a consent to corporate action by
a majority of stockholders entitled to vote on a matter is permitted. The
outstanding shares of common stock are validly issued, fully paid and
non-assessable.
The holders of common stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefor
only after accrued dividends are paid to holders of preferred stock and other
senior securities. In the event of liquidation, dissolution or winding up of
the affairs of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them subject to
the rights of holders of preferred stock and other senior securities.
Description of the Company's Series B Preferred Stock. The Company's
-----------------------------------------------------------
Certificate of Incorporation presently authorize 10,000,000 shares of preferred
stock. Presently, there are outstanding 42,427 shares of Series B Preferred
Stock par value $1.00 per share. Series B Preferred Stock has a liquidation
preference of $10.00 per share, and has a preference to receive
a dividend of $.585 per share before a dividend is paid on common stock, but
only if the board of directors declares a dividend. Series B Preferred Stock
has no voting rights. The Company may redeem any or all Series B Preferred
Stock . Each share of Series B Preferred Stock may be converted into two shares
of common stock.
---------------------------------------------------------
(3) TO RATIFY THE BOARD'S DECISION TO MERGE
WITH HISPANO TELEVISION VENTURES, INC. AND
TO RATIFY THE MERGER AGREEMENT
---------------------------------------------------------
<PAGE>
Required Vote. The Company and Hispano Television Ventures, Inc. ("HTV")
--------------
have entered into a merger agreement which is subject to approval by
stockholders of the Company and is the subject of this Proxy Proposal (3). The
Board of Directors unanimously adopted a resolution declaring the advisability
of, and the Board submits to the stockholders for approval, this Proxy Proposal
to merge with HTV. HTV would be merged into the Company. The merger would
result in the Company being the surviving entity. This Proxy Proposal (3) is
subject to the adoption of Proxy Proposal (2).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE BOARD'S DECISION TO MERGE WITH HISPANO TELEVISION VENTURES, INC.
DELAWARE APPRAISAL. Stockholders who do not vote in favor of Proposal 4
and who otherwise comply with the provisions of Section 262 of the General
Corporation Law of the State of Delaware (the "DGCL") will, under certain
circumstances if the Merger is consummated and completed, have the right to
dissent and to demand appraisal of the fair market value of their shares. See,
"Rights of Dissenting Stockholders." A copy of Section 262 is attached to this
Proxy Statement as Attachment "B".
This Proxy Statement contains or incorporates by reference information
about the Company as of the date hereof. See "Available Information" and
"Incorporation of Certain Documents by Reference."
This Proxy Statement contains or incorporates by reference information
about the Company as of the date hereof. See "Available Information" and
"Incorporation of Certain Documents by Reference."
History of the Relationship Between the Company and HTV. P. Alan Luckett
---------------------------------------------------------
is a control person of Hispano Television Ventures, Inc. ("HTV"). As a result
of a matter decided in binding arbitration, the Company had been a judgment
debtor in a judgment styled as Showplace Video v. American Independent
Network, Inc., No. 98-2154-E, County Court At Law No. 5, Dallas County,
Texas. In 1998, P. Alan Luckett purchased the judgment and released it in
exchange for 500,000 shares of common stock of the Company, and for access to
the digital uplink equipment of the Company, certain bandwidth of the satellite
transponder the Company leased, and the right of first refusal on the Company's
transponder rights and equipment leases in the event that the Company ceases
operations.
In August, 1999, the Company entered into an Asset Transfer Agreement (the
"Asset Transfer Agreement") with HTV whereby HTV agreed to pay certain
obligations of the Company totaling $82,500, and the Company agreed to repay
this amount to HTV on or before August 20, 1999 and to give HTV eight months of
free use of the satellite uplink equipment and the satellite transponder, both
of which the Company leases from third parties.
<PAGE>
The Asset Transfer Agreement provided that if the Company did not meet the
terms of the Asset Transfer Agreement, then the Company would be obligated to
immediately transfer and assign to HTV: (i) the leases to the uplink equipment
and the satellite transponder; and, (ii) the Company's FCC Radio Station
Authorization (the "Earth Station License"), which was granted to the Company in
1997. The Earth Station License authorizes the Company to build and operate a
domestic fixed transmit/receive C-band earth station uplink system on the
Company's premises. The Earth Station License expires in July, 2007. The
Company has not yet built the earth station uplink system.
The Asset Transfer Agreement provided that if the asset transfer was
effectuated, HTV would allow the Company to use the transferred assets for a
satellite usage fee of $22,500 per month, with one month of free usage, and the
Company would be able to continue providing its programming to its network
affiliates.
The leases to the uplink equipment and the satellite transponder, and the
Earth Station License were material and major assets of the Company. The
Company did not repay HTV. Moreover, the asset transfer has not been
effectuated at this time. The merger agreement described in Proxy Proposal (3)
sets forth that upon the Effective Date of the merger, the $82,500 owed to HTV
by the Company will be extinguished.
In August, 1999, the Company and HTV entered into discussions about future
financing and the desirability of a business combination. During this period,
the Company was unable to make lease payments for its facilities, and the
landlord made a new lease with HTV for the facility.
On September 2, 1999, the Company closed a transaction (the "HTV
Transaction") whereby the Company issued and sold 11,000,000 shares of its
common stock to HTV for $500,000 in cash. The Company believes that HTV issued
convertible debt to pay for these shares. HTV now owns approximately 57.9% of
the presently outstanding shares of common stock of the Company. As part of the
HTV Transaction, HTV will assist in the operations of the Company on an interim
basis.
In connection with the HTV Transaction, HTV proposed a merger with the
Company. The HTV Transaction set forth in the form of non-binding provisions
what may be characterized as a non-binding letter of intent which was subject to
a definitive agreement yet to be negotiated whereby HTV and the Company would
enter into a merger with the Company as the surviving corporation. These
non-binding provisions served as an outline (subject to negotiation) of the
terms of the merger.
During September, 1999, the Company and HTV negotiated a definitive Merger
Agreement, which was approved by the Company's Board of Directors on October 12,
1999, and by the Board of Directors of HTV on October 12, 1999. The Company and
HTV signed the merger agreement on October 14, 1999. The most recent quote on
the Company's common stock prior to October 14, 1999, was on October 12, 1999,
when the high bid price of the Company's stock was $.75 and the low bid price
was $.125.
<PAGE>
The merger is subject to stockholder approval of this Proxy Proposal (3),
which is itself subject to stockholder approval of Proxy Proposal (2). The
Company has received a written valuation analysis from Business Valuation
Services, Inc. This analysis sets forth the fair market value of 100% of the
common equity of the Company on a controlling interest basis. A copy of this
valuation analysis is attached as Attachment "C". See, "Valuation Analysis."
The merger may not occur for a period of several months subsequent to the
Annual Meeting, and the information regarding the Company and HTV is likely to
change materially from that contained or incorporated by reference herein.
Regardless of any changes in the information, the Company's stockholders will
not be entitled to another vote on the Proxy Proposals.
Reasons for the Merger. HTV is a media firm which owns: 100% of a
-------------------------
television station in Phoenix, AZ, 89% of a television station in Oklahoma City,
---
OK, broadcast equipment and a video library. The business of HTV includes
television programming targeting the Hispanic market. These assets and the
business of HTV would be owned by the Company as a result of the merger. The
Company operates a television network. This merger would increase the Company's
scope of media activities, which is the reason for engaging in the merger. For
example, as a result of the merger, the Company would be able to utilize the
broadcast assets of HTV, and HTV would be able to use the television network
distribution capabilities of the Company. The merger would result in the
extinguishment of $332,500 of the Company's debt. The Company believes that
HTV's management will remain after the merger and that this will increase the
Company's management depth.
Identification.
--------------
The Company is located at:
American Independent Network, Inc.
6125 Airport Freeway, Suite 200
Haltom City, TX 76117
(817) 222-1234
Hispano Television Ventures, Inc. is located at:
American Independent Network, Inc.
6125 Airport Freeway, Suite 200
Haltom City, TX 76117
(817) 222-1234
<PAGE>
Description of Merger. The merger agreement between the Company and HTV is
---------------------
attached to this Proxy Statement as Attachment "A". HTV would be merged into
the Company. The merger would result in the Company being the surviving entity.
Pursuant to the merger Agreement, the stockholders of HTV would receive a total
of 70,000,000 shares of common stock of the Company. HTV presently owns
11,000,000 shares of common stock of the Company, and these 11,000,000 shares
would be returned to the Company for cancellation or held as treasury stock by
the Company. After the merger, assuming that there have been no intervening
purchases or sales of the Company's common stock by HTV (and assuming that the
Company has not issued any additional authorized shares), HTV shareholders would
own 70,000,000 shares of common stock, or approximately 89.8% of the then
outstanding common stock of the Company.
Termination. The merger agreement sets forth the circumstances under which
-----------
the merger agreement may be terminated, which are, among other things, by mutual
consent of the parties, by the breach of material representations, warranties
and covenants by either party, by either party if the Company of the merger
shall not have occurred by November 30, 1999, and by either party if the
shareholders of the Company or HTV do not approve the merger.
Conditions to the Merger. The merger is subject to various conditions
---------------------------
relating to, among other things, the approval of stockholders of the Company and
HTV, the transfer to the Company, pursuant to FCC procedure, of the television
station licenses held by HTV, Hart-Scott-Rodino Act clearance, the conversion of
HTV convertible securities into HTV common stock by HTV holders, the Company
being released from $250,000 in debt which the Company presently owes to Messrs.
Bryant and Luckett, the extinguishment of $82,500 owed to HTV by the Company,
and the receipt by HTV of a written valuation analysis by a valuation
consultant.
Representations, Warranties and Covenants. In the merger agreement, the Company
- -----------------------------------------
and HTV each make various representations, warranties and covenants relating to,
among other things, its organization and qualification, capitalization,
authority, required consents, financial statements, books and records, the
absence of changes and undisclosed liabilities, receivables, suppliers and
customers, indebtedness, litigation, tax matters, employee benefit plans,
employment matters, contracts, compliance with laws, insurance, intellectual
property, regulatory actions, properties and title to assets, affiliated
transactions, accounting treatment, operation of business and takeover statutes.
Additional Agreements. The merger agreement sets forth additional
----------------------
agreements relating to, among other things, changing the name of the Company to
---
Hispanic Television Network, Inc., and restrictions on the transfer of shares to
be issued to the stockholders of HTV.
<PAGE>
Exchange Ratio. The Company will exchange 1.640624949 shares of its common
--------------
stock for each one share of HTV common stock. At the consummation and
completion of the merger, each outstanding share of HTV common stock will be
automatically converted into the right to receive validly issued, fully paid and
nonassessable shares of the Company's common stock in the ratio of 1.640624949
shares of the Company's common stock for each one share of HTV common stock. If
shares representing 100% of the shares of HTV are exchanged, the Company will
exchange a total of 70,000,000 shares of the Company for 100% of the shares of
HTV.
Manner and Basis for Converting Shares. Upon the consummation and
-------------------------------------------
completion of the merger, each HTV stockholder shall be entitled, upon surrender
thereof to the transfer agent for the Company's common stock, to receive in
exchange therefor a certificate or certificates representing the number of whole
shares of the Company's common stock into which the HTV common stock so
surrendered shall have been converted as aforesaid, in such denominations and
registered in such names as the stockholder may request. Until so surrendered,
each outstanding certificate that prior to the consummation and completion of
the merger represented HTV common stock shall be deemed from and after the date
of the consummation of the merger to evidence the right to receive that number
of full shares of the Company's common stock into which such HTV common stock
shall have been converted pursuant to the merger agreement.
Unless and until any such outstanding certificates shall be surrendered, no
dividends or other distributions payable to the holders of HTV common stock, as
of any time on or after the date of the consummation of the merger, shall be
paid to the holders of such outstanding certificates which represented HTV
common stock; provided, however, that upon surrender and exchange of such
outstanding certificates, there shall be paid to the record holders of the
certificates issued and exchanged therefor the amount, without interest thereon,
of dividends and other distributions, if any, that theretofore were declared and
became payable since the date of the consummation of the merger with respect to
the number of full shares of the Company's common stock issued to such holders.
If any certificate for shares of the Company's common stock is to be issued
in a name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange shall have paid
to the Company or its transfer agent any transfer or other taxes required by
reason of the issuance of a certificate for shares of the Company's common stock
in any name other than that of the registered holder of the certificate
surrendered, or established to the satisfaction of the Company or its transfer
agent that such tax has been paid or is not payable. No fraction of a share of
the Company's common stock shall be issued, but in lieu thereof, each
Stockholder who would otherwise be entitled to a fraction of a share of the
Company's common stock shall, upon surrender of the shares of HTV common stock
to the transfer agent for the Company, be paid an amount in cash (without
interest) equal to the value of such fraction of a share based upon the average
daily closing bid price per share of the common stock as reported on the Over
The Counter Bulletin Board for the day preceding the date of the consummation
of the merger.
<PAGE>
Securities of HTV. HTV is a privately owned firm and there is no public
-------------------
market for its securities. HTV presently has approximately 7 stockholders. HTV
has not paid a dividend on its securities. HTV has approximately 18
noteholders. As a result of the merger, most, if not all, of these noteholders
are expected to ultimately convert the notes into preferred stock of HTV, then
into common stock of HTV and thereafter into common stock of the Company.
Securities and Reporting by the Company. There are no material
--------------------------------------------
differences in the rights of security holders of the Company as a result of this
transaction. As a result of the merger, stockholders of the Company will not
receive any securities of the Company in connection with their being
stockholders of the Company. The Company is not in arrears or defaults in
connection with any of its securities. The Company currently files periodic
reports pursuant to Regulation S-B with the Securities and Exchange Commission.
Description of the Company's Common Stock. The Company's Certificate of
--------------------------------------------
Incorporation presently authorize 20,000,000 shares of common stock. If Proxy
Proposals 2 and 3 are approved, the authorized common stock of the Company will
consist of 200,000,000 shares of common stock, par value $.01, of which
approximately 78,007,466 shares of common stock will be outstanding as of the
Effective Time of the merger. The holders of common stock are entitled to one
vote per share with respect to all matters required by law to be submitted to
stockholders of the Company, including the election of directors. The common
stock does not have any cumulative voting, preemptive, subscription or
conversion rights. The election of directors and other general stockholder
action requires the affirmative vote of a majority of the shares of common
stock. The outstanding shares of common stock are validly issued, fully paid
and non-assessable.
The holders of common stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefor
only after accrued dividends are paid to holders of preferred stock and other
senior securities. In the event of liquidation, dissolution or winding up of
the affairs of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them subject to
the rights of holders of preferred stock and other senior securities.
Accounting Treatment. This merger is being accounted for as a pooling of
---------------------
interests.
Independent Auditor. Jack F. Burke, Jr. serves as the Company's
--------------------
independent auditor for the current year, and has been the Company's independent
--
auditor for the years ended December 31, 1998 and 1997. A representative of Jack
F. Burke, Jr. is not expected to be present at the Annual Meeting, and
therefore is not expected to make any statements nor be available to respond to
questions from stockholders. The Company has had no changes or disagreements
with accountants on the accounting and the financial disclosure of the Company
during the past two years. HTV has no audited financial statements.
<PAGE>
Federal Income Tax Consequences of the Merger. The following discussion
------------------------------------------------
describes certain U.S. federal income tax consequences of the proposed merger to
stockholders of the Company to stock holders of HTV who, pursuant to the merger,
exchange their HTV stock solely for the Company's common stock. In general, the
federal income tax consequences of the proposed merger will vary among
stockholders. In general, the receipt of cash by a stockholder pursuant to the
merger or the exercise of appraisal rights, will be taxable events for the
stockholder for federal income tax purposes and may also be taxable events
under applicable local, state and foreign tax laws. The tax consequences for a
particular stockholder will depend upon the facts and circumstances applicable
to that stockholder. Accordingly, each stockholder should consult the holder's
own tax adviser with respect to the federal, state, local or foreign tax
consequences of the Merger.
In addition, the actual consequences for each stockholder will be governed
by the specific facts and circumstances pertaining to his ownership of the
common stock. Thus, the Company recommends that each stockholder consult with
his tax advisor concerning his own personal tax situation. The Company has not
sought and will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the proposed
merger. However, the Company believes that because the proposed merger is not
part of a plan to periodically increase a stockholder's proportionate interest
in the assets or earnings and profits of the Company, the proposed merger
probably will constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986 and the Company will not recognize any gain
or loss as a result of the proposed merger.
Approval Under the Hart-Scott-Rodino Act. The consummation of this merger
------------------------------------------
may be subject to the notification filing requirements, applicable waiting
periods and possible review by the U.S. Department of Justice or the U.S.
Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR"). The U.S. Department of Justice review of certain
transactions may cause delays in anticipated closing of the merger and may
result in attempts by the U.S. Department of Justice to enjoin the merger or
negotiate modifications to the proposed terms. The obligations of the Company
and HTV to consummate and complete the merger are conditioned upon there being
no adverse regulatory measures under HSR. The Company and HTV will file the
notice required by HSR. The Company cannot predict the outcome of the
regulatory review of the merger or if the merger will be subject to regulatory
conditions, in sufficient time for the merger to be consummated and completed
in a timely manner, or at all.
FCC Approval. The obligations of the Company and HTV to consummate and
-------------
complete the merger are conditioned upon the transfer to the Company, pursuant
to FCC procedure, of the television station licenses held by HTV.
<PAGE>
Valuation Analysis. The Company has received a valuation analysis related
-------------------
to the merger from Business Valuation Services, Inc., which has no material
interest in the merger. Business Valuation Services, Inc. is qualified to give
a this analysis. Business Valuation Services, Inc. was selected to give the
analysis because of the expertise in business valuation. Business Valuation
Services, Inc. has performed many valuation analyses for many clients over many
years of service. Other than this analysis, Business Valuation Services, Inc.
has had no material relationship with any party to the merger. In connection
with the analysis, Business Valuation Services, Inc. will receive $12,000 in
compensation from the Company. The amount of consideration paid to the
stockholders of HTV by the Company pursuant to the merger was negotiated by and
between the Company and HTV. Business Valuation Services, Inc. did not
recommend the amount of consideration.
Summary of the Valuation Analysis. In preparing the valuation analysis
-------------------------------------
Business Valuation Services, Inc. reviewed and analyzed the Company's financial
information, discussed the Company with present and former management, legal
counsel and accountant, reviewed the Company's schedules of accounts and notes
payable, reviewed documents related to the Company's operations, and reviewed
the financial results of unrelated public television companies. The valuation
analysis sets forth that the value of the Company's assets are approximately $1
million at October 12, 1999, but that the Company is financially distressed
because the Company is unable to meet the current requirements of its hard
contracts. The valuation sets forth that the Company's ability to respond to
its financial distress is restricted and unlikely to emerge from financial
distress. The valuation analysis concludes that the fair market value of the
common equity of the Company is $-0-. at October 12, 1999. Business Valuation
Services, Inc. made only a limited investigation as to the accuracy and
completeness of the information provided by the Company. The Company set no
limitations nor gave any limiting instructions to Business Valuation Services,
Inc. as to the scope of the valuation analysis.
Restrictions on Resales By HTV Stockholders and Affiliates. The shares of
-----------------------------------------------------------
the Company issued to HTV stockholders in the merger will not be registered
under Securities Act, and the shares will be restricted securities as that term
is defined in Rule 144 under the Securities Act and may be resold by the HTV
stockholders only in transactions permitted by the resale provisions of Rule 144
under the Securities Act, or as otherwise permitted under the Securities Act.
Effective Time of Merger. The merger will be effective as of the date and
-------------------------
time of filing of a Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the provisions of the DGCL and with the
Secretary of State of the State of Texas in accordance with the provisions of
the Texas Business Corporations Act ("TBCA"), or as otherwise provided in the
Certificate of Merger.
The merger may not occur for a period of several months subsequent to the
Annual Meeting, and the information regarding the Company and HTV is likely to
change materially from that contained or incorporated by reference herein.
Regardless of any changes in the information regarding the Company and HTV, the
Company's stockholders will not be entitled to another vote on the proposals
contained herein.
<PAGE>
Interests of Certain Persons in the Merger. P. Alan Luckett is a control
--------------------------------------------
person and stockholder of HTV. Bob J. Bryant is a stockholder of HTV. Messrs.
Douglas K. Miller, James A. Ryffel, and Bob J. Bryant are noteholders of HTV and
they will ultimately convert the notes into preferred stock of HTV, then into
common stock of HTV and thereafter into common stock of the Company in
connection with the merger. Each of these persons will receive shares of the
Company as a result of the merger. As a condition to the merger, Messrs.
Luckett and Bryant have agreed to release the Company from $250,000 in debt
which the Company presently owes to Messrs. Bryant and Luckett.
Available Information About the Company. The Company is subject to the
-------------------------------------------
information requirements of the Exchange Act, and in accordance therewith files
reports, proxy statements and other information with the SEC. The reports,
proxy statements and other information filed by the Company with the SEC can be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the following Regional Offices of the SEC: Seven World Trade Center, 13th
Floor, New York, New York 10048 and Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of the material also can
be obtained from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Company is an electronic
filer under the EDGAR (Electronic Data Gathering, Analysis and Retrieval)
system maintained by the SEC. The SEC maintains a Web Site
(http://www.sec.gov) on the Internet that contains reports, proxy and
information statements and other information regarding companies that file
electronically with the SEC.
Information About the Company and Incorporation of Certain Documents by
---------------------------------------------------------------------------
Reference. The following sets forth information about the Company. Also,
information about the Company is incorporated herein by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998,
which is being provided to stockholders along with this Proxy Statement.
<PAGE>
BUSINESS OF THE COMPANY
Introduction
The Company operates a television network called the American Independent
Network. The Company has entered into agreements to provide television
broadcast stations with programming (television shows) for digital television
broadcasting. Such agreements typically provide that the Company retains
certain of the advertising time and advertising revenues generated from the
programming. At October 13, 1999, the Company provides programs to
approximately 25 broadcast stations and expects to program additional television
stations in the future either as affiliates of the Company's American
Independent Network, a television network, or through arrangements called Local
Marketing Agreements ("LMAs"). Currently, television LMAs are not considered
attributable interests under Federal Communications Commission ("FCC") multiple
television station ownership rules. However, the FCC is considering proposals
which would make LMAs attributable. If the FCC were to adopt an order that
makes such interests attributable, the Company could be prohibited from entering
into such LMAs with other stations in markets in which it already has an LMA
with another television station. The Company also owns a fractional interest in
each of three permits to construct and operate low power t.v. stations.
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, the Company
changed its name to American Independent Network, Inc. (the "Company" ). 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 March 1994, the Company began providing programming, media
production, and syndication services to television 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.
<PAGE>
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 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.
Company Affiliates
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 rebroadcast
the signal to their viewers through their analog transmitter. To enable the
Affiliate Stations to decompress the digital signal, the Company furnished each
Affiliate Station with digital decoding equipment. However, due to the costs of
providing the decoding equipment, the Company was not able to furnish the
necessary equipment to all of its existing Affiliate Stations. In addition,
Internet users 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.
Program Inventory
The Company acquires 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
<PAGE>
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 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 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 2,000 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 network to compress multiple
digital channels into the bandwidth currently required for a single analog
channel, thereby permitting the network to significantly expand its current
channel capacity with a much lower capital investment than would be required
lease individual analog channels. As a result of the conversion to digital
transmission, the Company was able to expand its single channel to a total of
five channels.
<PAGE>
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.
Marketing Strategy; Principal Markets and Customers
The Company generate revenues by: (i) the sale of its programming; and,
(ii) the sale of commercial advertising time within the programming.
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 is targeting as good
candidates for affiliation with the Company.
Programming--Customers: The Company's potential customers for its
programming includes all television and cable stations. 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 generally
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.
<PAGE>
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 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 programs. 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.
Advertising Sales, 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.
Advertising--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.
Advertising--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. Advertising time is generally a component of the
programming contract with Affiliate Stations, accordingly, the Company is not
required to separately market the advertising time to Affiliate Stations.
<PAGE>
Advertising--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
demographic market areas ("DMA") in order to obtain Nielsen ratings to allow the
Company to charge higher rates for their advertising time. Presently, the
Company has Affiliate Stations in 3 of the top 25 DMAs and 5 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.
<PAGE>
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
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 3 of the top 30 DMAs and broadcasts to an aggregate of
approximately 5,983,060 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.
<PAGE>
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 18-inch dish.
The Company is not dependant upon any one station for a significant
portions of 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. 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.
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. This authorization is
to be transferred to HTV.
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.
<PAGE>
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 8 full 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.
Going Concern Qualification by Independent Auditors
The Company's independent auditors have reported that the Company has
suffered recurring net operating losses and has a current ratio deficit that
raises substantial doubt about its ability to continue as a going concern.
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.
<PAGE>
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 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.
Important Events
Field of Cotton, L.P. On July 29, 1999, the Company effectuated an
-----------------------
agreement with Field of Cotton, L.P. whereby Field of Cotton, L.P. purchased
6,500,000 shares of common stock of the Company for a total consideration of
$4,250,000, in the form of a promissory note in the principal amount of
$4,022,600, and $227,400 in cash in the form of funds previously provided to the
Company by Field of Cotton, L.P. in 1999.
Subsequently, on August 20, 1999, Field of Cotton, L.P. announced that it
would not be able to provide the financing set forth in the stock purchase
agreement. The Company and Field of Cotton, L.P. also agreed in principal that
Field of Cotton, L.P. would have the right to air programming on the Company's
network under certain conditions during the next three years with a standard
barter arrangement for advertising time for Field of Cotton, L.P. on programming
provided by Field of Cotton, L.P. The agreement in principal further provides
that 275,000 shares of common stock of the Company be issued to Kris Lamans, the
General Partner of Field of Cotton, L.P. as compensation for his efforts on the
Company's behalf from April through August, 1999, and that Mr. Lamans be granted
an option to purchase up to 275,000 shares at an exercise price of $1.50 per
share expiring on the earlier of August 20, 2001 or six months after the bid
price of the stock is $1.50 or greater. This agreement in principal is subject
to a definitive agreement.
Transactions with Hispano Television Ventures, Inc. In August, 1999, the
----------------------------------------------------
Company entered into an Asset Transfer Agreement with HTV whereby HTV agreed to
pay certain obligations of the Company totaling $82,500, and the Company agreed
to repay this amount to HTV on or before August 20, 1999 and to give HTV eight
months of free use of the satellite uplink equipment and the satellite
transponder, both of which the Company leases from third parties.
The Asset Transfer Agreement provided that if the Company did not meet the
terms of the Asset Transfer Agreement, then the Company is obligated to
immediately transfer and assign (the "Asset Transfer") to HTV: (i) the leases to
the uplink equipment and the satellite transponder; and, (ii) the Company's FCC
Radio Station Authorization (the "Earth Station License"), which was granted to
the Company in 1997. The Earth Station License authorizes the Company to build
and operate a domestic fixed transmit/receive C-band earth station uplink system
on the Company's premises. The Earth Station License expires in July, 2007.
The Company has not yet built the earth station uplink system.
<PAGE>
The Asset Transfer Agreement provided that if the Asset Transfer is
effectuated, HTV would allow the Company to use the transferred assets for a fee
of $22,500 per month, with one month of free usage, and the Company would be
able to continue providing its programming to its network affiliates.
The leases to the uplink equipment and the satellite transponder, and the
Earth Station License were material and major assets of the Company.
At August 23, 1999, the Company has not repaid HTV and therefore the
Company was in default.
On September 2, 1999, American Independent Network, Inc. (the "Company")
closed a transaction (the "HTV Transaction") whereby the Company issued and sold
11,000,000 shares of its common stock to HTV for $500,000 in cash. The Company
believes that HTV issued convertible debt to pay for these shares. HTV now owns
approximately 57.9% of the presently outstanding shares of common stock of the
Company.
The asset transfer has not been effectuated at this time. As part of the
HTV Transaction, HTV will assist in the operations of the Company on an interim
basis.
PROPERTY OF THE COMPANY
The Company's principal offices are located at 6125 Airport Freeway, Haltom
City, Texas 76117. The premises measure approximately 13,900 square feet and is
used for the Company's general office and administrative purposes, as well as
for television programming services, warehouse needs and full-service television
studio production. Presently, HTV allows the Company to use this location at no
charge on a month to month basis. The Company believes that its space is
adequate for its current and future needs.
LEGAL PROCEEDINGS OF THE COMPANY
1. The Company is a party in litigation styled Bowne of Los Angeles, Inc. v.
American Independent Network, Inc., No. 236-177164-99, 236th Judicial District
Court of Tarrant County, Texas. This is a suit on a sworn account in the amount
of approximately $34,056. Bowne has filed a motion for summary judgment. The
Company intends to mount a vigorous defense.
<PAGE>
2. The Company is a party in litigation styled WorldCom Inc. v. American
Independent Network, Inc., No. 98-05447-1. This suit is for breach of contract
for approximately $76,000. This matter is in the discovery phase. The Company
has countersued for $2,500,000. The Company intends to vigorously oppose this
litigation.
3. The Company is a judgment debtor in litigation styled Ira Weingarten
d/b/a Equity Communications v. American Independent Network, Inc., No. 222751,
in Santa Barbara County Superior Court, Anacapa Division, California. A
judgment in the amount of $59,625 has been entered against the Company. This
was a suit for beach of contract.
4. The Company is a party in litigation styled American Independent Network,
Inc. v. Charles Coburn, No. 4-98 CV-784-A, U.S. District Court, Northern
District of Texas, Ft. Worth Division. This suit is for breach of contract and
fraud. This matter has been settled and the Company expects a mutual release to
be signed shortly.
5. The Company is a party in litigation styled American Independent Network,
Inc. v. Knapp Petersen and Clarke, No. 4-99CV-0124P, U.S. District Court,
Northern District of Texas, Ft. Worth Division and the case was recently
transferred to the Southern District of California. This suit relates to fees
for legal services. This matter is subject to a binding arbitration agreement.
6. As a result of a matter decided in binding arbitration, the Company had
been a judgment debtor in a judgment styled as Showplace Video v. American
Independent Network, Inc., No. 98-2154-E, County Court At Law No. 5, Dallas
County, Texas. In 1998, Alan Luckett purchased the judgment and released it in
exchange for 500,000 shares of common stock of the Company, and for access to
the digital uplink equipment of the Company, certain bandwidth of the satellite
transponder the Company leases, and the right of first refusal on the Company's
transponder rights and equipment leases in the event that the Company ceases
operations. Also in connection with the release of judgment, Randy Moseley
turned over 719,618 shares, which he owned, to the Company for cancellation,
and, Don Shelton, a former director and executive officer of the Company, turned
over 719,618 shares, which he owned, to the Company for cancellation.
7. The Company is a judgment debtor in the amount of $11,921 in favor of
Witwer, Poltraock & Giampietro in a matter styled Witwer, Poltraock & Giampietro
v. American Independent Network, Inc., No. 98M1152998, Circuit Court of Cook
County, Illinois, Municipal Department, First District. This was a suit for
legal fees.
8. The Company is a judgment debtor in the amount of $ 90,000 in favor of
New Image Video, Inc. in a matter styled New Image Video, Inc. v. American
Independent Network, Inc., No. CJ-94-7030-66 in the District Court of Oklahoma
County, Oklahoma. This was a breach of contract suit.
<PAGE>
9. The Company is a judgment debtor in the amount of $ 18,000 in favor of
Tarrant County, Texas for unpaid personal property taxes in Tarrant County,
Texas, in a matter styled Tarrant County v. American Independent Network, Inc.
No. E12675-97 236th Judicial District Court of Tarrant County, Texas. This
Company still owes $3,500 of a settlement amount.
10. The Company is a judgment debtor in the amount of $ 29,862 in favor of
Hall, Estill, Hardwick Gable in a matter styled Hall, Estill, Hardwick Gable v.
American Independent Network, Inc. No. CJ-98-1217, in the District Court of
Oklahoma County, Oklahoma. This was a suit for legal fees.
11. During the last quarter of 1998, the Company issued 680,000 shares of
common stock to Data West and John Priscella pursuant to an agreement to arrange
for financing for the Company. No financing was arranged. The Company intends
to pursue its claim against Data West and John Priscella to recover these shares
of common stock or have them paid for pursuant to the agreement.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS OF THE COMPANY
The Company's common stock is traded on the OTCBB under the symbol "AINW".
No trades were reported prior to October, 1998. the quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK PRICE RANGE
HIGH LOW
BID BID
------ ------
<S> <C> <C>
Quarter Ended
December 31, 1998. $ 1.00 $ .125
March 31, 1999 . . $2.125 $ .625
June 30, 1999. . . $2.125 $.3125
September 30, 1999 $.9375 $ .125
</TABLE>
<PAGE>
On October 12, 1999, the low bid price of the Company's common stock on the
OTCBB was $.125. On October 12, 1999, there were approximately 843 stockholders
of record of the common stock.
In November, 1998, the Company effectuated a 1:5 reverse stock split. All
references to share amounts in the Proxy Statement reflect post-reverse-split
share amounts.
Transfer Agent
The transfer agent and registrar for the Company's Common Stock is Liberty
Transfer Company, 191 New York Avenue, Huntington, NY 11743, tel. (516)
385-1616.
Dividend Policy
The Company has not paid, and the Company does not currently intend to pay
cash dividends on its common stock in the foreseeable future. The current
policy of the Company's Board of Directors is to retain all earnings, if any, to
provide funds for operation and expansion of the Company's business. The
declaration of dividends, if any, will be subject to the discretion of the Board
of Directors, which may consider such factors as the Company's results of
operations, financial condition, capital needs and acquisition strategy, among
others.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY
The following discussion should be read in conjunction with the financial
statements and notes thereto for the years ended December 31, 1998 and 1997, and
the quarter ended June 30, 1999.
Forward Looking Statement and Information
<PAGE>
This Management Discussion and Analysis contains various forward looking
statements which represent the Company's expectations or beliefs concerning
future events and involve a number of risks and uncertainties. Important
factors that could cause actual results to differ materially from those
indicated include risks and uncertainties relating to demographic changes;
existing government regulations and changes in, or the failure to comply with
government regulations; competition; the loss of any significant numbers of
subscribers or viewers; changes in business strategy or development plans;
technological developments and difficulties (including any associated with the
Year 2000); the ability to attract and retain qualified personnel; significant
indebtedness; the availability and terms of capital to fund the expansion of our
businesses. The Company has no obligation to update or revise these forward
looking statements to reflect the occurrence of future events or circumstances.
General
The Company was founded on December 11, 1992 and provides programming, media
production and syndication services to television arid 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. In 1998, the
Company changed the name of its subsidiary to "Senior Channel, Inc."
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 25 broadcast television stations and cable systems
nationwide. The stations serviced by the Company are primarily "independent"
broadcast 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
Result of Operations -- The year ended December 31, 1998 compared to the year
ended December 31, 1997.
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 1998 were $377,380 compared to $1,243,145 for
1997, a decrease of $865,765 or 69.6%. The decrease in revenues resulted from a
decrease in leasing out of digital channels.
<PAGE>
Cost of Operations. Costs of operations were $772,512 for the 1998 fiscal
year and $957,715 for the 1997 fiscal year, a 19.3% decrease. The decrease in
1998 was due to a decrease in up-linking and programming expenses. The $221,861
(38%) decrease in up-linking expenses resulted from the reduction of the
Company's spectrum space on the satellite transponder. Programming expenses,
which include costs for program development, editing, videotapes and other
miscellaneous expenses, increased by $5,022 (4.1%) for fiscal year ended 1998 as
compared to the 1997 fiscal year. Programming costs increased as the Company's
cost of certain programs increased. Net rental expenses, which include office
space, office equipment, and company vehicles decreased by 4.3% in 1998 due to
the decrease in office equipment rental cost. Amortization of the Senior
Channel increased by $137,936 as 1998 was the first year of the Senior Channel.
The reserve for trade credits decreased by $125,138 as no addition to the
reserve established in 1997 was deemed necessary in 1998. Depreciation and
amortization of leasehold expenses increased by $21,743 (36.7%) in 1998 due to
the first full year of depreciation being taken on the digital compression
equipment.
General and Administrative. General and administrative expenses for the
fiscal year ended December 31, 1998 were $557,367, an increase of $118,135 or
26.9% more than administrative expenses of $439,232 for fiscal year 1997. The
general and administrative expenses represent 147.7% and 35.3% of revenues for
fiscal years 1998 and 1997, 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, and advertising and
promotional costs.
Interest expense for the fiscal year 1998 was $231,788 and for fiscal year
1997 was $381,654, a decrease of $149,866 or 39.3%. This decrease was due to
reduction in the outstanding balance on various bridge loans and Series B
Preferred Stock.
During 1998, at the election of the note holders, the Company converted an
aggregate approximate amount of $333,750 in outstanding debt and accrued
interest into Common Stock of the Company. As a result of the conversions, the
Company expects interest expense for 1999 to be correspondingly reduced.
Operating Results. The Company had a net operating loss of $2,172,507 for
fiscal year ended December 31, 1998. The loss for 1998 was primarily attributed
to the decrease of $860,000 in lease revenues from satellite channel space and
programming time sales, the provision for doubtful accounts in the amount of
$1,584,594, and the amortization of the Senior Channel investment of $137,936.
The Company had a net operating loss of $2,640,982 for fiscal year ended
December 31, 1997. The loss for 1997 was primarily attributed to a provision
for doubtful accounts in the amount of $l,584,594, a non-recurring expense in
the amount of $380,260 resulting from the conversion of Bride Loans to Common
Stock, and a reserve in the amount of $125,138 for trade credits.
<PAGE>
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 1998, the net loss per of common
stock was $0.59. The loss is reflective of the decrease in revenues and the
provision for doubtful accounts and amortization of the Senior Channel
investment.
For fiscal 1997, net loss per share of common stock was $0.18. The loss
for fiscal year 1997 is reflective of the provision for doubtful accounts and
the costs of converting Bridge Loans to Common Stock.
Result of Operations -- The six months ended June 30, 1999 compared to the six
months ended June 30, 1998.
Revenues. For the six months ended June 30, 1999, revenues were $73,464
and for the comparable six month period in 1998, revenues were $130,385. The
decrease in 1999 revenues was due primarily to a decrease in 1999 in satellite
channel lease revenues.
Cost of Operations. For the six months ended June 30, 1999 and June 30,
1998, cost of
operations were $393,034 and $365,078, respectively. The increase in cost of
operations for the six months ended June 30, 1999, is due primarily to an
increase in production expenses and depreciation and amortization.
General and Administrative. For the six months ended June 30, 1999 general
and administrative expenses were $95,740 and for the six months ended June 30,
1998, general and administrative expenses were $267,207. The decrease in
general and administrative expenses for the six months ended June 30, 1999 is
due primarily to decreases in legal expenses, labor, telephone, transportation,
office supplies and sales tax.
Operating Loss. For the six months ended June 30, 1999, the Company's
operating losses were $415,310 and for the comparable period in 1998, the
Company's operating losses were $501,900. The loss before income taxes and
extraordinary items for the six months ended June 30, 1999 was $540,207 as
compared to a loss before income taxes and extraordinary items for the six
months ended June 30, 1998 of $687,472. Net loss for the six months ended June
30, 1999 was $579,831 as compared to a net loss for the six months ended June
30, 1998 of $721,940. The decrease in the loss before income taxes and
extraordinary item in 1999 is due primarily to a decrease in general and
administrative expenses and a decrease in other expenses being more than the
decrease in revenues (caused by the decrease in satellite channel lease
revenues). There was also an increase in cost of conversion of bridge loans
and preferred stock.
<PAGE>
Net Loss. For the six months ended June 30, 1999 and March 31, 1998, net
loss per share was $.11 and $.04, respectively.
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 $6,308,230 from inception through December 31, 1998, and
cumulative losses of $6,888,061 from inception through June 30, 1999.
Current liabilities at December 31, 1998 were $2,508,921, which exceed
current assets of $42,595 by $2,466,326. At December 31, 1997, current
liabilities exceeded current assets by $1,886,269. The decrease in current
assets in 1998 as compared to 1997 was primarily the result of the removal of
the note receivable. The current liabilities for 1998 decreased by $144,365 as
compared to 1997 due primarily to decreases in notes payable and accrued
interest of $370,953 and increase in accounts payable of $205,151.
Current liabilities at June 30, 1999 were $2,649,008 which exceed current
assets of $48,933 by $2,600,075. Current liabilities at June 30, 1998 exceeded
current assets by $2,215,689. The decrease in current assets in the second
quarter of 1999 compared to the second quarter of 1998 was primarily the result
of the removal of the note receivable. The current liabilities at June 30, 1999
decreased compared to June 30, 1998 due primarily to decreases in notes payable.
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.
Financing activities during 1998 and 1997 consisted of Bridge Loans in the
cumulative amount of $2,057,750 and sales of Preferred Stock in the cumulative
amount of 2,110,015. Of the combined amount of $4,167,765, approximately
$2,205,963 was used for operating expenses, $1,402,802 was paid in issue costs,
and $559,000 for debt repayment.
<PAGE>
Management believes that cash flow from operations will not be sufficient
to meet the Company's immediate cash needs and to finance future operations. In
the past, the Company has been able to generate funds from private placements of
debt and equity securities to finance operations. Presently, the company
requires additional capital investment in order to sustain it's operations, and
it is engaged in discussion with a media company for this purpose. However,
there can be no assurance that the Company will be successful in obtaining the
necessary operating capital.
Impact of inflation
Management does not believe that general inflation has had or will have a
material effect on operations.
Plan of Operation
The proposed plan of operation for the Company for the next 12 months will
include efforts to expand operations and production. These efforts may include
increasing the number of over-air broadcast affiliates as well as increasing the
number of cable households carrying the Company's programming. If the merger is
effectuated, the plan will also include the upgrading of programming and the
addition of CIN (Cadena Independiente Nacional) as a full time Hispanic Network
feed. Cadena Independiente Nacional is a trade name of HTV. The plan also
includes continuing the existing general market family channel programming
network
While revenue may be generated from the sale of air time to major
advertisers and program sales, the Company's cash requirements may increase
significantly for the following reasons:
1. Anticipated Increases in Satellite Transponder Time costs
2. Required Equipment Upgrades for production and uplink
3. Increased Personnel requirements including:
a. Traffic Reporting
b. Additional Master Control Staff
c. Marketing/Advertising Account Staff
d. Engineering Staff
e. Administrative/Accounting
4. Acquisition of Television properties nationally
5. Digital upgrades associated with FCC requirements
6. Insurance
<PAGE>
The anticipated increase in costs relative to Satellite Transponder costs
is effecting all users. The anticipated needs of cellular phone/pager companies
along with Internet and other communications expansions has created pricing
increases for all network broadcasters.
The company has already invested in upgrades in equipment to insure the
uplink facility is Y2K compliant, but additional upgrades will be required in
order to potentially add other feeds for clients who will pay the Company for
this service. Additional equipment will be added to allow the company to
produce programming in house for broadcast on the network.
Operations have been hampered by lack of adequate personnel. Account
Executives will be added in order to immediately pursue advertising revenue for
the company. Major national accounts require an accurate accounting of
programming and air times of their commercial spots (Traffic). Production
personnel will be added to provide professional level broadcast quality and
editing and commercial production capabilities.
The planned acquisition of multiple television properties will require top
level engineering and appropriate staff to insure continual FCC compliance in
these areas.
Insurance will be maintained on all property and equipment owned by the
company.
While the company will begin to derive revenue from operations prior to the
end of 1999, the anticipated operational changes listed above will require more
capital than will be generated from operations. A stock offering may be made to
generate necessary capital for acquisitions and expansion. Long term debt may
be considered in order to restructure existing debt and to make property
acquisitions. If made, such property acquisitions will increase the asset base
of the company and help to insure programming delivery in key market areas.
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.
<PAGE>
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 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.
Information About HTV. HTV is a media firm which owns: 100% of a
-----------------------
television station in Phoenix, AZ, 89% of a television station in Oklahoma City,
OK, broadcast equipment, and a video library. HTV was incorporated in Texas,
February 1998. HTV has no independent auditor.
HTV is the successor company of an established television production
company which has delivered programming regionally and nationally since 1990.
HTV broadcasts under the trade name CIN (Cadena Independiente Nacional) as a
full time Hispanic Network feed. Cadena Independiente Nacional (CIN) is in the
primary business of the production and delivery of Hispanic programming to the
television market through the establishment of a new Hispanic network. CIN is
targeting and negotiating contracts with independent stations to affiliate or
acquire for the purpose of developing the next major Hispanic network. CIN also
has full production capabilities which includes: studios, editing suites, etc.;
thereby enabling CIN to do outside production for others as well as for itself.
Programming for CIN will come from outside sources as well as in-house, this
will provide for diverse and quality programming. CIN has aired over 2,900
television programs in major US markets, has participated in live Internet
concert productions and has recently received accolades for opening the first
television stations for Hispanics in the state of Oklahoma.
CIN has positioned itself to take advantage of the three major weaknesses
in the Hispanic television market: 1) lack of programming directed to the
acculturated, affluent and educated, second-and third-generation Hispanic; 2)
lack of competitive rates available for advertisers; and 3) lack of competition
within the Hispanic television community. CIN is in a unique position to
maximize the economic and business opportunity that presently exists.
HTV has no independent auditor.
<PAGE>
Rights of Dissenting Stockholders. Holders of record of shares of capital
----------------------------------
stock of the Company who follow the appropriate procedures will be entitled to
appraisal rights under Section 262 of the DGCL in connection with the merger.
The following discussion is not a complete statement of the law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262, which is reprinted in its entirety as Attachment "B" to
this Proxy Statement. Except as set forth herein, the Company's stockholders
will not be entitled to appraisal rights in connection with the merger.
Under Section 262, record holders of common stock of the Company who follow
the procedures set forth in Section 262 will be entitled to have their shares
appraised by the Delaware Court of Chancery and to receive payment of the "fair
value" of their shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, as determined by the court. However, no holder of common stock who
votes in favor of the merger will be entitled to exercise these rights. Under
Section 262, where a merger agreement is to be submitted for approval and
adoption at a meeting of stockholders, as in the case of the Annual Meeting ,
not less than 20 days prior to the meeting, the Company must notify each of its
stockholders of record at the close of business on the Record Date that
appraisal rights are available and include in each such notice a copy of
Section 262. THIS PROXY STATEMENT CONSTITUTES THE REQUIRED NOTICE TO HOLDERS
OF COMMON STOCK. Any stockholder who wishes to exercise appraisal rights should
review the following discussion and Attachment "B" carefully, because failure
to timely and properly comply with the procedures specified in Section 262 will
result in the loss of appraisal rights under the DGCL.
A stockholder wishing to exercise appraisal rights must deliver to the
Company, before the vote on the approval and adoption of the merger Agreement
at the Annual Meeting, a written demand for appraisal of the holder's shares of
stock. A vote against the merger will not satisfy this requirement. In
addition, a stockholder wishing to exercise appraisal rights must hold of
record the shares in question on the date the written demand for appraisal is
made and must continue to hold such shares through the Effective Time.
Only a holder of record of shares of the common stock of the Company is
entitled to assert appraisal rights for the shares registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder
of record fully and correctly, as the holder's name appears on the stock
certificates.
<PAGE>
If the shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity; if the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for the
record owner or owners. A record holder such as a broker who holds shares as
nominee for several beneficial owners may exercise appraisal rights with
respect to the shares held for one or more beneficial owners, while not
exercising appraisal rights with respect to the shares held for other
beneficial owners; in that event, the written demand should set forth the
number of shares as to which appraisal is sought (and, where no number of
shares is expressly mentioned, the demand will be presumed to cover all shares
held in the name of the record owner). Stockholders who hold their shares in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by the nominee. All written
demands for appraisal of shares should be mailed or delivered to the Company
Broadcasting, Inc., 650 Madison Avenue, New York, New York 10022, Attention:
Secretary or Assistant Secretary, so as to be received before the vote on the
approval and adoption of the merger Agreement at the Special Meeting.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the merger agreement and the merger. Accordingly,
a vote against Proposal 4, or an abstention with respect to Proposal 4, will not
prevent a stockholder from exercising appraisal rights, but a vote in favor of
Proposal 4 will prevent the stockholder from exercising appraisal rights.
However, if a stockholder returns a signed proxy but does not specify a vote
against Proposal 4 or a direction to abstain, then the proxy, if not revoked,
will be voted for Proposal 4, which will have the effect of waiving that
stockholder's appraisal rights.
Within 10 days after the Effective Time, the Company, as the Surviving
Corporation, must send a notice as to the effectiveness of the merger to each
person who has satisfied the appropriate provisions of Section 262. Within 120
days after the Effective Time, but not thereafter, the Company, or any holder of
shares entitled to appraisal rights under Section 262 who has complied with the
foregoing procedures, may file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of such shares. The Company is not
under any obligation, and has no present intention, to file a petition with
respect to the appraisal of the fair value of the shares. Accordingly, it is
the obligation of the stockholders to initiate all necessary action to perfect
their appraisal rights within the time prescribed in Section 262.
Within 120 days after the Effective Time, any record holder of shares who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of shares of the Company stock with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. The statements must be mailed within 10 days after the Company
receives a written request therefor.
<PAGE>
If a petition for an appraisal is timely filed, then, after a hearing on
the petition, the Delaware Court of Chancery will determine the holders of
shares entitled to appraisal rights and will appraise the "fair value" of the
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Holders considering
seeking appraisal should be aware that the fair value of their shares as
determined under Section 262 could be more than, the same as or less than the
value of the merger consideration that they would otherwise receive if they did
not seek appraisal of their shares. The Delaware Supreme Court has stated that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. More specifically, the Delaware
Supreme Court has stated that: "Fair value, in an appraisal context, measures
'that which has been taken from the stockholder, viz., his proportionate
interest in a going concern.' In the appraisal process the corporation is
valued 'as an entity,' not merely as a collection of assets or by the sum of
the market price of each share of its stock. Moreover, the corporation must be
viewed as an on-going enterprise, occupying a particular market position in the
light of future prospects." In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a stockholder's exclusive remedy. The Delaware Court of Chancery will also
determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares have been appraised. The costs of the action
may be determined by the court and taxed upon the parties as the court deems
equitable. The court may also order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal (including,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, among others) be charged pro rata against the value of all
of the shares entitled to appraisal.
Any holder of shares who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to the demand for appraisal for any purpose, and will not be entitled
to the payment of dividends or other distributions on those shares (except
dividends or other distributions payable to holders of record of shares of the
same class or series of stock as of a date prior to the Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal provided
in the DGCL, then that holder's shares will be converted into the appropriate
merger consideration, without interest, in accordance with the merger agreement.
A holder of shares will fail to perfect, or will effectively lose, the right to
appraisal if no petition for appraisal is filed within 120 days after the
Effective Time. A holder may withdraw a demand for appraisal by delivering to
the Company a written withdrawal of the demand for appraisal and acceptance of
the merger, except that any such attempt to withdraw made more than 60 days
after the Effective Time will require the written approval of the Company.
Failure to follow the steps required by Section 262 for perfecting
appraisal rights may result in the loss of appraisal rights.
<PAGE>
The foregoing is a summary of certain of the provisions of Section 262. It
is qualified in its entirety by reference to the full text of Section 262,
which is attached to this Proxy Statement as Attachment "B" .
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table summarizes the per share information for the Company
and HTV on a historical, pro forma combined and equivalent basis. The pro forma
information gives effect to the merger accounted for as a pooling of interest.
You should read this information together with the Company's and HTV's
historical and pro forma financial statements and the notes thereto. You should
not rely on the pro forma combined information as being indicative of the
results that would have been achieved had the companies been combined or the
future results that the combined company will experience after the merger.
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
PER COMMON SHARE DATA
YEAR ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Historical:
Net income (loss) per share, basic $ (0.59) $(0.18) $(0.12)
Book value per common share. . . . $(22.24) $ 0.78 $ 9.02
Pro forma combined after the merger:
Net loss per share, basic. . . . . $ (0.59) n/a n/a
Book value per common share. . . . $ .002 n/a n/a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC.
PER COMMON SHARE DATA
YEAR ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Historical:
Net income (loss) per share, basic $ 0.00 n/a n/a
Book value per common share. . . . $ 0.05 n/a n/a
Pro forma combined after the merger:
Net loss per share, basic. . . . . $(0.59) n/a n/a
Book value per common share. . . . $0.002 n/a n/a
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA GIVING EFFECT TO THE MERGER
PER COMMON SHARE DATA
YEAR ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Equivalent Pro forma combined
after the merger:
Net gain(loss) per share, basic $(0.59) n/a n/a
Book value per common share . . $0.002 n/a n/a
</TABLE>
Financial Information About the Company and Incorporation of Certain
---------------------------------------------------------------------------
Documents by Reference. The following sets forth financial information about
- ------------------------
the Company. Also, financial information about the Company is incorporated
herein by reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998 which is being provided to stockholders along with this
Proxy Statement.
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Financial Statements: Page
Report of Independent Certified Public Accountants F-1
Balance Sheet at December 31, 1998 and
December 31, 1997 F-2
Statement of Operations for the Twelve Months
ended December 31, 1998 and 1997 F-4
Stockholders' Equity for the
Twelve Months ended December 31, 1998 and 1997 F-5
Statement of Cash Flows for the Twelve Months
ended December 31, 1998 and 1997 F-6
Notes to Financial Statements F-7
<PAGE>
JACK F. BURKE, JR.
CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 15728
HATTIESBURG, MISSISSIPPI 39404
REPORT OF INDEPENDENT AUDITOR
The Board of Directors
American Independent Network, Inc.
Haltom City, Texas 76117
I have audited the accompanying balance sheets of American Independent Network.
Inc. as of December 31, 1998 and 1997, and the related statements of
operations, stockholder's equity and cash flows for the years then ended. These
financial statements are the responsibility of American Independent Network Inc.
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, 1998 and 1997 and the results of its operations and its cash
flows for the years ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 19 to the
financial statements, the company has suffered recurring net operating losses
and has a current ratio deficit which raises substantial doubts about its
ability to continue as a going concern. Management's plans in regard to the
matters are also described in Note 19. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
Sincerely,
/s/ Jack F. Burke, Jr.
June 7,1999
F-1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents . . . . . . . . . . . . $ 9,807 $ 34,768
Accounts Receivable . . . . . . . . . . . . . . . 2,788 2,250
Trade Credits Receivable. . . . . . . . . . . . . 30,000 30,000
Note Receivable Net (Doubtful Accounts $700,000). 0 700,000
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . 42,595 767,018
---------- ----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold Improvements. . . . . . . . . . . . . . 22,851 22,851
Less Amortization . . . . . . . . . . . . . . . . -8,608 -8,028
Equipment and Furnishings . . . . . . . . . . . . 130,642 125,096
Digital Compression Equipment . . . . . . . . . . 845,092 831,391
Accumulated Depreciation. . . . . . . . . . . . . -184,400 -103,954
---------- ----------
TOTAL PLANT, PROPERTY AND EQUIPMENT. . . . . 805,577 867,356
---------- ----------
OTHER ASSETS
Trade Credits Receivable Net (Allowance $125,138) 231,990 261,990
Other Investments . . . . . . . . . . . . . . . . 564,489 893,658
Note Receivable Net (Doubtful Accounts $884,595). 0 884,595
---------- ----------
TOTAL OTHER ASSETS . . . . . . . . . . . . . 796,479 2,040,243
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . $1,644,651 $3,674,617
---------- ----------
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDER'S EQUITY 1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable. . . . . . . . . . . . . . $ 382,555 $ 177,404
Notes Payable . . . . . . . . . . . . . . . 1,603,529 2,133,930
Accrued Interest - Notes. . . . . . . . . . 278,979 119,530
Advances from Affiliates. . . . . . . . . . 31,038 9,602
Interest Due Preferred Shareholders . . . . 37,440 37,440
Equipment Lease Payments. . . . . . . . . . 175,380 175,380
----------- -----------
TOTAL CURRENT LIABILITIES. . . . . . . 2,508,921 2,653,286
----------- -----------
LONG TERM DEBT
Deferred Income Tax . . . . . . . . . . . . 0 661,824
Equipment Lease Payments. . . . . . . . . . 109,003 216,407
----------- -----------
TOTAL LONG TERM DEBT . . . . . . . . . 109,003 878,231
----------- -----------
TOTAL LIABILITIES. . . . . . . . . . . 2,617,924 3,531,517
----------- -----------
STOCKHOLDER'S EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1997 53,427 shares issued
1998 42,427 shares issued. . . . . . . 42,427 53,427
Common Stock - 20,000,000 shares authorized
1997 issued 18,232,505 @ $.01 Par . . . 182,325
1998 issued 4,375,623 @ $.05 Par . . . 218,780
Additional Paid in Capital. . . . . . . . . 5,073,750 4,511,821
Retained Earnings . . . . . . . . . . . . . -6,308,230 -4,135,723
Note Receivable . . . . . . . . . . . . . . 0 -468,750
----------- -----------
Total Stockholder's Equity . . . . . . -973,273 143,100
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY . . . $ 1,644,651 $ 3,674,617
----------- -----------
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
<S> <C> <C>
REVENUES
INCOME FROM NETWORK OPERATIONS . . . . . . . . . $ 377,380 $ 1,243,145
------------ ------------
COST AND EXPENSES:
Satellite Rental. . . . . . . . . . . . . . 360,000 581,861
Programming Expenses. . . . . . . . . . . . 24,992 12,162
Productions Expenses. . . . . . . . . . . . 103,750 111,558
Depreciation. . . . . . . . . . . . . . . . 80,445 54,692
Amortization of Leasehold . . . . . . . . . 580 4,590
Amortization of Senior Channel. . . . . . . 137,936 0
Rental Expense (Net). . . . . . . . . . . . 64,809 67,714
Provision for Doubtful Accounts . . . . . . 1,584,595 1,584,595
Administrative Expenses . . . . . . . . . . 557,367 439,232
Reserve for Trade Credits . . . . . . . . . 0 125,138
------------ ------------
TOTAL COST AND EXPENSES. . . . . . . . 2,914,474 2,981,542
------------ ------------
NET INCOME (LOSS) FROM OPERATIONS. . . -2,537,094 -1,738,397
------------ ------------
OTHER INCOME - GAIN ON SALE OF ASSETS. 0 785,257
------------ ------------
OTHER EXPENSES
Interest Expense (Net). . . . . . . . . . . 231,789 381,654
Amortization of Debt Issue Cost. . . . . . . 0 250,135
Loss on Sale of Assets. . . . . . . . . . . 31,798 13,969
------------ ------------
TOTAL OTHER EXPENSES . . . . . . . . . 263,587 645,758
------------ ------------
GAIN (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM. . . . . . . . . . . . -2,800,681 -1,598,898
INCOME TAX BENEFIT (EXPENSE) . . . . . . . . . . 661,824 -661,824
------------ ------------
NET (LOSS) BEFORE EXTRAORDINARY ITEM . . . . . . -2,138,857 -2,260,722
EXTRAORDINARY ITEM
Cost of Conversion of Bridge Loans
To Common Stock . . . . . . . . . . . . . -33,650 380,260
------------ ------------
NET (LOSS) . . . . . . . . . . . . . . . . . . . -$2,172,507 -$2,640,982
------------ ------------
EARNINGS PER SHARE OF COMMON STOCK . . . . . . . -$0.59 -$0.18
WEIGHTED AVERAGE SHARES. . . . . . . . . . . . . 3,705,036 14,834,322
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE ANALYSIS OF STOCKHOLDER'S EQUITY
FOR THE TWELVE MONTH ENDED DECEMBER 31, 1998 AND 1997
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN NOTE RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 . . . . . 107,546 $ 107,546 14,045,268 $140,453 $ 2,513,734 $ 0 -$1,494,741
Preferred A 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
Bridge Loan Conversions 1,653,691 16,537 810,051
Sale of Common Stock 200,000 2,000 98,000
Sale of Common Stock for
Note Receivable. . . . . . . . 1,875,000 18,750 450,000 -468,750
Net Loss for the Year Ended
December 31, 1997. . . . . . . -2,640,982
-----------
BALANCE DECEMBER 31, 1997 . . . . . 53,427 53,427 18,232,505 182,325 4,511,821 -468,750 -4,135,723
Preferred Stock Conversions . . . . -11,000 -11,000 22,000 220 10,780
Bridge Loan Conversions 208,021 2,080 85,805
Reverse Sale of Common Stock
for Note Receivable. . . . . . -1,875,000 -18,750 -450,000 468,750
Common Issued for Financing. . . . 3,400,000 34,000 -34,000
Adjustment to reflect reverse split
of Common of 1 for 5 . . . . . -15,990,005
Affiliate Debt Forgiveness. . . . . 688,726
Net Loss for the Year Ended
December 31, 1998. . . . . . . -2,172,507
Post Split Bridge Loan
Conversions. . . . . . . . . . 378,102 18,905 260,618
----------- -------- -----------
BALANCE DECEMBER 31, 998. . . . . . 42,427 $ 42,427 4,375,623 $218,780 $ 5,073,750 $ 0 -$6,308,230
--------- --------- ----------- -------- ----------- ----------- -----------
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF CASH FLOW
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES
Net Gain (Loss) . . . . . . . . . . . . . . . . -$2,172,507 -$2,640,982
Adjustment to reconcile net income to net
cash from operating activities:
Amortization of Leasehold . . . . . . . . . . . 580 4,570
Depreciation. . . . . . . . . . . . . . . . . . 80,445 54,712
Amortization of Senior Channel. . . . . . . . . 137,936 0
Sale of Assets with Note Receivable . . . . . . 1,584,595 1,584,595
Provision for Doubtful Accounts . . . . . . . . 0 -785,257
Reserve for Trade Credits . . . . . . . . . . . 0 125,138
Non Cash Operating Expenses . . . . . . . . . . 0 3,991
Accounts Receivable . . . . . . . . . . . . . . -538 8,480
Non Cash Revenues . . . . . . . . . . . . . . . 0 -120,000
Cost of Loan Conversion to Common Stock . . . . 33,650 380,260
Trade Credits Receivable. . . . . . . . . . . . 30,000 45,000
Deferred Tax Benefit. . . . . . . . . . . . . . -661,824 0
Deferred Tax Credit . . . . . . . . . . . . . . 0 661,824
Investment in Stocks. . . . . . . . . . . . . . 196,455 0
Accounts Payable. . . . . . . . . . . . . . . . 205,152 -106,932
Accrued Interest. . . . . . . . . . . . . . . . 159,449 -1,964
Conversion of Interest Payable to Common Stock. 0 165,612
Advances from Affiliates. . . . . . . . . . . . 21,436 4,561
Customer Deposits . . . . . . . . . . . . . . . 0 -20,000
Investment in Senior Channel. . . . . . . . . . 0 -689,680
------------ ------------
TOTAL CASH USED BY OPERATING ACTIVITIES. . . . . . . -385,171 -1,326,072
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Equipment . . . . . . . . . . . . -19,247 -99,915
Investment in Film Library. . . . . . . . . . . -5,222 -7,523
------------ ------------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES. . . . . . -24,469 -107,438
------------ ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Note Payable (Decrease) Increase . . . . . . . . -196,651 819,580
Long Term Lease (Decrease). . . . . . . . . . . -107,404 -101,650
Preferred Stock Increase. . . . . . . . . . . . 0 175,154
Common Stock Increase . . . . . . . . . . . . . 0 2,000
Debt Forgiveness by Affiliate . . . . . . . . . 688,734 0
Additional Paid-In Capital Increase . . . . . . 0 513,348
------------ ------------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES. . . . . 384,679 1,408,432
------------ ------------
Net Cash Increase (Decrease) . . . . . . . . . . . . -24,961 -25,078
Cash, Beginning of Period. . . . . . . . . . . . . . 34,768 59,846
CASH AT END OF YEAR. . . . . . . . . . . . . . . . . $ 9,807 $ 34,768
------------ ------------
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-6
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Consist of cash balances. Cash and cash equivalents
consist of highly liquid investments with an original maturity date of ninety
days or less. The company does not have any cash equivalents.
TRADE CREDITS RECEIVABLES - The company owns trade credits in the amount of
$387,128 at December 31,1998 and $417,128 at December 31, 1997. 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 $231,990 at December 31, 1998.
The trade credits were obtained in 1994 in exchange for an investment in common
stock and was valued at the fair value of the investment in common stock. The
company uses the credits primarily for travel expense. The company, has also
exchanged trade credits for computer equipment and legal services. Management
does not consider impairment under FAS 121 is appropriate as management intends
to fully utilize the credits and the credits do not have an expiration date. Due
to the slow rate of usage, the company has established a valuation account of
$125,138. The trade group, the company is a member of, currently has over twenty
four hundred participants.
F-7
<PAGE>
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The company has accounts
receivable at December 31, 1998 of $2,788 owed by regular customers. Management
deems this amount to be fully collectible. No allowances for doubtful accounts
is necessary. At December 31, 1997 the total accounts receivable was $2,250.
PLANT, PROPERTY AND EQUIPMENT - Plant, property and equipment is recorded at
cost.
DEPRECIATION AND AMORTIZATION - 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. Book depreciation and income
tax depreciation are on a straight line basis. For income tax information see
Note 3.
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 generally considers all
expected future events other than enactments 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
generally 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.
OTHER ASSETS - Consist of the following:
1998 1997
-------- --------
Investment in Stocks $ 0 $196,455
Film Library 12,745 7,523
Investment in Senior Channel 551,744 689,680
-------- --------
Total Other Assets $564,489 $893,658
OTHER COMPREHENSIVE INCOME - The company does not have any other comprehensive
income. Other comprehensive income and net income (loss) are the same.
F-8
<PAGE>
NOTE 2 - NOTES PAYABLE
Notes Payable at December 31, 1998 consist of the following notes:
<TABLE>
<CAPTION>
DUE ACCRUED
CREDITOR DATE INTEREST PRINCIPAL INTEREST
<S> <C> <C> <C> <C>
Shelley Media Marketing* 9/30/98 10% $ 85,279 $ 5,100
Cleveland Broadcasting* 9/30/98 10% 1,632 1,000
Pacific Acquisition Group 12/31/98 11% 250,500 25,050
Bridge Loans 10/31/97 15% 1,266,118 242,534
---------- ---------
Total $1,603,529 $ 273,684
---------- ---------
Advances from Other
Affiliated Companies Demand 10% 31,038 5,295
---------- ---------
Total $1,634,567 $ 278,979
---------- ---------
<FN>
*Affiliated Companies
</TABLE>
Notes Payable at December 31, 1997 consist of the following notes:
<TABLE>
<CAPTION>
DUE ACCRUED
CREDITOR DATE INTEREST PRINCIPAL INTEREST
<S> <C> <C> <C> <C>
Shelley Media Marketing* 9/30/98 10% $ 51,100 $ -
Cleveland Broadcasting* 9/30/98 10% 26,089 -
ATN Network, Inc.* 9/30/98 10% 284,241 -
Pacific Acquisition Group 12/31/98 11% 250,500 -
Bridge Loans 10/31/97 15% 1,522,000 119,530
---------- ---------
Total 2,133,930 119,530
Advances from Other
Affiliated Companies Demand 10% 9,602 2,295
---------- ---------
Total $2,143,532 $ 121,825
---------- ---------
<FN>
*Affiliated Companies
</TABLE>
NOTE 3 - INCOME TAXES
DEFERRED INCOME TAX LIABILITY CONSIST OF THE FOLLOWING COMPONENTS:
<TABLE>
<CAPTION>
Provision for Income Taxes: 1998 1997
<S> <C> <C>
Current $ - $ -
Deferred Liability 1,137,548 (1,137,548)
Less Tax Asset - Carryover (475,724) 475,724
----------- ------------
Total Provision for Income Taxes $ 661,824 $ (661,824)
----------- ------------
</TABLE>
Installment sale in 1997 which created deferred
tax liability of $1,137,548 and a current 1997
tax expense of $661,824 has been canceled reducing
the tax liability to $0.
The tax effects of temporary differences that give rise to deferred income by
Assets and liabilities at December 31, are as following:
<TABLE>
<CAPTION>
DEFERRED INCOME TAX ASSETS 1998 1997
<S> <C> <C>
Net operating loss $ 698,290 $ 683,201
Valuation account 698,290 (207,477)
---------- -----------
$ - $ 475,724
---------- -----------
DEFERRED INCOME TAX LIABILITIES
Installment sale method on Notes Payable $1,137,548
Valuation allowance (475,724)
-----------
Net deferred tax asset liability $ (661,827)
The company has net operating losses (NOLs) at
December 31, 1998 of approximately $4,730,842.
These NOLs expire as follows:
2010 $ 70,912
2011 1,191,269
2012 635,367
2018 2,833,294
----------
$4,730,842
----------
The company has capital loss carryover of $46,036
Capital loss carryover will expire as follows:
2002 $ 14,238
2003 31,798
----------
$ 46,036
----------
</TABLE>
Realization of deferred tax assets associated with the NOLs and net capital
loss carryovers is dependent on generating sufficient taxable income prior
to their expiration. Due to the uncertainty of the company's ability to generate
such income with the possibility that these carryovers may expire unused,
management has established a valuation account against them.
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997
CASH USED FOR:
<S> <C> <C>
Interest $63,441 $127,861
Taxes $ - $ -
</TABLE>
NOTE 5 - 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:
NOTE RECEIVABLE - The carrying amount approximates fair value because each is
valued at estimated discounted future cash flows.
LONG TERM INVESTMENTS - The fair value of these investments are estimated based
on quoted market prices for those and similar investments.
NOTES PAYABLE - The carrying value approximates fair value because of the short
Maturity date of these investments.
The estimated Fair Values of the company's Financial Instruments are as follows:
<TABLE>
<CAPTION>
1998 1997
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Notes Receivable $ - $ - $1,584,595 $1,584,595
Long Term Investments - - 196,455 390,910
Accounts Payable 382,555 382,555 177,404 177,404
Equipment Lease Payments 284,383 255,945 391,787 354,219
Notes Payable $1,603,529 $1,603,529 $2,133,930 $2,133,930
</TABLE>
NOTE 6 - LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The company is obligated on three leases. The leases are as follows:
BUILDING - The company utilizes the spaces as both corporate offices and
studios. The lease is $5,400 per month and expired May 31, 1998.The lease was
renewed for 36 months at $6,368 per month and expires February 2002.
EQUIPMENT - The company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 31,
1999. The lease has a fair market value purchase option at the end of the lease.
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
equipment for a period of 36 month 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 has 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 ease modification. The company
pays the new lease balance at the rate of $30,000 per month during
the period January 1, 1998 through July 1, 1999 when the lease terminates.
Details of lease obligations are as follows:
<TABLE>
<CAPTION>
CAPITALIZED CAPITALIZED OPERATING
EQUIPMENT EQUIPMENT TRANSPONDER BUILDING
LEASE #1 LEASE #2 LEASE LEASE
<S> <C> <C> <C> <C>
1999 $ 123,756 $ 51,624 $ 210,000 $ 76,200
2000 87,493 21,510 76,200
2001 31,750
</TABLE>
NOTE 7 - 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. 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>
<CAPTION>
<S> <C>
Note Receivable (Present Value) $ 3,637,940
Common Stock 1,875,000 shares @ $.25 468,750
------------
$ 3,169,190
------------
BOOK VALUE OF ASSETS SOLD
Prepaid Television Inventory $ 1,426,933
Other Long Term Assets (Trade Due Bills) 837,000
Accounts Receivable (Inet, Inc.) 120,000
------------
Total Asset Book Value 2,383,933
------------
Gain on Sale $ 785,257
------------
AIN canceled this transaction in September 1998 for
non-payment by Media Fund ,Inc. and the following
accounts were affected by the cancellation:
Note Receivable, Net of Reserves $(2,053,345)
Deferred Tax Liability 1,137,548
Deferred Tax Benefit 447,047
Common Stock 18,750
Paid in Capital 450,000
</TABLE>
NOTE 8 - RELATED PARTIES
The company has engaged in transactions with certain other enterprises that are
Affiliated companies. These companies are controlled by the management and
Principals stockholders of American Independent Network Inc. The controlled
companies transactions are as follows:
<TABLE>
<CAPTION>
1998 1997
FUNDS FUNDS
BORROWED REPAID BORROWED REPAID
<S> <C> <C> <C> <C>
Cleveland Broadcasting $ 24,457 $ 12,185
San Antonio $ 10,000 11,064 2,200
Broadcasting (3)
TV Channel 22 (3) 22,500 - 12,310 5,500
LYN Broadcasting - - (1) 4,500
ATN Network - 255,812 $ 579,250 (2) $320,376
Shelley Media Marketing $ 707,896 $673,717
<FN>
(1) Repaid with common stock issued at $3.25 per share
(2) Repaid $100,000 with common stock at $0.10 per share
(3) Other affiliated companies
</TABLE>
NOTE - 9 PREFERRED STOCK
Preferred stockholder's may convert one share of preferred stock into two shares
Of common stock. Preferred stockholder's also receive nine percent interest per
annum in lieu of dividends. Summary of preferred stock transactions are
as follows:
<TABLE>
<CAPTION>
<S> <C>
Number of Preferred B Shares sold in 1996 per Comparative
Analysis of Stockholder's Equity 107,546
Number of Preferred B Shares sold in 1997 per Comparative
Analysis of Stockholder's Equity 175,154
---------
Total number of Preferred B Shares Sold 282,700
Number of Preferred B Shares converted to common stock in 1997
at the rate of two common for each Preferred B,
which would equal 480,546 shares of common stock. (229,273)
---------
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to common stock in 1998
at the rate of two common for each Preferred B, which would
equal 22,000 shares of common stock (11,000)
---------
Number of Preferred B Shares outstanding at December 31, 1998 43,427
---------
</TABLE>
NOTE 10 - SENIOR CHANNEL
The company acquired the Copyright to the Senior Channel in exchange for
accounts receivable in the amount of $689,680 due to the company from the owners
of the Senior Channel Copyright. The Senior Channel has twenty-four hour
programming per day. There was no gain or loss recognized when accounts
receivable for the Senior Channel was converted into Investment in Senior
Channel. The company's projections indicate that the cost will be recovered in
four to to five years. The company continues to evaluate this asset quarterly
and will amortize the cost over five years and at December 31, 1998 had
amortized $137,936 of the cost.
NOTE 11 - INVESTMENT IN COMMON STOCK
The company owned 368,100 shares of Quick Tent, Inc. (NASD Small Cap QTNT) at
December 31, 1997. The company sold Quick Tent, Inc. stock in 1998 resulting in
a loss of $31,748. This investment is included in Other Investments at
December 31, 1997.
NOTE 12 - FILM LIBRARY
The film library consist of approximately 2,000 films and television produced
Tapes at a cost of $12,745.
NOTE 13 - BRIDGE LOAN
In 1997 Bridge Loan holders had the right to convert their loan to common stock
at $3.25 per share, $431,118 of loans were converted into 132,652 shares in
that year. To equate the the difference between market price of $0.25 per share
and the conversion price of $3.25 an additional 1,521,039 common shares were
issued in 1997. In 1998 $333,750 of bridge loans was converted to 450,731 shares
of common stock at an as average price of $0.74 per share. An additional 134,602
shares were issued to equalized with the market.
NOTE 14 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED BY
INCREASE IN NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C>
Notes Payable 1998 $1,603,529
Notes Payable 1997 2,133,930
-----------
Net Change (530,401)
Notes Paid by Conversion to Common Stock 333,750
-----------
Net Cash Used by Notes Payable $ (196,651)
-----------
</TABLE>
NOTE 15 - CAPITAL STOCK
During 1998, the company declared a 1 for 5 reverse split in its common stock.
At the time of the reverse split in November 1998, there were 19,987,526 shares
outstanding. After adjusting the outstanding shares for the 1 for 5 reverse
split, there were 3,997,521 shares outstanding.
NOTE 16 - STOCK ISSUED FOR FINANCING
The company issued 3,400,000 shares of common stock for no consideration for
which the company was to receive financing. As financing has not materialized,
the company is in the process of retrieving the stock. After the split the stock
amount is 680,000 shares.
NOTE 17 - DEBT FORGIVENESS BY AFFILIATE
An affiliated company has forgiven its debt from American Independent Network in
the amount of $688,734. Pursuant to Accounting Principal Board Opinion Number
26, this has been treated as a contribution to capital. There are no tax effects
as the company has no tax asset or liability.
NOTE 18 - LEGAL MATTERS
The company has had several judgments rendered against it. One judgement has
Resulted in a receivership in 1999. Judgments in place at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
JUDGEMENT ENTERED FOR AMOUNT
<S> <C> <C>
Witner, Poltrck & Giampietro $ 11,921
Hall, Estill, Hardwick & Gable 29,862
New Image Video 90,000
Tarrant County Appraisal District 18,000
Ira Weingarten/Equity Communications 60,000
Showplace Video 56,000 Converted to receivership in 1999
Bowne of Los Angeles, Inc. 34,056
WorldCom Inc. 76,000
Knapp Petersen and Clarke __________ In arbitration
$ 375,839
</TABLE>
These amounts are included in accounts payable.
NOTE 19 - GOING CONCERN
As shown in the accompanying financial statements the company has had recurring
net operating losses resulting in cash flow problems. All of the company's debt
is short term resulting in a substantial current ratio deficit (current
liabilities and long term liabilities due within twelve months are greater than
current assets and assets available for use within twelve months). These
circumstances raise substantial doubt as to the company's ability to continue
as a going concern. Such conditions may prevent the company from meeting its
liabilities within a timely manner.
Management is seeking and believes it will succeed in attracting new debt and
equity capital. Management believes that it will obtain sufficient capital to be
able to fund an agreement with its creditors and revitalize its sales efforts
which it is believed will internally generate sufficient funds for continued
operations.
The financial statements do not include any adjustments that might be necessary
if the company is unable to continue as a going concern.
F-9
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
REVIEWED FINANCIAL STATEMENTS
JUNE 30, 1998 AND JUNE 30, 1999
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
TABLE OF CONTENTS
<S> <C>
Independent Auditor's Review . . . . . . . . . . . . . . . . . . 1
Comparative Balance Sheet ( Assets). . . . . . . . . . . . . . . 2
Comparative Balance Sheet (Liabilities and Stockholders' Equity) 3
Comparative Statement of Operations. . . . . . . . . . . . . . . 4
Comparative Analysis of Stockholders' Equity . . . . . . . . . . 5
Comparative Statement of Cash Flow . . . . . . . . . . . . . . . 6
Notes to Comparative Financial Statements. . . . . . . . . . . . 7
</TABLE>
<PAGE>
JACK F. BURKE, JR.
CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 15728
HATTIESBURG, MISSISSIPPI 39404
REVIEW REPORT
I have reviewed the accompanying balance sheet of American Independent Network,
Inc. as of June 30, 1999 and the related statements of income, retained
earnings, and cash flows for the six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of American
Independent Network, Inc.,
A review consist principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 18 to the
financial statements, the company has suffered recurring net operating losses
and has a current ratio deficit which raises substantial doubts about its
ability to continue as a going concern. Management's plans in regard to the
matters are also described in Note 18. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
Sincerely,
Jack F. Burke, Jr.
October 14, 1999
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
JUNE 30, 1999 AND 1998
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents. . . . $ 845 $ 4,543
Accounts Receivable. . . . . . . 18,088 4,743
Trade Credits Receivable . . . . 30,000 30,000
Note Receivable, Net of
Doubtful Account of $700,00. . 0 700,000
---------- ----------
TOTAL CURRENT ASSETS. . . . . . . . . 48,933 739,286
---------- ----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold Improvements . . . . . 22,851 22,851
Equipment and Furnishings. . . . 134,642 130,317
Digital Compression Equipment. . 845,452 844,719
Accumulated Depreciation . . . . -233,008 -141,622
---------- ----------
TOTAL PLANT, PROPERTY AND EQUIPMENT . 769,937 856,265
---------- ----------
OTHER ASSETS
Deferred Tax Benefits. . . . . . 0 0
Trade Credits Receivable, Net
of Allowance of $125,138 . . . 211,990 241,990
Other Investments. . . . . . . . 495,521 737,485
Note Receivable, Net of Doubtful
Account of $884,595. . . . . . 0 884,595
---------- ----------
TOTAL OTHER ASSETS. . . . . . . . . . 707,511 1,864,070
---------- ----------
TOTAL ASSETS. . . . . . . . . . . . . $1,526,381 $3,459,621
========== ==========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE BALANCE SHEET
JUNE 30, 1999 AND 1998
1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable . . . . . . . . . . . $ 436,917 $ 264,163
Notes Payable. . . . . . . . . . . . . 1,564,979 2,194,740
Accrued Interest - Notes . . . . . . . 403,254 255,349
Advances from Affiliates . . . . . . . 31,038 27,903
Interest Due Preferred Shareholders. . 37,440 37,440
Equipment Lease Payment. . . . . . . . 175,380 175,380
----------- -----------
TOTAL CURRENT LIABILITIES . . . . . . . . . 2,649,008 2,954,975
----------- -----------
LONG TERM DEBT
Deferred Income Tax. . . . . . . . . . 0 661,824
Equipment Lease Payments . . . . . . . 79,003 153,444
----------- -----------
TOTAL LONG TERM DEBT. . . . . . . . . . . . 79,003 815,268
----------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . 2,728,011 3,770,243
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock - 1,000,000 shares
$1 Par Authorized - 1998 42,427
shares issued, 1999 42,427 shares
issued. . . . . . . . . . . . . . . 42,427 42,427
Common Stock - 20,000,000 Authorized
1998 issued 18,465,199 @ $.01 par . 184,650
1999 issued 6,105,229 @ $.05 par. . 305,261
Additional Paid in Capital . . . . . . 5,338,743 4,788,714
Retained Earnings (Deficit). . . . . . -6,888,061 -4,857,663
Note Receivable. . . . . . . . . . . . 0 -468,750
----------- -----------
Total Stockholders' Equity. . . . . . . . . -1,201,630 -310,622
----------- -----------
Total Liabilities and Stockholders' Equity. $ 1,526,381 $ 3,459,621
=========== ===========
The Accompanying "Notes to Financial Statement"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998
<S> <C> <C>
REVENUES
INCOME FROM NETWORK OPERATIONS . . . . . $ 73,464 $ 130,385
---------- -----------
COST AND EXPENSES
Satellite Rental. . . . . . . . . . 180,000 180,000
Programming Expenses. . . . . . . . 542 1,926
Productions Expenses. . . . . . . . 67,459 52,144
Depreciation. . . . . . . . . . . . 39,000 27,240
Amortization of Leasehold . . . . . 1,000 2,400
Amortization of Senior Channel. . . 68,968 68,968
Rental Expense (Net). . . . . . . . 36,068 32,400
Administrative Expenses . . . . . . 95,740 267,207
---------- -----------
TOTAL COST AND EXPENSES. . . . . . . . . 488,774 632,285
---------- -----------
NET (LOSS) FROM OPERATIONS . . . . . . . -415,310 -501,900
OTHER EXPENSES
Interest Expense (Net). . . . . . . 140,850 185,572
Gain on Disposal of Assets. . . . . -15,953 0
---------- -----------
TOTAL OTHER EXPENSES . . . . . . . . . . 124,897 185,572
---------- -----------
GAIN (LOSS) BEFORE INCOME TAXES AND
AND EXTRAORDINARY ITEM . . . . . . . . -540,207 -687,472
INCOME TAX BENEFIT (EXPENSE) . . . . . . 0 0
---------- -----------
NET (LOSS) BEFORE EXTRAORDINARY ITEM . . -540,207 -687,472
---------- -----------
EXTRAORDINARY ITEM
Cost of Conversion of bridge Loans
to Common Stock. . . . . . . . . 39,624 34,468
---------- -----------
NET (LOSS) . . . . . . . . . . . . . . . -579,831 -721,940
-----------
EARNINGS PER SHARE OF COMMON STOCK . . . -$0.11 -$0.04
Weighted Average Shares. . . . . . . . . 5,438,860 18,344,782
The Accompanying "Notes to Financial Statement"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE ANALYSIS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN NOTE RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996. . . . . . . . 107,546 $ 107,546 14,045,268 $140,453 $ 2,513,734 $ 0 -$1,494,741
Preferred B Shares Issued. . . . . . . . 175,154 175,154 963,347
Issue Cost of Preferred B -547,999
Conversion of Preferred B
Shares to Common . . . . . . . . . . . -229,273 -229,273 458,546 4,585 224,688
Common Issued to Bridge
Loan Investors 1,521,039 15,210 380,260
Conversion of Bridge Loans 132,652 1,327 429,791
Sale of Common Stock 200,000 2,000 98,000
Sale of Common Stock for
a Note Receivable 1,875,000 18,750 450,000 -468,750
Net Loss for the Year Ended
December 31, 1997 -2,640,982
-----------
BALANCE DECEMBER 31, 1997. . . . . . . . 53,427 53,427 18,232,715 182,325 4,511,821 -468,750 -4,135,723
Preferred Stock Conversions. . . . . . . -11,000 -11,000 22,000 220 10,780
Conversion of Bridge Loans 72,610 726 233,024
Reverse Sale of Common Stock
for Note Receivable -1,875,000 -18,750 -450,000 468,750
Common Issued for Financing 3,400,000 34,000 -34,000
Adjustment to Reflect Reverse
Split of Common of 1 for 5 -15,990,005
Affiliate Debt Forgiveness 688,726
Net Loss for the Year Ended
December 31, 1998 -2,172,507
Post Split Bridge Loans
Conversions 378,102 18,905 260,618
----------- -------- -----------
BALANCE DECEMBER 31, 1998. . . . . . . . 42,427 42,427 4,375,623 218,780 5,073,750 0 -6,308,230
Conversion of Bridge Loans 62,500 3,125 46,875
Common Stock Issued Upon
Conversion of Bridge Loans
and Preferred Stock to
Equalize Prior Conversions 415,472 20,774 18,850
Common Stock Transactions
Relating to Settlement of
Receivership:
Issued 1,650,000 82,500
Canceled -1,398,366 -69,918 -12,582
Common Stock Purchase
Agreement with Field of Cotton, L. P. 1,000,000 50,000 211,850
Loss for Six Months Ended
June 30, 1999 -579,831
-----------
BALANCE JUNE 30, 1999. . . . . . . . . . 42,427 $ 42,427 6,105,229 $305,261 $ 5,338,743 $ 0 -$6,888,061
</TABLE>
The Accompanying "Notes to Financial Statement"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
COMPARATIVE STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30,
1999 1998
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES
Net (Loss) . . . . . . . . . . . . . . . . -$579,831 -$721,940
Adjustment to Reconcile Net Income to Net
Cash From Operating Activities
Cost of loan Conversion to Common Stock. . 39,624 34,468
Depreciation . . . . . . . . . . . . . . . 39,000 27,240
Amortization of Leasehold. . . . . . . . . 1,000 2,400
Trade Credits Receivable . . . . . . . . . 20,000 20,000
Amortization of Senior Channel . . . . . . 68,968 68,968
Accounts Receivable. . . . . . . . . . . . -15,300 -2,493
Investment in Common Stocks. . . . . . . . 0 91,525
Accounts Payable . . . . . . . . . . . . . 54,362 86,759
Accrued Interest . . . . . . . . . . . . . 124,275 135,819
Advances From Affiliates . . . . . . . . . 0 18,301
---------- ----------
TOTAL CASH USED BY OPERATING ACTIVITIES . . . . -247,902 -238,953
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Equipment. . . . . . . . . . -4,360 -18,549
Investment in Film Library . . . . . . . . 0 -4,320
---------- ----------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES . . . -4,360 -22,869
---------- ----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Notes Payable Increase . . . . . . . . . . 11,450 294,560
Long Term Lease (Decrease) . . . . . . . . -30,000 -62,963
common Stock Increase. . . . . . . . . . . 50,000 0
Additional Paid-In Capital Increase. . . . 211,850 0
---------- ----------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES . . 243,300 231,597
---------- ----------
Net Cash Increase . . . . . . . . . . . . . . . -8,962 -30,225
CASH, BEGINNING OF PERIOD . . . . . . . . . . . 9,807 34,768
---------- ----------
CASH AT END OF PERIOD . . . . . . . . . . . . . $ 845 $ 4,543
---------- ----------
</TABLE>
The Accompanying "Notes to Financial Statement"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
6
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Consist of cash balances. Cash and Cash equivalent
consist of highly liquid investment with an original maturity date of ninety
days or less. The Company does not have any cash equivalents.
TRADE CREDITS RECEIVABLES - The Company owns trade credits in the amount of
$367,128 at June 30, 1999 and $397,128 at June 30, 1998. 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 $211,990 at June 30, 1999. The
Trade Credits were obtained in 1994 in exchange for an Investment in Common
Stock and was valued at the fair value of the asset investment in common stock.
The Company uses the credits primarily for travel expense. The Company, also
exchanged Trade Credits for computer equipment and Fine Art. Management does not
consider impairment under FAS 121 is appropriate as management intends to fully
utilize the credits and the credits do not have an expiration date. Due to the
slow rate of usage the Company has established a valuation account of $125,138.
The trade group, the Company is a member of, currently has over twenty four
hundred participants.
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The Company has accounts
receivable at June 30, 1999 of $18,088 owed by regular customers. Management
deems this amount to be fully collectible. No allowance for doubtful accounts is
necessary. At June 30, 1998 the total was $4,743.
PLANT, PROPERTY AND EQUIPMENT - Plant, property and equipment is recorded at
cost.
7
<PAGE>
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 amortization was $40,000 for the six months ended June 30, 1999
and $29,640 for the six months ended June 30, 1998.
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 generally considers all
expected future events other than enactments 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
generally 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.
OTHER INVESTMENTS - Consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Investment in Stocks . . . . . . $ 0 $104,930
Film Library . . . . . . . . . . 12,745 11,843
Investment in Senior Channel . . 482,776 520,712
-------- --------
Total Other Investments $495,521 $737,485
</TABLE>
NOTE 2 - NOTES PAYABLE
Note Payable at June 30, 1999 consist of the following notes:
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
<S> <C> <C> <C> <C>
Shelley Media Marketing 9/30/98 10% $ 97,229 5,100
Cleveland Broadcasting Co.* 9/30/98 10% 1,132 1,000
Pacific Acquisition Group, Inc. 12/31/98 11% 250,500 31,925
Bridge Loan 10/31/97 15% 1,216,118 357,434
---------- --------
Total $1,564,979 $397,959
Advances from Other
Affiliated Companies Demand 10% 31,038 5,295
---------- --------
Total $1,596,017 $403,254
<FN>
*Affiliated Companies
</TABLE>
8
<PAGE>
Notes Payable at June 30, 1998 consist of the following notes:
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
<S> <C> <C> <C> <C>
Shelley Media Marketing* 9/30/98 10% $ 50,650 $ 2,532
Cleveland Broadcasting Co.* 9/30/98 10% 157,014 1,000
ATN Network, Inc.* 9/30/98 10% 571,450 27,550
Pacific Acquisition Group Inc. 12/31/98 11% 250,500 12,525
Bridge Loan 10/31/98 15% 1,307,126 211,742
---------- ---------
Total $2,194,740 $ 255,349
Advances from Other
Affiliated Companies Demand 10% 27,903 0
---------- ---------
Total $2,222,643 $ 255,349
<FN>
*Affiliated Companies
</TABLE>
NOTE 3 - INCOME TAXES
Deferred income tax liability consist of the following components:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Provision for Income Taxes:
Current 0 0
Deferred Liability 0 1,137,548
Less Provision for Income Taxes 0 (475,724)
---- ----------
Total Provision for Income Taxes 0 661,824
</TABLE>
The tax effects of temporary differences which give rise to deferred income by
assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred Income Tax Assets:
Net Operating Loss 0 683,201
Valuation Allowance 0 (207,477)
---- ----------
Total Deferred Income Tax Asset 0 475,724
Deferred Income Tax Liabilities:
Installment Sale Method on Notes Payable 0 1,137,548
Valuation Allowance 0 475,724)
---- ----------
Net Deferred Tax Asset Liability 0 661,827
</TABLE>
9
<PAGE>
The Company has net operating losses (NOLs) at December 31, 1998 of
approximately $4,730,842. These NOLs expire as follows:
2010 $70,912
2011 1,191,269
2012 635,367
2018 2,833,294
---------
$4,730,842
The Company has capital loss carryover of $46,036 which will expire as follows:
2002 $14,238
2003 31,798
----------
$46,036
Realization of deferred tax assets associated with the NOLs and net capital loss
carryover is dependent on generating sufficient taxable income prior to their
expiration. Due to the uncertainty of the Company's ability to generate such
income with the possibility that these carry-overs may expire unused, management
has established a valuation account against them.
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash used for:
Interest $16,575 $17,520
Income Taxes $ 0 $ 0
</TABLE>
NOTE 5 - 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 for where it is practicable to estimate that
value.
NOTE RECEIVABLE - The carrying amount approximates fair value because each is
valued at estimated discounted future cash flows.
LONG TERM INVESTMENTS - The fair value of these investments are estimated based
on quoted market prices for those and similar investments.
10
<PAGE>
NOTES PAYABLE - The carrying value approximates fair value because of the short
maturity date of these investments.
The estimated Fair Values of the Company's Financial Instruments are as follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Note Receivable $ 0 $ 0 $1,584,595 $1,584,595
Long Term Investments Accounts 0 0 104,930 104,930
Accounts Payable 436,917 436,917 264,163 264,163
Equipment Lease Payments 254,383 225,945 360,353 324,318
Notes Payable 1,564,979 1,564,979 2,194,740 2,194,740
</TABLE>
NOTE 6 - LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The Company is obligated on three leases. The lease are as follows:
BUILDING - The Company utilizes the spaces as both corporate offices and
studios. The lease is $6,350 per month and expires February 28, 2002.
EQUIPMENT - The Company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 31,
1999. The lease has a fair market value purchase option at the end of the lease.
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
equipment for a period of 36 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 has 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 lease balance at the rate of $30,000 per month during the period January 1,
1998 through July 31, 1999 when the lease terminates.
Details of lease obligations are as follows:
<TABLE>
<CAPTION>
Capitalized Capitalized Operating
Equipment Equipment Transponder Building
Lease #1 Lease #2 Lease Lease
<S> <C> <C> <C> <C>
1999 $ 119,380 $ 54,530 $ 30,000 $ 38,100
2000 18,706 21,510 76,200
2001 18,706 76,200
2002 19,050
</TABLE>
11
<PAGE>
NOTE 7 - 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, Inc. The controlled
companies transactions are as follows:
<TABLE>
<CAPTION>
1999 1998
Funds Funds
Borrowed Repaid Borrowed Repaid
<S> <C> <C> <C> <C>
Cleveland Broadcasting $ 500 $ 0 $ 0 $ 8,156
San Antonio Broadcasting 0 0 0 3,700
TV Channel 22 0 0 22,500 0
ATN Network 0 0 334,500 168,826
Shelley Media Marketing 29,950 18,000 0 450
</TABLE>
NOTE 8 - PREFERRED STOCK
Preferred stockholders' may convert one share of preferred stock into two shares
of common. Preferred stockholders' also receive nine percent interest per annum
in lieu of dividends. Summary of preferred stock transactions are as follows:
Number of Preferred B Shares outstanding at December 31, 1997
53,427
Number of Preferred B Shares converted to Common Stock
in 1998 at the rate of two common for each Preferred B which
would equal 22,000 shares of common stock
(11,000)
Number of Preferred B Shares outstanding at December 31, 1998
42,427
NOTE 9 - SENIOR CHANNEL
The Company acquired the Copyright to the Senior Channel in exchange for
accounts receivable in the amount of $689,680 due to the Company from the owners
of the Senior Channel Copyright. The Senior Channel has twenty-four hour
programming per day. There was no gain or loss recognized when accounts
receivable for the Senior Channel was converted into Investment in Senior
Channel. The Company's projections indicate that the cost will be recovered in
four to five years. The Company continues to evaluate this asset quarterly and
will amortize the cost over five years. The amortization during the six months
ended June 30, 1999 was $68,968 and the cumulative amortization at June 30, 1999
was $206,904.
12
<PAGE>
NOTE 10 - INVESTMENT IN COMMON STOCK
The Company owned 193,100 shares of Quick Tent, Inc. (NASD Small Cap QTNT) at
June 30, 1998. The Company sold all of its Quick Tent, Inc. stock in 1998
resulting in a loss of $31,748. This investment is included in Other Assets at
June 30, 1998 at a value of $104,930 and at June 30, 1999 at $0.00. See Note 1
Other Investments.
NOTE 11 - FILM LIBRARY
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $12,745.
NOTE 12 - BRIDGE LOAN
In the quarter ended March 31, 1999, Bridge Loans in the amount of $50,000 were
converted into 62,500 shares of common stock of the Company at an average price
of $0.80 per share. In 1998 Bridge Loans in the amount of $333,750 were
converted into 450,731 Common Shares at an average price of $0.74 per share. An
additional 134,602 shares were issued to equalize the conversion price with the
market price in 1998, and 372,880 shares were issued to equalize the conversion
price with the market price in 1999.
NOTE 13 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED BY
INCREASE IN NOTES PAYABLE
Notes Payable 1998 $1,603,529
Notes Payable 1999 1,564,979
-----------
Net Change
(38,550)
Notes paid by Conversion to
Common Stock 50,000
-----------
Cash Flow generated by Note Payable $11,450
NOTE 14 - CAPITAL STOCK
During 1998, the Company declared a 1 for 5 reverse split in its common stock.
At the time of the reverse in November 1998 there were 19,987,526 shares
outstanding. After adjusting the outstanding shares for the 1 for 5 reverse
split, there were 3,997,521 shares outstanding.
NOTE 15 - STOCK ISSUED FOR FINANCING
The Company issued 3,400,000 shares (680,000 post-split shares) of common stock
for no consideration for which the Company was to receive financing. As
financing has not materialized, the Company is in the process of retrieving the
stock.
13
<PAGE>
NOTE 16 - DEBT FORGIVENESS BY AFFILIATE
An affiliated company forgave its debt from American Independent Network, Inc.
in the amount of $688,734 in 1998. Pursuant to Accounting Principal Board
Opinion Number 26, the amount was treated as a contribution to capital. There
was no tax effect as the Company has no tax asset or liability.
NOTE 17 - LEGAL MATTERS
The Company has had several judgements rendered against it. Judgements in place
at June 30, 1999 are as follows:
Judgment Entered For
Witner, Poltraock, Giampietro $11,921
Hatt, Estill, Hardwick & Gable 29,862
New Image Video 90,000
Ira Weingarten/Equity Communications 60,000
---------
$191,783
These amounts have been accounted for in accounts payable.
NOTE 18 - GOING CONCERN
As shown in the accompanying financial statements the Company has had recurring
net operating losses resulting in cash flow problems. All of the Company's debt
is short term resulting in a substantial current ratio deficit (current
liabilities and long term liabilities due within twelve months are greater than
current assets and assets available for use within twelve months). These
circumstances raise substantial doubt as to the Company's ability to continue as
a going concern. Such conditions may prevent the Company from meeting its
liabilities within a timely manner.
Management is seeking and believes it will succeed in attracting new debt and
equity capital. Management believes that it will obtain sufficient capital to be
able to fund an agreement with its creditors and revitalize its sales efforts
which it is believes will internally generate sufficient funds for continued
operations.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
14
<PAGE>
Pro Forma Financial Information. The following financial information sets
-------------------------------
forth on a pro forma basis the financial statements of American Independent
Network, Inc. (the surviving corporation in the merger) as if the merger took
place on December 31, 1998, which was the last day of the Company's most recent
fiscal year.
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
HISPANO TELEVISION VENTURES, INC.
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND JUNE 30, 1999
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
TABLE OF CONTENTS
<S> <C>
Review Report on Pro Forma Financial Information . . . . . 1
Condensed Pro Forma Balance Sheet - June 30, 1999 . . . 2
Condensed Pro Forma Balance Sheet - December 31, 1998. 3
Condensed Pro Forma Income Statement - June 30, 1999 . . 4
Condensed Pro Forma Income Statement - December 31, 1998 5
Notes to Pro Forma Financial Statements. . . . . . . . . . 6
</TABLE>
<PAGE>
JACK F. BURKE, JR.
CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 15728
HATTIESBURG, MISSISSIPPI 39404
REPORT ON REVIEW OF PRO FORMA FINANCIAL INFORMATION
I have reviewed the pro forma adjustments reflecting the transaction described
in Note 1 and the application of those adjustments to the historical amounts in
the accompanying pro forma condensed balance sheets of American Independent
Network, Inc. and Hispano Television Ventures, Inc. at December 31, 1998 and
June 30, 1999 and pro forma statement of income for the twelve months ended
December 31, 1998 and for the six months interim period ending June 30, 1999.
American Independent Network, Inc. financial statements for the year ended
December 31, 1998 were audited by me and the interim period ended June 30, 1999
was reviewed by me. Hispano television Ventures, Inc. was reviewed by another
accountant for the year ended December 31, 1998 and the interim period ended
June 30, 1999. Such pro forma adjustments are based on management's assumptions
as described in Note 2. Our review was conducted in accordance with standards
established by the American Institute of Certified Public Accountants.
A review is substantially less in scope than an examination, the objective of
which is the expression of an opinion on management's assumptions, the pro forma
adjustments and the application of those adjustments to historical financial
information. Accordingly, we do not express such an opinion.
The objective of this pro forma financial information is to show what the
significant effects on the historical information might have been had the event
occurred at an earlier date. However, the pro forma condensed financial
statements are not necessarily indicative of the results of operations or
related effects on financial position that would have been attained had the
above-mentioned event actually occurred earlier.
Based on my review, nothing came to my attention that caused me to believe that
management's
assumptions do not provide a reasonable basis for presenting the significant
effects directly attributable to the above-mentioned event described in Note 1,
that the related pro forma adjustments do not give appropriate effect to those
adjustments to the historical financial statement amounts in the pro forma
condensed balance sheet as of December 31, 1998 and June 30, 1999, and the pro
forma condensed statement of income year ended December 31, 1998 and the six
months ended June 30, 1999.
Sincerely,
/S/ Jack F. Burke, Jr.
October 14, 1999
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
CONDENSED PRO FORMA BALANCE SHEET
JUNE 30, 1999
HISTORIC PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
STATEMENTS ADJUSTMENTS STATEMENTS
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . $ 845 $ 402,748
500,000 $ 903,593
Other Current Assets. . . . . . . . . . . 48,088 66,990 115,078
----------- ------------ -----------
TOTAL CURRENT ASSETS . . . . . . . . 48,933 969,738 1,018,671
----------- ------------ -----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold Improvements. . . . . . . . . . 22,851 22,851
Equipment and Furnishings . . . . . . . . 134,642 113,674 248,316
Digital Compression Equipment . . . . . . 845,452 845,452
----------- -----------
1,002,945 113,674 1,116,619
Accumulated Depreciation and Amortization -233,008 -15,996 249,004
----------- ------------ -----------
TOTAL PLANT, PROPERTY AND EQUIPMENT. 769,937 97,678 867,615
----------- ------------ -----------
OTHER ASSETS
Trade Credits Receivable,
Net of Allowance of $125,138 . . . . . 211,990 211,990
Other Investments . . . . . . . . . . . . 495,521 500,000 995,521
Deposits 25,750 25,750
Intangible Assets 147,122 147,122
------------ -----------
TOTAL OTHER ASSETS . . . . . . . . . 707,511 672,872 1,380,383
----------- ------------ -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . 1,526,381 1,740,288 3,266,669
----------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable. . . . . . . . . . . . . 436,917 51,924 488,841
Notes Payable . . . . . . . . . . . . . . 1,564,979 1,564,979
Accrued Interest. . . . . . . . . . . . . 403,254 403,254
Equipment Lease Payments. . . . . . . . . 175,380 175,380
Other Current Liabilities . . . . . . . . 68,478 5,516 73,994
----------- ------------ -----------
TOTAL CURRENT ASSETS . . . . . . . . 2,649,008 57,440 2,706,448
Long Term Debt . . . . . . . . . . . . . . . . 79,003 505,042 584,045
-500,000 -500,000
------------ -----------
TOTAL LIABILITIES. . . . . . . . . . 2,728,011 62,482 2,790,493
----------- ------------ -----------
STOCKHOLDERS' EQUITY
Preferred Stock . . . . . . . . . . . . . 42,427 42,427
Common Stock. . . . . . . . . . . . . . . 305,261 -21,333
700,000
21,333 1,005,261
Additional Paid in Capital. . . . . . . . 5,338,743 1,000,000
769,528
-678,667 6,429,604
Retained Earnings . . . . . . . . . . . . -6,888,061 -113,055 -7,001,116
----------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY . . . . . -1,201,630 1,677,806 476,176
----------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . $ 1,526,381 $ 1,740,288 $ 3,266,669
----------- ------------ -----------
</TABLE>
The Accompanying "Notes to Financial Statement"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
CONDENSED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
HISTORIC PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
STATEMENTS ADJUSTMENTS STATEMENTS
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . $ 9,807 $ 89
500,000 $ 509,896
Other Current Assets . . . . . . . . . . . 32,788 32,788
--------------- ------------ -----------
TOTAL CURRENT ASSETS. . . . . . . . . 42,595 500,089 542,684
--------------- ------------ -----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold Improvements . . . . . . . . . . 22,851 22,851
Equipment and Furnishings. . . . . . . . . 130,642 59,868 190,510
Digital Compression Equipment. . . . . . . 845,092 845,092
Accumulated Deprecation and Amortization . -193,008 -9,978 -202,986
--------------- ------------ -----------
TOTAL PLANT, PROPERTY AND EQUIPMENT. 805,577 49,890 855,467
--------------- ------------ -----------
OTHER ASSETS
Trade Credits Receivable,
Net of Allowance of $125,138. . . . . . 231,990 231,990
Other Investments. . . . . . . . . . . . . 564,489 106,822
500,000 1,171,311
--------------- ------------ -----------
TOTAL OTHER ASSETS. . . . . . . . . . 796,479 606,822 1,403,301
--------------- ------------ -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . 1,644,651 1,156,801 2,801,452
--------------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Account Payable. . . . . . . . . . . . . . 382,555 12,240 394,795
Notes Payable. . . . . . . . . . . . . . . 1,603,529 1,603,529
Accrued Interest . . . . . . . . . . . . . 278,979 278,979
Other Current Liabilities. . . . . . . . . 243,858 243,858
--------------- ------------ -----------
TOTAL CURRENT LIABILITIES . . . . . . 2,508,921 12,240 2,521,161
Long Term Debt. . . . . . . . . . . . . . . . . . 109,003 109,003
--------------- ------------ -----------
TOTAL LIABILITIES . . . . . . . . . . 2,617,924 12,240 2,630,164
--------------- ------------ -----------
STOCKHOLDERS' EQUITY
Preferred Stock. . . . . . . . . . . . . . 42,427 42,427
Common Stock . . . . . . . . . . . . . . . 218,780 156,401
700,000
-156,401 918,780
Additional Paid in Capital . . . . . . . . 5,073,750 1,000,000
-543,599 5,530,151
Retained Earnings (Deficit). . . . . . . . -6,308,230 -11,840 -6,320,070
--------------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY. . . . . . -973,273 1,144,561 171,288
--------------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . $ 1,644,651 $ 1,156,801 $ 2,801,452
</TABLE>
The accompanying "Notes To Financial Statements"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
CONDENSED PRO FORMA INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1999
HISTORIC PRO FORMA
INCOME PRO FORMA INCOME
STATEMENTS ADJUSTMENT STATEMENT
<S> <C> <C> <C>
INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,464 $ 8,400 $ 81,864
----------- ----------- ----------
COST AND EXPENSE
Satellite Rental. . . . . . . . . . . . . . . . . . 180,000 180,000
Production Expense. . . . . . . . . . . . . . . . . 67,998 2,100 70,098
Bad Debts 16,987 16,987
Contract Services and Consulting Fees 42,196 42,196
Rental Expense. . . . . . . . . . . . . . . . . . . 36,068 16,357 52,425
Depreciation and Amortization . . . . . . . . . . . 108,968 11,719 120,687
Administrative Expense. . . . . . . . . . . . . . . 95,740 14,794 110,534
----------- ----------- ----------
TOTAL COST AND EXPENSE . . . . . . . . . . . . 488,774 104,153 592,927
----------- ----------- ----------
NET (LOSS) FROM OPERATIONS . . . . . . . . . . . . . . . -415,310 -95,753 -511,063
OTHER INCOME AND (EXPENSE)
Interest Expense. . . . . . . . . . . . . . . . . . -140,850 -5,462 -146,312
Gain on Disposal of Assets. . . . . . . . . . . . . 15,953 15,953
----------- ----------
NET (LOSS) BEFORE INCOME TAX AND EXTRAORDINARY ITEM. . . -540,207 -101,215 -641,422
Extraordinary Item
Cost of Conversion of Bridge Loans to Common Stock. -39,624 -39,624
INCOME TAX . . . . . . . . . . . . . . . . . . . . . . . 0 0 0
----------- ----------- ----------
NET (LOSS) . . . . . . . . . . . . . . . . . . . . . . . -579,831 -101,215 -681,046
----------- ----------- ----------
Earnings Per Share of Common Stock . . . . . . . . . . . -$0.11 -$0.01 -$0.13
Weighted Average Shares. . . . . . . . . . . . . . . . . $ 5,438,860 $21,333,334 $5,438,860
</TABLE>
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
See Accountant's Review Report
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
CONDENSED PRO FORMA INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
HISTORIC PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
STATEMENTS ADJUSTMENTS STATEMENTS
<S> <C> <C> <C>
INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 377,380 $ 1,997 $ 379,377
------------ ------------ ------------
COST AND EXPENSE
Satellite Rental. . . . . . . . . . . . . . . . . 360,000 360,000
Productions Expense . . . . . . . . . . . . . . . 128,742 128,742
Bad Debts . . . . . . . . . . . . . . . . . . . . 1,584,595 1,584,595
Depreciation and Amortization. . . . . . . . . . 218,961 11,788 230,749
Administrative Expenses . . . . . . . . . . . . . 622,176 2,049 624,225
------------ ------------ ------------
Total Cost and Expense . . . . . . . . . . . 2,914,474 13,837 2,928,311
------------ ------------ ------------
NET (LOSS) FROM OPERATIONS . . . . . . . . . . . . . . -2,537,094 -11,840 2,548,934
------------ ------------ ------------
OTHER EXPENSES
Interest . . . . . . . . . . . . . . . . . . . . . -231,789 -231,789
Loss on Sale of Assets. . . . . . . . . . . . . . -31,798 -31,798
------------ ------------
TOTAL OTHER EXPENSES . . . . . . . . . . . . -263,587 -263,587
------------ ------------
Loss Before Income Tax and Extraordinary Items . . . . -2,800,681 -11,840 -2,812,521
INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . . 661,824 661,824
------------ ------------
Net Loss Before Extraordinary Items. . . . . . . . . . -2,138,857 -11,840 -2,150,697
Extraordinary Item
Cost of Conversion of Bridge Loan to Common Stock -33,650 -33,650
------------ ------------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . -$2,172,507 -$11,840 -$2,184,347
------------ ------------ ------------
Earnings Per Share of Common Stock . . . . . . . . . . -$0.59 0.00 -$0.59
Weighted Average Shares. . . . . . . . . . . . . . . . 3,705,036 21,333,334 3,705,036
</TABLE>
The Accompanying "Notes to Financial Statements'
Are An Integral Part of These Financial Statements
See Accountant's Review Report
5
<PAGE>
AMERICAN INDEPENDENT NETWORK INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
NOTE 1 INTRODUCTION
American Independent Network, Inc. (AIN) (A Delaware Corporation) and Hispano
Television Ventures, Inc. (HTV) (A Texas Corporation) are both involved in
producing television programming.
An agreement between the two companies will result in a statutory merger of HTV
into AIN with AIN the surviving entity.
AIN will issue 70,000,000 shares of newly authorized shares of Common Stock,
$0.01 par value for five hundred thousand dollars ($500,000) cash and the net
equity of HTV via the merger. The stock will be issued to the stockholders' of
HTV upon surrender of their HTV stock for cancellation.
The pro forma adjustments illustrates the changes to the historic financial
statements for the calendar year ending December 31, 1998 and for the six month
interim period ending June 30, 1999. The audited financial statements of AIN at
December 31, 1998 and the reviewed financial statements of HTV at December 31,
1998 and the reviewed interim financial statements at June 30, 1999 for AIN and
HTV are incorporated herein by references.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The statutory merger referred to in Note 1 will be accounted for as a pooling of
interest business combination combining the accounts of each combining entity
and continuing the activities of the combining entities as one entity.
NOTE 3 MANAGEMENT'S ASSUMPTIONS
The only assumptions indicated are that the merger will take place and the stock
purchase will occur. According to the provisions of Accounting Principles Board
Opinion No. 16 Business Combinations, a business combination effected as pooling
of interest does not ordinarily involve a choice of assumptions by management.
Accordingly, a report on a proposed pooling transactions need not address
management assumptions. Pursuant to a letter agreement, dated August 27, 1999,
having been executed by both corporations, there are no material uncertainties
regarding the merger event.
6
<PAGE>
NOTE 4 PRO FORMA ADJUSTMENTS
The adjustment column consist of the accounts of Hispano Television Ventures,
Inc. pursuant to the statutory merger and the following pro forma adjustments:
<TABLE>
<CAPTION>
ADJUSTMENTS AT DECEMBER 31, 1998
AMERICAN INDEPENDENT HISPANO TELEVISION
NETWORK, INC. VENTURE, INC.
ADDITIONAL
COMMON PAID IN COMMON PAID IN NOTES
STOCK CAPITAL STOCK CAPITAL CASH INVEST PAYABLE
<S> <C> <C> <C> <C> <C> <C> <C>
Merger of HTV into AIN
Stock Exchange 70,000,000
Shares of AIN Common
For The Outstanding Shares
Of HTV Common . . . . . . . 700,000 1,000,000 -156,401 -543,599 500,000 500,000
-------- ----------- --------- --------- -------- -------- --------
TOTAL. . . . . . . $700,000 $ 1,000,000 -$156,401 -$543,599 $500,000 $500,000
-------- ----------- --------- --------- -------- -------- --------
ADJUSTMENTS AT JUNE 30, 1999
Merger Of HTV Into AIN
Stock Exchange 70,000,000
Shares Of AIN Common
For the Outstanding Shares
Of HTV Common . . . . . . . 700,000 1,000,000 -21,333 -678,667 500,000 500,000
-------- ----------- --------- --------- -------- -------- --------
TOTAL. . . . . . . $700,000 $ 1,000,000 -$21,333 -$678,667 $500,000 $500,000
-------- ----------- --------- --------- -------- -------- --------
</TABLE>
7
<PAGE>
Financial Information About HTV. The following sets forth financial
----------------------------------
information about the HTV. This financial information about HTV is unaudited.
The Company and HTV agree that it is impracticable for an audit of HTV to be
conducted in time to be included in this Proxy Statement. HTV has no
independent auditor.
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
HISPANO TELEVISION VENTURES, INC.
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND JUNE 30, 1999
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC.
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
<S> <C>
ACCOUNTANT'S REVIEW REPORT . . . . . . . . . 3
FINANCIAL STATEMENTS
BALANCE SHEET. . . . . . . . . . . . . . . 4
STATEMENT OF INCOME AND RETAINED EARNINGS. 5
STATEMENT OF CASH FLOWS. . . . . . . . . . 6
NOTES TO FINANCIAL STATEMENTS. . . . . . . . 7-8
</TABLE>
2
<PAGE>
REVIEWED FINANCIAL STATEMENTS
Hispano Television Ventures, Inc
AS OF DECEMBER 31, 1998
<PAGE>
To the Stockholders and
Board of Directors
Hispano Television Ventures, Inc.
Ft. Worth, TX
I have reviewed the accompanying balance sheet of Hispano Television Ventures,
Inc. as of December 31, 1998, and the related statements of income and retained
earnings and cash flows for the period February 24, 1998 (inception) to December
31, 1998, in accordance with the Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Hispano Television Ventures, Inc.
A review consists primarily of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/s/ Stanley A. Wisener, CPA
October 7, 1999
3
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC.
================================================================================
BALANCE SHEET
As of December 31 1998
- ------------------------------------ ---------
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 89
---------
Total Current Assets 89
---------
PROPERTY AND EQUIPMENT 49,890
---------
OTHER ASSETS 106,822
- ------------------------------------ ---------
$156,801
==================================== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable-Shareholders $ 12,240
---------
Total Current Liabilities 12,240
---------
SHAREHOLDERS' EQUITY
Common Stock 156,401
Retained Earnings (11,840)
---------
Total Shareholders' Equity 144,561
- ------------------------------------ ---------
$156,801
==================================== =========
</TABLE>
See accompanying notes and accountant's review report
4
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC.
================================================================================
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Period February 24, 1998 (inception) to December 31 1998
- ------------------------------------------------------------ ---------
<S> <C>
SALES $ 1,997
COST OF SALES
---------
1,997
OPERATING EXPENSES
Advertising
Dues & Subscriptions 12
Bank Charges 10
Depreciation and Amortization 11,788
Postage and Delivery 123
Legal and Professional Fees 850
Office Expense 251
Telephone and Utilities 346
Travel and Entertainment 457
---------
13,837
---------
LOSS FROM OPERATIONS (11,840)
OTHER INCOME (EXPENSES), NET 0
---------
LOSS BEFORE TAXES (11,840)
Provision for Income Taxes 0
---------
NET LOSS (11,840)
Beginning Retained Earnings 0
- ------------------------------------------------------------ ---------
ENDING RETAINED EARNINGS $(11,840)
============================================================ =========
</TABLE>
See accompanying notes and accountant's review report
5
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC.
================================================================================
STATEMENT OF CASH FLOWS
For the Period February 24, 1998 (inception) to December 31 1998
- ----------------------------------------------------------- ----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (11,840)
----------
Adjustments to Reconcile Net Income to Net
Cash Used in Operating Activities
Depreciation & Amortization 11,788
Changes in Operating Assets and Liabilities
Increase in Other Assets (108,632)
----------
Total Adjustments (96,844)
----------
Net Cash Used in Operating Activities (108,684)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (5,500)
Issuance of Common Stock 102,033
----------
Net Cash Provided in Investing Activities 96,533
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowing from Shareholders 12,240
----------
Net Cash Provided by Financing Activities 12,240
----------
NET INCREASE IN CASH 89
Beginning Cash 0
- ----------------------------------------------------------- ----------
ENDING CASH $ 89
=========================================================== ==========
</TABLE>
See accompanying notes and accountant's review report
6
<PAGE>
HISPANO TELEVISION VENTURES, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NATURE OF BUSINESS
Hispano Television Ventures, Inc. was incorporated in Texas on February 24,
1998, and is a successor to Hispanic Independent Productions, LLC which was
formed on September 25, 1997. The Company was originally in the business of
producing programs and commercials for the television industry. Currently the
Company is in the process of establishing a new Hispanic television network. The
Company has recently acquired one television station and has signed a letter of
intent to acquire another station.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally 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 those estimates.
CASH
The Company considers all short-term investments with maturity of three months
or less to be cash equivalents.
AMORTIZATION OF OTHER ASSETS
Costs incurred to obtain intangible assets are capitalized and amortized over
the estimated useful lives of the assets. As of December 31, 1998, other assets
consisted of the following:
<TABLE>
<CAPTION>
Cost Life in Years
------------- ----------------
<S> <C> <C>
Intangible Production Costs $ 108,632 15
Less: Accumulated Amortization (1,810)
-----------
$ 106,822
============
</TABLE>
PROPERTY AND EQUIPMENT
The Company's property and equipment is stated at cost less related accumulated
depreciation. Depreciation expense is computed on the straight-line basis over
the estimated useful lives of the assets. For federal tax purposes, the Company
depreciates property and equipment using the modified accelerated cost recovery
system and other acceptable tax depreciation methods.
Property and equipment by major classification consisted of the following:
Cost Life in Years
-------- -------------
Television Production Equipment $59,868 5
Less: Accumulated Depreciation (9,978)
--------
$49,890
========
See accompanying notes and accountant's review report
7
<PAGE>
HISPANO TELEVISION VENTURES, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW DISCLOSURES
<S> <C>
Other cash flow information:
Cash paid for interest $ 1,733
Cash paid for income taxes 0
Significant noncash investing and financing activities:
Stock issued for equipment $54,768
contributed by Shareholders
</TABLE>
FAIR VALUE OF FINANCIAL INVESTMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments", requires disclosure of their fair value
information about financial instruments. Fair Value estimates discussed herein
are based on certain market assumptions and pertinent information available to
management as of December 31, 1998. The respective carrying values of certain
on-balance- sheet financial instruments approximated their face values. These
financial instruments include cash, and note payable to shareholders. Fair
values were assumed to approximate carrying values for these financial
instruments since they are short term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
COMMON STOCK
Shares authorized 5,000,000
=========
Shares issued and outstanding 3,200,000
=========
No par value
See accompanying notes and accountant's review report
8
<PAGE>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
ACCOUNTANT'S REVIEW REPORT . . . . . . . . . 3
FINANCIAL STATEMENTS
BALANCE SHEET. . . . . . . . . . . . . . . 4
STATEMENT OF INCOME AND RETAINED EARNINGS. 5
STATEMENT OF CASH FLOWS. . . . . . . . . . 6
NOTES TO FINANCIAL STATEMENTS. . . . . . . . 7-9
</TABLE>
2
<PAGE>
REVIEWED FINANCIAL STATEMENTS
HISPANO TELEVISION VENTURES, INC DBA CADENA INDEPENDIENTE NACIONAL
AS OF JUNE 30, 1999
<PAGE>
To the Stockholders and
Board of Directors
Hispano Television Ventures, Inc.
Ft. Worth, TX
I have reviewed the accompanying balance sheet of Hispano Television Ventures,
Inc., dba Cadena Independiente Nacional as of June 30, 1999, and the related
statements of income and retained earnings and cash flows for the six months
ending June 30, 1999, in accordance with the Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of Hispano Television Ventures, Inc., dba
Cadena Independiente Nacional.
A review consists primarily of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Stanley A. Wisener, CPA
October 11, 1999
3
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
BALANCE SHEET
As of June 30 1999
- ------------------------------------ -----------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 402,748
Prepaid Expenses 66,990
-----------
Total Current Assets 469,738
-----------
PROPERTY AND EQUIPMENT 97,678
-----------
OTHER ASSETS
Investment in ATN Network, Inc. 500,000
Deposits 25,750
Intangible Assets 147,122
-----------
Total Other Assets 672,872
-----------
$1,240,288
==================================== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 51,924
Note Payable-Shareholders 2,985
Accrued Expenses 2,531
-----------
Total Current Liabilities 57,440
-----------
LONG TERM DEBT 505,042
-----------
SHAREHOLDERS' EQUITY
Common Stock 21,333
Paid In Capital 769,528
Retained Earnings (113,055)
-----------
Total Shareholders' Equity 677,806
- ------------------------------------ -----------
$1,240,288
==================================== ===========
</TABLE>
See accompanying notes and accountant's review report
4
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Six Months Ending June 30 1999
- ----------------------------------------- ----------
<S> <C>
SALES $ 8,400
COST OF SALES 2,100
----------
GROSS PROFIT 6,300
OPERATING EXPENSES
Advertising 1,000
Bad Debts 16,987
Bank Charges 223
Contract Services and Consulting Fees 42,196
Depreciation and Amortization 11,719
Interest Expense 5,462
Postage and Delivery 465
Taxes 2,531
Rent 16,357
Office Expense 1,275
Telephone and Utilities 2,593
Travel and Entertainment 6,707
----------
107,515
----------
LOSS FROM OPERATIONS (101,215)
OTHER INCOME (EXPENSES), NET 0
----------
(101,215)
LOSS BEFORE TAXES
Provision for Income Taxes 0
----------
NET LOSS (101,215)
Beginning Retained Earnings (11,840)
- ----------------------------------------- ----------
ENDING RETAINED EARNINGS $(113,055)
========================================= ==========
</TABLE>
See accompanying notes and accountant's review report
5
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
STATEMENT OF CASH FLOWS
For the Six Months Ending June 30 1999
- ---------------------------------------------------------------------------- ----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(101,215)
----------
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities
Depreciation & Amortization 11,719
Other Noncash Expenses 6,510
Changes in Operating Assets and Liabilities
Increase in Other Assets (45,251)
Increase in Accounts Payable and Accrued Expenses 54,455
----------
Total Adjustments 27,433
----------
Net Cash Used in Operating Activities (73,782)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (53,806)
Paid in Capital from Shareholders 34,460
----------
Net Cash Used in Investing Activities (19,346)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Payments on Loans from Shareholders (9,255)
Net Borrowing from Long Term Debt 505,042
----------
Net Cash Provided by Financing Activities 495,787
----------
NET INCREASE IN CASH 402,659
Beginning Cash 89
- ---------------------------------------------------------------------------- ----------
ENDING CASH $ 402,748
============================================================================ ==========
</TABLE>
See accompanying notes and accountant's review report
6
<PAGE>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NATURE OF BUSINESS
Hispano Television Ventures, Inc. was incorporated in Texas on February 24,
1998, and is a successor to Hispanic Independent Productions, LLC which was
formed on September 25, 1997. The Company was originally in the business of
producing programs and commercials for the television industry. Currently the
Company is in the process of establishing a new Hispanic television network. The
Company has recently acquired one television station and has signed a letter of
intent to acquire another station.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally 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 those estimates.
CASH
The Company considers all short-term investments with maturity of three months
or less to be
cash equivalents.
AMORTIZATION OF INTANGIBLE ASSETS
Costs incurred to obtain intangible assets are capitalized and amortized over
the estimated useful lives of the assets. As of June 30, 1999, other assets
consisted of the following:
<TABLE>
<CAPTION>
Cost Life in Years
--------------- --------------
<S> <C> <C>
Intangible Production Costs $ 108,632 15
Deferred Financing Costs $ 46,001 2
Less: Accumulated Amortization (7,511)
---------------
$ 147,122
===============
</TABLE>
Deferred financing costs are related to a note payable due May 31, 2001 and
are capitalized and amortized over the term of the loan.
PROPERTY AND EQUIPMENT
The Company's property and equipment is stated at cost less related accumulated
depreciation. Depreciation expense is computed on the straight-line basis over
the estimated useful lives of the assets. For federal tax purposes, the Company
depreciates property and equipment using the modified accelerated cost recovery
system and other acceptable tax depreciation methods.
Property and equipment by major classification consisted of the following:
<TABLE>
<CAPTION>
Cost Life in Years
---------- -------------
<S> <C> <C>
Television Production Equipment $113,674 5
Less: Accumulated Depreciation (15,996)
---------
$ 97,678
=========
</TABLE>
See accompanying notes and accountant's review report
7
<PAGE>
<TABLE>
<CAPTION>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTAL CASH FLOW DISCLOSURES
Other cash flow information:
<S> <C>
Cash paid for interest $ 5,462
Cash paid for income taxes 0
Significant noncash investing and financing activities:
Stock issued for all outstanding $500,000
shares of ATN Network, Inc.
Stock issued for consulting agreement $ 100000
with Woodcrest Capital, L.L.C.
</TABLE>
FAIR VALUE OF FINANCIAL INVESTMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments", requires disclosure of their fair value
information about financial instruments. Fair Value estimates discussed herein
are based on certain market assumptions and pertinent information available to
management as of June 30, 1999. The respective carrying values of certain
on-balance- sheet financial instruments approximated their face values. These
financial instruments include cash, and note payable to shareholders. Fair
values were assumed to approximate carrying values for these financial
instruments since they are short term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
LONG TERM DEBT
On May 28, 1999, the Company entered into a loan agreement with a group of
investors and borrowed $500,000. This loan is due on May 31, 2001 and is
convertible in multiples of $1,000 into shares of the Company's series A
Convertible Preferred Stock. The interest rate on the note is 11% and interest
is due and payable on the last day of March, June, September and December,
starting June 30, 1999. If the interest is not paid on that date the interest
is then capitalized and included as part of the outstanding principal of the
note. The note is secured by all of the Company's accounts receivable,
equipment, intangible assets, promissory notes and any other assets. The
balance at June 30, 1999 is $505,042.
<TABLE>
<CAPTION>
COMMON STOCK
<S> <C> <C>
Shares Authorized 50,000,000
Shares Issued and Outstanding 21,333,334
Par Value $ 0.001
PREFERRED STOCK
Shares Authorized 25,000,000
Shares Issued and Outstanding 0
Par Value $ 0.001
The Preferred Stock has 8,000,000 of the authorized
shares designated as "Series A" Preferred.
</TABLE>
See accountant's review report
8
<PAGE>
HISPANO TELEVISION VENTURES, INC. DBA CADENA INDEPENDIENTE NACIONAL
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK
The Company from time to time maintains cash balances held at finacial
institutions in excess of federally insured limits.
SUBSEQUENT EVENTS
On September 1, 1999 the Company entered into a note modification with the
investors group which increased the Long Term Convertible Dept from $500,000 to
$1,000,000. The additional debt was used to purchase stock from the American
Independent Network, Inc. (AIN). On September 2, 1999, the Company closed a
transaction
On September 2, 1999, the Company closed a transaction (the AIN transaction)
whereby the Company 11,00,000 shares of common stock from AIN for $500,000. The
Company now owns approximately 60% of the presently outstanding shares of common
stock of AIN. As a part of this transaction, the Company proposed a transaction
to merge the assets of the Company with AIN. AIN will be the surviving entity
from this transaction.
One June 15, 1999, CIN entered into a Letter of Intent to purchase Walt Morris's
89% interest in Cleveland Broadcasting Corporation Channel 22 in Oklahoma City,
Oklahoma. The $25,000 payment to Mr. Morris on this date is recorded as an
earnest money deposit on the purchase of his interest in the station subject to
finalization of due diligence and receipt of FCC license and consents. The
station is being acquired for $250,000 cash payable over installments and a to
be determined amount of stock. Both parties are working towards completing this
transaction.
<TABLE>
<CAPTION>
STATEMENT OF SHAREHOLDERS EQUITY
Number of Par Value & Capital Retained
Shares in Excess of Par Earnings Total
---------- -------------------- ---------- ----------
<S> <C> <C> <C> <C>
Balance February 24, 1998 0 0 0 0
Stock Issued 3,200,000 $ 156,401 $ (11,840) $ 144,561
---------- -------------------- ---------- ----------
Balance December 31, 1998 3,200,000 $ 156,401 $ (11,840) 144,561
Stock Issued 2,133,334 634,460 0 634,460
Stock Dividend 16,000,000 0 0 0
Net Loss 0 0 (101,215) (101,215)
---------- -------------------- ---------- ----------
Balance June 30, 1999 21,333,334 $ 790,861 $ 113,055 $ 677,806
========== ==================== ========== ==========
</TABLE>
See accountant's review report
9
<PAGE>
--------------------------------------------------------
(4) TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE
THE NAME OF THE COMPANY
TO "HISPANIC TELEVISION NETWORK, INC.",
OR SUCH OTHER SIMILAR NAME IF THIS NAME IS NOT AVAILABLE.
---------------------------------------------------------
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the stockholders for approval, a
proposal to amend the Certificate of Incorporation change the name of the
Company to "Hispanic Television Network, Inc.", or such other similar name if
this name is not available. This Proxy Proposal (4) is subject to the adoption
of Proxy Proposal (3).
DESCRIPTION AND EFFECT OF THE AMENDMENT
<PAGE>
The Board of Directors of the Company recommends the approval of the
proposed amendment to change the name of the Company to "Hispanic Television
Network, Inc.", or such other similar name if this name is not available. The
proposed Amendment would amend Article I of the Certificate of Incorporation, as
amended, of American Independent Network, Inc. to change the name of the Company
to "Hispanic Television Network, Inc.", or such other similar name if this name
is not available. By approving this Proxy Proposal (4), stockholders authorize
the Board of Directors to select a name similar to Hispanic Television Network,
Inc. if this name is not available. Such an Amendment requires the affirmative
vote of a majority of the shares of Common Stock present or represented by proxy
and entitled to vote at the Annual Meeting.
PRINCIPAL REASONS FOR THE AMENDMENT
The Board of Directors believes it is desirable to change the name of the
Company because of the adoption, if so adopted, of Proxy Proposal (3). The
business of HTV includes television programming aimed at the Hispanic market,
and the name Hispanic Television Network, Inc. is more appropriate for the
business markets of the merged Company. Further, the Board of Directors
believes that the name Hispanic Television Network, Inc. is more likely to have
a greater intangible value, and a greater recognition value to the Company in
the future, than the current name of the Company. In the event that the name
"Hispanic Television Network, Inc." is not available, the Directors will select
a similar name.
THE AMENDMENT TO CERTIFICATE OF INCORPORATION
The proposed Amendment to the First Article will be as follows:
FIRST:
"The name of the Corporation is Hispanic Television Network, Inc."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR AMENDING THE
COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO
HISPANIC TELEVISION NETWORK, INC., OR SUCH OTHER SIMILAR NAME IF THIS NAME IS
NOT AVAILABLE.
---------------------------------------------------------
(5) TO RATIFY THE SELECTION OF JACK F. BURKE, JR. AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
---------------------------------------------------------
<PAGE>
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the stockholders, the Board's
selection of independent auditor.
The Board of Directors has selected Jack F. Burke, Jr. as the Company's
independent auditor for the current fiscal year. The Board of Directors wishes
to obtain from the Stockholders a ratification of their action in appointing
Jack F. Burke, Jr. as independent auditor of the Company for the fiscal year
ending December 31, 1999. Such ratification requires the affirmative vote of a
majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting.
In the event the appointment of Jack F. Burke, Jr. as independent
auditor is not ratified by the Stockholders, the adverse vote will be considered
as a direction to the Board of Directors to select other independent auditors
for the fiscal year ending December 31, 1999.
Jack F. Burke, Jr. serves as the Company's independent auditor for the
current year, and has been the Company's independent auditor for the years ended
December 31, 1998 and 1997. A representative of Jack F. Burke, Jr. is not
expected to be present at the Annual Meeting, and therefore is not expected to
make any statements nor be available to respond to questions from stockholders.
The Company has had no changes or disagreements with accountants on the
accounting and the financial disclosure of the Company during the past two
years. HTV has no audited financial statements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF JACK F. BURKE, JR. AS INDEPENDENT AUDITOR FOR FISCAL YEAR ENDING DECEMBER
31, 1999.
---------------------------------------------------------
(6) TO AMEND THE BYLAWS TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE BYLAWS
---------------------------------------------------------
<PAGE>
DESCRIPTION AND EFFECT OF THE AMENDMENT
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the stockholders, a proposal to amend
the Bylaws to authorize the Board of Directors to amend the Bylaws. The Board
of Directors of the Company recommends the approval of the proposed amendment to
the Bylaws to authorize the Board of Directors to amend the Bylaws.
PRINCIPAL REASONS FOR THE AMENDMENT
The amendment would provide the Company with the ability to make changes in
corporate governance and other matters permitted to be made in the bylaws
without the Company incurring the time or expense of a stockholder meeting.
THE AMENDMENT TO CERTIFICATE OF INCORPORATION
The proposed Bylaw Amendment to Article XI-Amendments--Section 1 will be as
follows:
Article XI-Amendments
Section 1. The Bylaws of the corporation may be created, amended, or
repealed by the majority vote of the Directors of the corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
THE BYLAWS TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE BYLAWS
---------------------------------------------------------
(7) OTHER MATTERS
---------------------------------------------------------
The Board of Directors is not aware of any other matters to be presented
for action at the Annual Meeting. However, if any other matter is properly
presented at the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgement on such matters.
<PAGE>
INCORPORATION BY REFERENCE
The Company incorporates herein by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998 which is being provided to
stockholders along with this Proxy Statement.
FUTURE PROPOSALS OF STOCKHOLDERS
The deadline for stockholders to submit proposals to be considered for
inclusion in the Proxy Statement for the year 2000 Annual Meeting of
Stockholders is January 31, 2000.
BY ORDER OF THE BOARD OF DIRECTORS OF
AMERICAN INDEPENDENT NETWORK, INC.
/s/ Walter Morgan /s/ Randy Moseley
Director, CEO and President Director and Chief Financial Officer
Haltom City, TX Haltom City, TX
<PAGE>
PROXY
AMERICAN INDEPENDENT NETWORK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1999
The undersigned hereby appoints Walter Morgan and Randy Moseley, and each
of them as the true and lawful attorneys, agents and proxies of the undersigned,
with full power of substitution, to represent and to vote all shares of Common
Stock of American Independent Network, Inc. held of record by the undersigned on
October 12, 1999 at the Annual Meeting of Stockholders to be held at 6125
Airport Freeway, Suite 200, Haltom City, TX 76117 on November 19, 1999, at 6:00
PM (CST) and at any adjournments thereof. Any and all proxies heretofore given
are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED:
(I) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN.
(II) FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY TO AUTHORIZE A TOTAL OF 200,000,000 SHARES OF COMMON STOCK, TO AUTHORIZE
20,000,000 SHARES OF PREFERRED STOCK AND TO RESET THE PAR VALUE OF PREFERRED
STOCK.
(III) FOR THE RATIFICATION OF THE BOARD'S DECISION TO MERGE WITH HISPANO
TELEVISION VENTURES, INC.
(IV) FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY TO CHANGE THE NAME OF THE COMPANY TO "HISPANIC TELEVISION NETWORK,
INC.", OR SUCH OTHER SIMILAR NAME IF THIS NAME IS NOT AVAILABLE.
(V) FOR THE RATIFICATION OF THE BOARD'S SELECTION OF JACK F. BURKE, JR.
AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31,
1999.
<PAGE>
(VI) FOR THE PROPOSAL TO AMEND THE BYLAWS TO AUTHORIZE THE BOARD OF
DIRECTORS TO AMEND THE BYLAWS
1. ELECTION OF DIRECTORS OF THE COMPANY. (INSTRUCTION: TO WITHHOLD
--------------------------
AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR
-------------------------------------------------------------------------
OTHERWISE STRIKE, THAT NOMINEE'S NAME IN THE LIST BELOW.)
---------------------------------------------------------
FOR all nominees listed below WITHHOLD authority to
except as marked to the contrary. vote for all nominees
below.
James A. Ryffel
P. Alan Luckett
Douglas K. Miller
Bob J. Bryant
2. Proposal to amend the Certificate of Incorporation of the Company to
authorize a total of 200,000,000 shares of common stock, to authorize 20,000,000
shares of preferred stock and to reset the par value of preferred stock.
FOR AGAINST ABSTAIN
3 Proposal to ratify the Board's decision to merge with Hispano Television
Ventures, Inc. and to ratify the merger agreement.
FOR AGAINST ABSTAIN
4. Proposal to amend the Certificate of Incorporation to change the name of
the Company to "Hispanic Television Network, Inc.", or such other similar name
if this name is not available.
FOR AGAINST ABSTAIN
<PAGE>
77
5. Proposal to ratify the selection of Jack F. Burke, Jr. as the
Company's independent auditor for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
6. PROPOSAL TO AMEND THE BYLAWS TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND
THE BYLAWS.
FOR AGAINST ABSTAIN
7. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
FOR AGAINST ABSTAIN
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
_____________________ ___________________________________
Number of Shares of Signature
Common Stock
Stock Owned
As of the Record Date of October 12, 1999
___________________________________
(Typed or Printed Name)
___________________________________
Signature if held jointly
___________________________________
(Typed or Printed Name)
DATED: ___________________________
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED
<PAGE>
AT THE MEETING. PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY.
<PAGE>
Attachment"A"
Merger Agreement
Between
American Independent Network, Inc. and Hispano Television Ventures, Inc.
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
AMERICAN INDEPENDENT NETWORK, INC.
AND
HISPANO TELEVISION VENTURES, INC.
DATED AS OF OCTOBER 15, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I - THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. The Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.04. Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.05. Directors and Officers. . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES . . . . . . . . 2
Section 2.01. Merger Consideration: Conversion and Cancellation of Securities 2
Section 2.02. Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Stock Transfer Books. . . . . . . . . . . . . . . . . . . . . . 4
Section 2.04. Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF HTV . . . . . . . . . . . . . . 5
Section 3.01. Organization and Qualification: Subsidiaries. . . . . . . . . . 5
Section 3.02. Articles of Incorporation and Bylaws. . . . . . . . . . . . . . 5
Section 3.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.04. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.05. No Conflict: Required Filings and Consents. . . . . . . . . . . 7
Section 3.06. Permits; Compliance.. . . . . . . . . . . . . . . . . . . . . . 8
Section 3.07. Reports; Financial Statements; Undisclosed Liabilities. . . . . 8
Section 3.08. Absence of Certain Changes or Events. . . . . . . . . . . . . . 8
Section 3.09. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.10. Employee Benefit Plans; Labor Matters.. . . . . . . . . . . . . 9
Section 3.11. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.12. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.13. Insider Interests; Transactions with Management.. . . . . . . . 10
Section 3.14. Contracts and Agreements. . . . . . . . . . . . . . . . . . . . 11
Section 3.15. Brokers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.16. Board Recommendations.. . . . . . . . . . . . . . . . . . . . . 11
Section 3.17. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.18. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF AIN. . . . . . . . . . . . . . . 12
Section 4.01. Organization and Qualification; Subsidiaries. . . . . . . . . . 12
Section 4.02. Certificate of Incorporation and Bylaws; Formation Documents. . 12
Section 4.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.04. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.05. No Conflict; Required Filings and Consents. . . . . . . . . . . 14
Section 4.06. Permits; Compliance.. . . . . . . . . . . . . . . . . . . . . . 14
Section 4.07. Reports; Financial Statements.. . . . . . . . . . . . . . . . . 14
Section 4.08. Absence of Certain Changes or Events. . . . . . . . . . . . . . 15
i
<PAGE>
Section 4.09. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.10. Employee Benefit Plans; Labor Matters . . . . . . . . . . . . . 16
Section 4.11. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 17
Section 4.13. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.14. Insider Interests; Transactions with Management . . . . . . . . 18
Section 4.15. Contracts and Agreements. . . . . . . . . . . . . . . . . . . . 18
Section 4.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.17. Board Recommendations . . . . . . . . . . . . . . . . . . . . . 18
Section 4.18. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 19
Section 5.02. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.03. Access and Information. . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI - ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.01. Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . 22
Section 6.02. Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII - CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.01. Additional Conditions to Obligations of AIN.. . . . . . . . . . 23
Section 7.02. Additional Conditions to Obligations of HTV . . . . . . . . . . 24
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . 26
Section 8.01.Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.02. Effect of Termination; Remedies.. . . . . . . . . . . . . . . . 26
Section 8.03. Amendment.. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.04. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.05. Fees and Expenses.. . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.01. Effectiveness of Representations, Warranties and Agreements.. . 27
Section 9.02. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.03. Certain Definitions.. . . . . . . . . . . . . . . . . . . . . . 29
Section 9.04. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.05. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.06. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.07. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.08. Parties in Interest.. . . . . . . . . . . . . . . . . . . . . . 30
Section 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative.. . . . . 30
Section 9.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.11. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.12. Specific Performance. . . . . . . . . . . . . . . . . . . . . . 30
Section 9.13. Confidentiality Agreement . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of October 15, 1999 (this
"Agreement"), is by and between American Independent Network, Inc., a Delaware
-----
corporation ("AIN"), and Hispano Television Ventures, Inc., a Texas corporation
---
("HTV").
---
WHEREAS, HTV, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("DGCL") and the Texas Business Corporation Code ("TBCA"), will merge
---- ----
with and into AIN (the "Merger");
------
WHEREAS, the Board of Directors of HTV has determined that the Merger is
advisable and is fair to, and in the best interests of, HTV and its
stockholders, has approved and adopted this Agreement and the transactions
contemplated hereby, and has recommended approval and adoption of this Agreement
by the stockholders of HTV; and
WHEREAS, the Board of Directors of AIN has determined that the Merger is
advisable and is fair to, and in the best interests of, AIN and its
stockholders, has approved and adopted this Agreement and the transactions
contemplated hereby, and has recommended approval and adoption of this Agreement
by the stockholders of AIN;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the DGCL and the TBCA, at
the Effective Time (as defined in Section 1.03 of this Agreement), HTV shall be
------------
merged with and into AIN. As a result of the Merger, the separate corporate
existence of HTV shall cease and AIN shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
----------------------
Section 1.02. The Closing. Subject to the terms and conditions of this
-----------
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
-------
offices of Cantey & Hanger, L.L.P., 801 Cherry Street, Suite 2100, Fort Worth,
Texas 76102, at 9:00 a.m., local time, on the day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article VII shall be fulfilled or waived in accordance herewith (other than
-------
conditions with respect to actions the respective parties hereto will take at
the Closing), or (b) at such other time, date or place as AIN and HTV may agree.
The date on which the Closing occurs is hereinafter referred to as the "Closing
-------
Date."
- ----
Section 1.03. Effective Time. On the Closing Date, the parties hereto
--------------
shall cause the Merger to be consummated by filing a Certificate of Merger with
the Delaware Secretary of State and Articles of Merger with the Texas Secretary
of State in such forms as are required by, and executed in accordance with the
relevant provisions of the DGCL and the TBCA, respectively (the date and time of
the completion of such filing or such later date and time as may be specified in
the Certificate of Merger and Articles of Merger as the effective time of the
Merger being the "Effective Time").
---------------
Section 1.04. Effect of the Merger. At the Effective Time, the effect
--------------------
of the Merger shall be as provided in Section 259 of the DGCL and Article 5.06
of the TBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of AIN and HTV shall vest in the Surviving Corporation, and all
debts, obligations, liabilities and duties of each of AIN and HTV shall become
the debts, obligations, liabilities and duties of the Surviving Corporation.
<PAGE>
Section 1.05. Directors and Officers. James A. Ryffel, P. Alan Luckett,
----------------------
Douglas K. Miller and Bob J. Bryant shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. P. Alan Luckett shall be
the President and Chief Operating Officer, Douglas K. Miller shall be the Chief
Financial Officer and the Treasurer, and Victoria O. Luckett shall be the
Secretary of the Surviving Corporation in each case until their respective
successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Merger Consideration: Conversion and Cancellation of
--------------------------------------------------------
Securities. At the Effective Time, by virtue of the Merger and without any
- ----------
action on the part of AIN, HTV or the holders of any of HTV's securities:
(a) Subject to the other provisions of this Article II, each share of
----------
common stock, par value $.001 per share, of HTV ("HTV Common Stock") issued and
----------------
outstanding immediately prior to the Effective Time (excluding any Dissenting
Shares and any HTV Common Stock described in Section 2.01(d) of this Agreement)
---------------
shall be converted into the right to receive 1.640624949 fully paid and
nonassessable share of common stock, par value $.01 per share, of AIN ("AIN
---
Common Stock") (the "Conversion Ratio").
- ------------- -----------------
(b) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of AIN Common Stock or
HTV Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Conversion Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(c) As a result of their conversion pursuant to Section 2.01(a), all
---------------
shares of HTV Common Stock shall cease to be outstanding and shall automatically
be canceled and retired. Each certificate previously evidencing HTV Common
Stock outstanding immediately prior to the Effective Time (other than HTV Common
Stock described in Section 2.01(d) of this Agreement and any Dissenting Shares)
--------------
("Converted Common Stock") shall thereafter represent, subject to Section
------------------------ -------
2.02(b) of this Agreement, the right to receive that number of shares of AIN
- -------
Common Stock determined pursuant to the Conversion Ratio and, if applicable, the
right to receive cash pursuant to Section 2.02(b) of this Agreement ("Merger
--------------- ------
Consideration"). The holders of certificates previously evidencing Converted
- -------------
Common Stock shall cease to have any rights with respect to such Converted
Common Stock except the right to receive the applicable Merger Consideration and
as otherwise provided in this Agreement or by law. Such certificates previously
evidencing Converted Common Stock shall be exchanged for certificates evidencing
whole shares of AIN Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with the provisions of Section 2.02
------------
of this Agreement. No fractional shares of AIN Common Stock shall be issued
and, in lieu thereof, a cash payment shall be made pursuant to Section 2.02(b)
---------------
of this Agreement.
(d) Notwithstanding any provision of this Agreement to the contrary,
each share of HTV Common Stock held in the treasury of HTV immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(e) Each share of AIN Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding and shall
thereafter represent one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation, and shall not be converted or
affected by virtue of the Merger.
(f) Notwithstanding Section 2.01(e) of this Agreement, each share of
AIN Common Stock held by HTV immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no payment shall be
made with respect thereto.
<PAGE>
Section 2.02. Certificates.
------------
(a) Surrender of Certificates. As soon as practicable following the
---------------------------
Effective Time, a Letter of Transmittal will be forwarded to the holders of HTV
Common Stock soon after the date of this Agreement, and upon a stockholder's
completion and return of the Letter of Transmittal to AIN, along with the
endorsed original HTV certificates, certificates representing the number of
shares of AIN Common Stock based on the Conversion Ratio set forth in Section
-------
2.01(a) of this Agreement, shall be issued to such stockholder or as otherwise
- -------
requested in the Letter of Transmittal.
(b) No Fractional Shares. No certificates evidencing fractional shares
--------------------
of AIN Common Stock shall be issued upon the surrender for exchange of HTV
Common Stock certificates, and such fractional share interests shall not entitle
the owner thereof to any rights of a stockholder of AIN. In lieu of any such
fractional shares, (i) each holder of a certificate previously evidencing HTV
Common Stock, upon surrender of such certificate for exchange pursuant to this
Article II, shall be paid an amount in cash (without interest), rounded to the
- -----------
nearest cent, determined by multiplying (A) the Closing Price multiplied by the
Conversion Ratio by (B) the fractional interest to which such holder would
otherwise be entitled (after taking into account all shares of HTV Common Stock
held of record by such holder at the Effective Time). "Closing Price" means the
-------------
closing sales price of the AIN Common Stock on the OTCBB as reported by the Wall
Street Journal on the day preceding the Closing Date as provided in Section 1.02
------------
hereof.
Section 2.03. Stock Transfer Books. At the Effective Time, the stock
---------------------
transfer books of HTV shall be closed and there shall be no further registration
of transfers of shares of HTV Common Stock thereafter on the records of HTV.
If, after the Effective Time, HTV Common Stock certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration, deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article II.
-----------
Section 2.04. Dissenters' Rights.
-------------------
(a) Notwithstanding the provision of Section 2.01 or any other
-------------
provision in this Agreement to the contrary, each share of HTV Common Stock
issued and outstanding immediately prior to the Effective Time and held by
stockholders who have not voted such shares in favor of the Merger or consented
thereto in writing and qualify under and have complied with all of the
provisions of Articles 5.11 and 5.12 of the TBCA (the "Appraisal Provisions")
("Dissenting Shares") shall not, by virtue of the Merger, be converted into the
------------------
right to receive the Merger Consideration but such stockholder shall be entitled
to receive payment of the appraised value of such shares of HTV Common Stock or
held by them in accordance with the Appraisal Provisions; provided, however,
-------- -------
that if any holder of Dissenting Shares (i) subsequently delivers a written
withdrawal of his demand for appraisal rights (with the written consent of AIN
if such written withdrawal is not made after the Effective Time within the time
periods required by the Appraisal Provisions), or (ii) fails to perfect
dissenter's rights as provided in the Appraisal Provisions, or (iii) if neither
any holder of Dissenting Shares nor the Surviving Corporation has filed a
petition demanding a determination of the value of Dissenting Shares within the
time provided in the Appraisal Provisions, the Dissenting Shares held by such
holder or holders (as the case may be) shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration as provided in this Agreement
without any interest thereon and shall be treated for all purposes as Converted
Common Stock.
(b) HTV shall give AIN (i) prompt notice of any written demands for
appraisal, withdrawal of demands for appraisal and any other instruments served
pursuant to the Appraisal Provisions and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
Appraisal Provisions. HTV agrees that prior to the Effective Time, it will not,
without the prior written consent of AIN, voluntarily make or agree to make any
payment with respect to, or settle or offer to settle, any such demands.
<PAGE>
(c) Each holder of Dissenting Shares who becomes entitled, pursuant to
the Appraisal Provisions, to payment for his or its Dissenting Shares shall
receive payment therefor after the Effective Time from the Surviving Corporation
(but only after the amount thereof shall have been agreed upon or finally
determined pursuant to such provisions) and such shares shall be canceled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HTV
HTV hereby represents and warrants to AIN that:
Section 3.01. Organization and Qualification: Subsidiaries. HTV is a
---------------------------------------------
corporation, and each of HTV's subsidiaries (as such term in defined in Section
-------
9.03 herein) is a corporation, duly organized, validly existing and in good
- ----
standing under the laws of the jurisdiction of its incorporation or
organization, and each of HTV and its subsidiaries has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as it is now being conducted and is qualified to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so qualified and in good standing
could not reasonably be expected to have a HTV Material Adverse Effect. The
term "HTV Material Adverse Effect" as used in this Agreement shall mean any
------------------------------
change or effect that would be materially adverse to the financial condition,
results of operations, business, or prospects of HTV and its subsidiaries, taken
as a whole, at the time of such change or effect. Section 3.01 of the
------------
Disclosure Schedule delivered by HTV to AIN concurrently with the execution of
this Agreement (the "HTV Disclosure Schedule") sets forth, as of the date of
------------------------
this Agreement, a true and complete list of all HTV's directly or indirectly
owned subsidiaries, together with the jurisdiction of incorporation or
organization of each such subsidiary and the percentage of each such
subsidiary's outstanding capital stock or other equity interests owned by HTV or
another subsidiary of HTV.
Section 3.02. Articles of Incorporation and Bylaws. HTV has heretofore
------------------------------------
furnished or made available to AIN complete and correct copies of the Articles
of Incorporation and the Bylaws, in each case as amended or restated to the date
hereof, of HTV and each of its subsidiaries. Neither HTV nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws.
Section 3.03. Capitalization.
--------------
(a) The authorized capital stock of HTV consists of 50,000,000 shares
of HTV Common Stock, par value $.001 per share, and 25,000,000 shares of
Preferred Stock, par value $0.001 per share. At the date hereof, 21,333,334
shares of HTV Common Stock were issued and outstanding, no shares of HTV Common
Stock were held by HTV in its treasury or by HTV's subsidiaries and no shares of
HTV Common Stock were reserved for issuance. Each of the issued shares of
capital stock of each of HTV and its subsidiaries is duly authorized, validly
issued and fully paid and nonassessable, and has not been issued in violation of
(nor are any of the authorized shares of capital stock of, or other equity
interests in, HTV or any of its subsidiaries subject to) any preemptive or
similar rights created by statute, the Articles of Incorporation or Bylaws (or
the equivalent organizational documents) of HTV or any of its subsidiaries, any
agreement to which HTV or any of its subsidiaries is a party or is bound or
applicable federal or state securities laws. All issued shares or other equity
interests in the subsidiaries of HTV owned by HTV or a subsidiary of HTV are
owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations on HTV's or such subsidiaries' voting rights, charges or
other encumbrances of any nature whatsoever.
(b) Except as set forth in Section 3.03(b) of the HTV Disclosure
Schedules, no bonds, debentures, notes or other indebtedness of HTV or its
subsidiaries having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on which
stockholders may vote ("HTV Voting Debt") are issued or outstanding.
-----------------
<PAGE>
(c) There are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which HTV or any of its subsidiaries is a party relating to the issued or
unissued capital stock of HTV or any of its subsidiaries or obligating HTV or
any of its subsidiaries to grant, issue, sell or register under federal or state
securities laws any shares of capital stock, HTV Voting Debt or other equity
interests of HTV or any of its subsidiaries. There are no obligations,
contingent or otherwise, of HTV or any of its subsidiaries (i) to repurchase,
redeem or otherwise acquire any shares of HTV Common Stock or other capital
stock of HTV or the capital stock of any subsidiary of HTV or (ii) other than
advances to wholly owned subsidiaries in the ordinary course of business, to
provide funds to, or to make any investment in (in the form of a loan, capital
contribution or otherwise), or to provide any guarantee with respect to the
obligations of, any subsidiary of HTV or any other person. Except (i) as set
forth in Section 3.03(c) of the HTV Disclosure Schedule or (ii) for the
----------------
subsidiaries of HTV set forth in Section 3.01 of the HTV Disclosure Schedule,
------------
neither HTV nor any of its subsidiaries (x) directly or indirectly owns, (y) has
agreed to purchase or otherwise acquire or (z) holds any interest convertible
into or exchangeable or exercisable for the capital stock or any other equity
interests of any corporation, partnership, joint venture or other business
association or entity. Except as set forth in Section 3.03(c) of the HTV
---------------
Disclosure Schedule or for any agreements, arrangements or commitments between
HTV and its wholly owned subsidiaries or between such wholly owned subsidiaries,
there are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on, or calculated in accordance with, the revenues or
earnings of HTV or any of its subsidiaries. Except as set forth in Section
-------
3.03(c) of the HTV Disclosure Schedule, there are no voting trusts, proxies or
- -------
other agreements or understandings to which HTV or any of its subsidiaries is a
party or by which HTV or any of its subsidiaries is bound with respect to the
voting of any shares of capital stock or other equity interests of HTV or any of
its subsidiaries.
Section 3.04. Authority. HTV has all requisite corporate power and
---------
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (subject to,
with respect to the Merger, the approval and adoption of this Agreement by the
stockholders of HTV as set forth in Section 7.01(a) of this Agreement). The
---------------
execution and delivery of this Agreement by HTV and the consummation by HTV have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of HTV are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (subject to, with respect to the
Merger, the approval and adoption of this Agreement by the stockholders of HTV
as described in Section 7.01(a) of this Agreement). This Agreement has been
----------------
duly executed and delivered by HTV and, assuming the due authorization,
execution and delivery hereof by AIN, constitutes the legal, valid and binding
obligation of HTV, enforceable against HTV in accordance with its terms.
Section 3.05. No Conflict: Required Filings and Consents.
-----------------------------------------------
(a) Except as disclosed in Section 3.05(a) of the HTV Disclosure
----------------
Schedule, the execution and delivery of this Agreement by HTV does not, and the
performance by HTV of its obligations hereunder, including consummation of the
transactions contemplated hereby, will not (i) conflict with or violate the
Articles of Incorporation or Bylaws, or the equivalent organizational documents,
in each case as amended or restated, of HTV or any of its subsidiaries, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule or regulation (collectively, "Laws") in effect as of the date of
----
this Agreement or any judgment, order or decree to which HTV or any of its
subsidiaries is a party or by or to which any of their respective properties are
bound or subject or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair any of HTV's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or encumbrance on any of the
properties or assets of HTV or any of its subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which HTV or any of its
subsidiaries is a party or by or to which HTV or any of its subsidiaries or any
of their respective properties are bound or subject, excluding from the
foregoing clause (iii) any such conflicts, violations, breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that individually or in the aggregate could
not reasonably be expected to have an HTV Material Adverse Effect. The Board of
Directors of HTV has approved the Merger, this Agreement and the transactions
contemplated hereby. To the best of HTV's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated hereby.
<PAGE>
(b) The execution and delivery of this Agreement by HTV does not, and
the performance by HTV of its obligations hereunder, including consummation of
the transactions contemplated hereby, will not, require HTV to obtain any
consent, license, permit, waiver, approval, authorization or order of, or to
make any filing with or notification to, any governmental or regulatory
authority, federal, state, local or foreign (collectively, "Governmental
------------
Entities"), except for (i) applicable requirements, if any, of the Securities
- --------
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
state securities or blue sky laws ("Blue Sky Laws") and (ii) the filing and
-------------
recordation of appropriate merger documents as required by the TBCA.
Section 3.06. Permits; Compliance. HTV is in possession of all permits
-------------------
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to possess such permits
could not reasonably be expected to have an HTV Material Adverse Effect.
Section 3.07. Reports; Financial Statements; Undisclosed Liabilities.
-------------------------------------------------------
(a) HTV has delivered to AIN (i) an unaudited consolidated balance
sheet of HTV and its subsidiaries as of June 30, 1999 and (ii) an unaudited
consolidated statement of income, stockholders' equity and cash flows for the
six month period ended June 30, 1999. Such unaudited consolidated financial
statements, (i) are in accordance with the books and records of HTV and its
subsidiaries in all material respects and were prepared in accordance with the
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (A) to the extent disclosed therein or
required by changes in generally accepted accounting principles), as may be
indicated in the notes thereto, and (ii) fairly present in all material respects
the consolidated financial position of HTV and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated (except, in the case of unaudited consolidated
financial statements for interim periods, for the absence of footnotes and
subject to adjustments, consisting only of normal, recurring accruals, necessary
to present fairly such results of operations and cash flows).
(b) Except as and to the extent set forth on the consolidated balance
sheet of HTV and its subsidiaries as of June 30, 1999, including the notes
thereto, neither HTV or any of its subsidiaries has any liabilities or
obligations material to HTV and its subsidiaries that are not referenced on such
balance sheet. Except as set forth in Section 3.07 of the HTV Disclosure
-------------
Schedule, since June 30, 1999, neither HTV nor any of its subsidiaries has
incurred any liabilities except for (i) liabilities or obligations incurred in
the ordinary course of business and consistent with past practice which do not
have an HTV Material Adverse Effect, and (ii) for professional fees and expenses
incurred in connection with or as a result of the Merger.
Section 3.08. Absence of Certain Changes or Events. Except as set
----------------------------------------
forth in Section 3.08 of the HTV Disclosure Schedule, since June 30, 1999, HTV
-------------
and its subsidiaries have conducted their respective businesses only in the
ordinary course and in a manner consistent with past practice and there has not
been (a) any damage, destruction or loss with respect to any assets of HTV or
any of its subsidiaries that, whether or not covered by insurance, would
constitute an HTV Material Adverse Effect, (b) any change by HTV or its
subsidiaries in their significant accounting policies, (c) except for dividends
by a subsidiary of HTV to HTV or another wholly owned subsidiary of HTV, any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of HTV Common Stock or the shares of stock of, or other equity
interests in, any subsidiary of HTV or any redemption, purchase or other
acquisition of any of HTV's securities or any of the securities of any
subsidiary of HTV, (d) any increase in the benefits under, or the establishment
or amendment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, performance awards (including, without
limitation, the granting of stock appreciation rights or restricted stock
awards), stock purchase or other employee benefit plan, or any increase in the
compensation payable or to become payable to any of the directors or officers of
HTV or the employees of HTV or its subsidiaries as a group, except for (i)
increases in salaries or wages payable or to become payable in the ordinary
course of business and consistent with past practice or (ii) the granting of
stock options in the ordinary course of business to employees of HTV or its
subsidiaries who are not directors or executive officers of HTV, or (e) any
other HTV Material Adverse Effect.
<PAGE>
Section 3.09. Litigation. Except as set forth in Section 3.09 of the
---------- ------------
HTV Disclosure Schedule, there is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of HTV, investigation of any kind,
at law or in equity (including actions or proceedings seeking injunctive
relief), pending or, to the knowledge of HTV, threatened against HTV or any of
its subsidiaries or any properties or rights of HTV or any of its subsidiaries,
and neither HTV nor any of its subsidiaries is subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement
with, or, to the knowledge of HTV, continuing investigation by, any Governmental
Entity, or any judgment, order, writ, injunction, decree or award of any
Governmental Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
Section 3.10. Employee Benefit Plans; Labor Matters.
-----------------------------------------
(a) HTV and its subsidiaries have no "employee benefit plan" within the
meaning of Section 3.3 of the Employee Retirement Income Securities Act of 1974,
-----------
as amended.
(b) There are no collective bargaining or other labor union contracts
to which HTV or its subsidiaries is a party and no collective bargaining
agreement is being negotiated by HTV or any of its subsidiaries. There is no
pending or, to the best knowledge of HTV, threatened labor dispute, strike or
work stoppage against HTV or
Section 3.11. Taxes. Except as set forth in Section 3.11 of the HTV
----- ------------
Disclosure Schedule:
(a) (i) all returns and reports ("Tax Returns") of or with respect to
-----------
any Tax (as defined in Section 9.03 of this Agreement) that are required to be
------------
filed on or before the date hereof by or with respect to HTV or any of its
subsidiaries have been duly and timely filed, (ii) Taxes that have become due
with respect to the period covered by each such Tax Return have been paid, (iii)
all withholding Tax requirements imposed on or with respect to HTV or any of its
subsidiaries have been satisfied in all material respects, and (iv) no penalty,
interest or other charge is due with respect to the late filing of any such Tax
Return or late payment of any such Tax.
(b) There is no claim against HTV or any of its subsidiaries for any
amount of Taxes, no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to HTV or any of its
subsidiaries, and no Tax Return of or with respect to HTV or any of its
subsidiaries has been, or is being, audited by the Internal Revenue Service or
any state, local or other taxing authority other than those disclosed (and to
which are attached copies of all audit or similar reports) in Section 3.11 of
------------
the HTV Disclosure Schedule.
(c) The total amounts set up as liabilities for current and deferred
Taxes in the financial statements referred to in Section 3.07 of this Agreement
------------
are sufficient to cover the payment of all Taxes, whether or not assessed or
disputed, with respect to HTV and any of its subsidiaries up to and through the
periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due and for
Taxes being contested in good faith that have been disclosed in Section 3.10 of
------------
the HTV Disclosure Schedule and for which adequate provisions have been made in
the financial statements referred to in Section 3.07, no liens for Taxes exist
------------
upon the assets of any of HTV or any of its subsidiaries.
(e) Neither HTV nor any of its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
<PAGE>
(f) Neither HTV nor any of its subsidiaries has made an election under
Section 341(f) of the Code. Except as disclosed in Section 3.11 of the HTV
------------
Disclosure Schedule, neither HTV nor any of its subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under the circumstances could obligate it to make any payments that will not be
deductible under Sections 162(m) or 280G of the Code.
(g) Neither HTV nor any of its subsidiaries have taken or agreed to
take any action that would create a material risk that the Merger would not
qualify as a tax free reorganization under the provisions of Section
368(a)(1)(A) of the Code.
(h) To the extent HTV's liabilities exceed the adjusted basis of its
assets, AIN will be responsible to pay any related tax liability.
Section 3.12. Properties. Except as set forth in Section 3.12 of the
---------- ------------
HTV Disclosure Schedule, HTV and each of its subsidiaries has good, valid and
marketable title to all properties, rights, licenses, and other assets, tangible
and intangible, owned by it, including, without limitation, those listed on the
Financial Statements, free and clear of all mortgages, pledges, security
interests, liens, charges and other encumbrances, except liens for current taxes
not yet due. Except as set forth in Section 3.12 of the HTV Disclosure
-------------
Schedule, HTV and its subsidiaries' buildings, equipment, and other tangible
assets are in good operating condition in all respects and are fit for use in
the ordinary course of HTV's and its subsidiaries' business. HTV and each
subsidiary owns or has a valid leasehold interest in all assets and properties
(real or personal) necessary for the conduct of its business as possibly
conducted and proposed to be conducted.
Section 3.13. Insider Interests; Transactions with Management. Except
-----------------------------------------------
as set forth in Section 3.13 of the HTV Disclosure Schedule, no officer,
-------------
director, or employee of HTV or holder of more than five percent of HTV Common
Stock currently outstanding has any interest in any property, real or personal,
tangible or intangible, agreement, arrangement, or understanding, written or
oral, providing for the employment of, furnishing of services by, rental or real
or personal property from, or otherwise requiring payments to any such
shareholder, officer, director or employee used in or pertaining to the business
of HTV or any subsidiary, except for the ordinary rights of a stockholder or
employee stock option holder. Except as set forth on Section 3.13 of the HTV
------------
Disclosure Schedule, no executive officer or director of HTV or any of its
subsidiaries (except in his capacity as such) has any direct or indirect
material interest in (a) any competitor, customer, supplier or agent of HTV or
any of its subsidiaries, or (b) any person that is a party to any contract or
agreement with HTV or any of its subsidiaries.
Section 3.14. Contracts and Agreements. The contracts and agreements
-------------------------
listed in Section 3.14 of the HTV Disclosure Schedule constitute all of the
-------------
written and oral contracts, commitments, leases, and other agreements
(including, without limitation, promissory notes, loan agreements, and other
evidences of indebtedness) to which HTV or any of its subsidiaries is a party or
by which any of their properties are bound with respect to which the obligations
of or the benefits to be received by HTV or any of its subsidiaries,
individually or in the aggregate, could reasonably be expected to have a value
in excess of $25,000 (each a "Material Contract"). Except as set forth in
------------------
Section 3.14 of the HTV Disclosure Schedule, neither HTV nor any of its
- -------------
subsidiaries are and, to the best knowledge of HTV, no other party thereto is in
default (and no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default) under any Material Contract, and
neither HTV nor any of its subsidiaries have waived any right under any Material
Contract. Neither HTV nor any of its subsidiaries have received any notice of
default or termination under any Material Contract and neither HTV nor any of
its subsidiaries has assigned or otherwise transferred any rights under any
Material Contract or any other contract, to the extent default or termination
could have an HTV Material Adverse Effect.
Section 3.15. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of HTV.
<PAGE>
Section 3.16. Board Recommendations. By a unanimous vote of the Board
---------------------
of Directors (which meeting was duly called and held and at which a quorum was
present at all times), the Board of Directors (a) approved and adopted this
Agreement, including the Merger and the other transactions contemplated hereby,
and determined that the Merger is fair to the stockholders of HTV, and (b)
subject to Section 6.01 hereof, resolved to recommend approval and adoption of
------------
this Agreement, including the Merger and the other transactions contemplated
herein, by the stockholders of HTV.
Section 3.17. Disclosure. No representation or warranty hereunder
----------
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
Section 3.18. Due Diligence. HTV has had access to AIN's business
--------------
records since September 1, 1999 and has had the opportunity to conduct and will
continue to conduct due diligence investigation as it deems appropriate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AIN
AIN hereby represents and warrants to HTV that:
Section 4.01. Organization and Qualification; Subsidiaries. AIN is a
----------------------------------------------
corporation, and each of AIN's subsidiaries (as such term is defined in Section
-------
9.03 herein) is a corporation duly organized, validly existing and in good
- ----
standing under the laws of the jurisdiction of its incorporation and each of AIN
and its subsidiaries has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing could not
reasonably be expected to have a AIN Material Adverse Effect. The term "AIN
---
Material Adverse Effect" as used in this Agreement shall mean any change or
- -------------------------
effect that would be materially adverse to the financial condition, results of
operations, business, or prospects of AIN taken as a whole, at the time of such
change or effect. Section 4.01 of the Disclosure Schedule delivered by AIN to
------------
HTV concurrently with the execution of this Agreement (the "AIN Disclosure
--------------
Schedule") sets forth, as of the date of this Agreement, a true and complete
- --------
list of all the AIN's directly or indirectly owned subsidiaries which have not
been previously disclosed, together with the jurisdiction of incorporation or
organization of each such subsidiary and the percentage of each such subsidiary,
outstanding capital stock or other equity interests owned by AIN or another
subsidiary of AIN.
Section 4.02. Certificate of Incorporation and Bylaws; Formation
-------------------------------------------------------
Documents. AIN has furnished or made available to HTV complete and correct
- ---------
copies of the Certificate of Incorporation and Bylaws, in each case as amended
or restated to the date hereof, of AIN and each of its subsidiaries. Neither
AIN nor any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
Section 4.03. Capitalization.
--------------
(a) The authorized capital stock of AIN as of the Effective Time will
consist of 20,000,000 shares of AIN Common Stock, par value $.01 per share
("AIN Common Stock") and 10,000,000 shares of preferred stock par value $1.00
------------------
per share (the "Preferred Stock"). Immediately prior to the Effective Time,
----------------
19,007,466 shares of AIN Common Stock will be issued and outstanding (which
include 11,000,000 shares issued to HTV which will be surrendered to AIN and
canceled upon the Effective Time) and 42,000 shares of Series B Preferred Stock
will be issued and outstanding. Except as described in this Section 4.03 or in
------------
Section 4.03(a) of the AIN Disclosure Schedule, no shares of capital stock of
- ----------------
AIN are reserved for issuance for any other purpose. Each of the issued shares
of capital stock of AIN and its subsidiaries is duly authorized, validly issued
and, fully paid and nonassessable, and has not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity interests
in, AIN or any of its subsidiaries subject to) any preemptive or similar rights
created by statute, the Certificate of Incorporation or Bylaws of AIN or any of
its subsidiaries, any agreement to which AIN is a party or is bound or
applicable federal or state securities laws.
<PAGE>
(b) No bonds, debentures, notes or other indebtedness of AIN having the
right to vote (or convertible into or exchangeable or exercisable for securities
having the right to vote) on any matters on which stockholders may vote ("AIN
---
Voting Debt") are issued or outstanding.
- ------------
(c) There are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which AIN or any of its subsidiaries is a party relating to the issued or
unissued capital stock of AIN or any of its subsidiaries or obligating AIN to
grant, issue or sell any shares of capital stock, AIN Voting Debt or other
equity interests of AIN or any of its subsidiaries. There are no obligations,
contingent or otherwise, of AIN or any of its subsidiaries (i) to repurchase,
redeem or otherwise acquire any shares of AIN Common Stock or other capital
stock of AIN or the capital stock of any Subsidiary of AIN or any of its
subsidiaries or (ii) other than advances to wholly owned subsidiaries in the
ordinary course of business, to provide funds to, or to make any investment in
(in the form of a loan, capital contribution or otherwise), or to provide any
guarantee with respect to the obligations of any Subsidiary of AIN or any other
person. Neither AIN nor any of its subsidiaries (x) directly or indirectly
owns, (y) has agreed to purchase or otherwise acquire or (z) does not hold any
interest convertible into or exchangeable or exercisable for the capital stock
or any other equity interests of any corporation, partnership, joint venture or
other business association or entity. There are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on, or calculated in
accordance with, the revenues or earnings of AIN or any of its subsidiaries.
There are no voting trusts, proxies or other agreements or understandings to
which AIN or any of its subsidiaries is a party or by which AIN or any of its
subsidiaries is bound with respect to the voting of any shares of capital stock
or other equity interests of AIN or any of its subsidiaries.
Section 4.04. Authority. AIN has all requisite corporate power and
---------
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby(subject to,
with respect to the Merger, the approval and adoption of this Agreement by the
stockholders of AIN as set forth in Section 7.01(a) of this Agreement. The
---------------
execution and delivery of this Agreement by AIN and the performance by AIN of
its obligations hereunder, including the consummation of the transactions
contemplated hereby, have been or were duly authorized by all necessary
corporate action and no other corporate proceedings on the part of AIN are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (subject to, with respect to the Merger, the approval and
adoption of this Agreement by the stockholders of AIN as set forth in Section
-------
7.01(a) of this Agreement). This Agreement has been duly executed and delivered
- -------
by AIN and, assuming the due authorization, execution and delivery hereof by
HTV, constitutes the legal, valid and binding obligations of AIN, enforceable
against AIN in accordance with its terms.
Section 4.05. No Conflict; Required Filings and Consents.
-----------------------------------------------
(a) The execution and delivery of this Agreement by AIN, does not and
the performance by AIN of its obligations hereunder, including consummation of
the transactions contemplated hereby will not (i) conflict with or violate the
Certificate of Incorporation or Bylaws, or the equivalent organizational
documents, in each case as amended or restated, of AIN or any of its
subsidiaries, (ii) conflict with or violate any Laws in effect as of the date of
this Agreement or any judgment, order or decree to which AIN or any of its
subsidiaries is a party or by or to which any of its properties are bound or
subject or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair any of AIN's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or encumbrance on any of the
properties or assets of AIN or any of its subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which AIN or any of its
subsidiaries is a party or by or to which AIN or any of its subsidiaries or any
of their respective properties are bound or subject, excluding from the
foregoing clause (iii) any such conflicts, violations, breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that individually or in the aggregate could
not reasonably be expected to have a AIN Material Adverse Effect. The Board of
Directors of AIN has approved the merger, this Agreement and the transactions
contemplated hereof.
<PAGE>
(b) The execution and delivery of this Agreement by AIN does not and
the performance by AIN of its obligations hereunder, including consummation of
the transactions contemplated hereby, will not, require AIN to obtain any
consent, license, permit, waiver, approval, authorization or order of, or to
make any filing with or notification to, any governmental or regulatory
authority, federal, state, local or foreign (collectively, "Governmental
------------
Entities"), except for (i) applicable requirements, if any, of the Securities
- --------
Act, the Exchange Act, and the Blue Sky Laws and (ii) the filing and recordation
of appropriate merger documents as required by the DGCL.
Section 4.06. Permits; Compliance. AIN is in possession of all permits
-------------------
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted except where the failure to possess such permits
could not reasonably be expected to have a AIN Material Adverse Effect.
Section 4.07. Reports; Financial Statements.
-------------------------------
(a) AIN has delivered to HTV audited financial statements for the
periods ending December 31, 1997 and December 31, 1998. AIN has also delivered
to HTV (i) an unaudited balance sheet of AIN as of June 30, 1999, and (ii) pro
forma unaudited balance sheets and statements of income, stockholders' equity
and cash flows as of June 30, 1999. Such audited and unaudited historical
financial statements, including any such financial statements and schedules to
be contained in AIN SEC reports (or incorporated by referenced therein) (i) are
in accordance with the books and records of AIN in all material respects and
have been prepared in accordance with the published rules and regulations of the
SEC and generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (A) to the extent disclosed therein or
required by changes in generally accepted accounting principles, and (B) in the
case of the unaudited financial statements, as permitted by the rules and
regulations of the SEC) and (ii) fairly present in all material respects the
consolidated financial position of AIN as of the respective dates thereof and
the results of operations and cash flows for the periods indicated (except, in
the case of unaudited financial statements for interim periods, for the absence
of footnotes and subject to adjustments, consisting only of normal, recurring
accruals, necessary to present fairly such results of operations and cash
flows).
(b) Except as and to the extent set forth on the unaudited balance
sheet of AIN and its subsidiaries as of June 30, 1999, including the notes
thereto, neither AIN or any of its subsidiaries has any liabilities or
obligations material to AIN and its subsidiaries that are not referenced on such
balance sheet. Except as set forth in Section 4.07 of the AIN Disclosure
-------------
Schedule, since June 30, 1999, neither AIN nor any of its subsidiaries has
incurred any liabilities except for (i) liabilities or obligations incurred in
the ordinary course of business and consistent with past practice which do not
have an AIN Material Adverse Effect, and (ii) for professional fees and expenses
incurred in connection with or as a result of the Merger.
Section 4.08. Absence of Certain Changes or Events. Except as set
----------------------------------------
forth in Section 4.08 of the AIN Disclosure Schedule, since January 1, 1999
-------------
until August 31, 1999, AIN and its subsidiaries have conducted their respective
businesses only in the ordinary course and in a manner consistent with past
practice and there has not been (a) any damage, destruction or loss with respect
to any assets of AIN, that, whether or not covered by insurance, would
constitute a AIN Material Adverse Effect, (b) any change by AIN in its
significant accounting policies, (c) except for dividends by a subsidiary of AIN
to AIN or another wholly owned subsidiary of AIN, any declaration, setting aside
or payment of any dividends or distributions in respect of shares of AIN Common
Stock or the shares of stock of, or other equity interests in, any subsidiary of
AIN or any redemption, purchase or other acquisition of any of AIN's securities
or any of the securities of any subsidiary of AIN, (d) any increase in the
benefits under, or the establishment or amendment of, any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
performance awards (including, without limitation, the granting of stock
appreciation rights or restricted stock awards), stock purchase or other
employee benefit plan, or any increase in the compensation payable or to become
payable to any of the directors or officers of AIN or the employees of AIN or
its subsidiaries as a group, except for (i) increases in salaries or wages
payable or to become payable in the ordinary course of business and consistent
with past practice or (ii) the granting of stock options in the ordinary course
of business to employees of AIN or its subsidiaries who are not directors or
executive officers of AIN, or (e) any other AIN Material Adverse Effect.
<PAGE>
Section 4.09. Litigation. Except as set forth in AIN's audited
----------
financial statements for the period ending December 31, 1998 and on Form 10Q
filed with the Securities and Exchange Commission as of June 30, 1999, there is
no claim, action, suit, litigation, proceeding, arbitration or, to the knowledge
of AIN, investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or, to the knowledge of AIN,
threatened against AIN or any of its subsidiaries or any properties or rights of
AIN or any of its subsidiaries, and neither AIN nor any of its subsidiaries is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of AIN, continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator, including,
without limitation, cease-and-desist or other orders.
Section 4.10. Employee Benefit Plans; Labor Matters.
-----------------------------------------
(a) AIN and its subsidiaries have no "employee benefit plan" within the
meaning of Section 3.3 of the Employee Retirement Income Securities Act of 1974,
-----------
as amended.
(b) There are no collective bargaining or other labor union contracts
to which AIN is a party and no collective bargaining agreement is being
negotiated by AIN. There is no pending or, to the best knowledge of AIN,
threatened labor dispute, strike or work stoppage against the AIN.
Section 4.11. Taxes. Except as set forth in Section 4.11 of the AIN
----- ------------
Disclosure Schedule:
(a) (i) all Tax Returns that are required to be filed on or before the
-----------
date hereof by or with respect to AIN or any of its subsidiaries have been duly
and timely filed, (ii) Taxes that have become due with respect to the period
covered by each such Tax Return have been paid, (iii) all withholding Tax
requirements imposed on or with respect to AIN or any of its subsidiaries have
been satisfied in all material respects, and (iv) no penalty, interest or other
charge is due with respect to the late filing of any such Tax Return or late
payment of any such Tax .
(b) There is no claim against AIN or any of its subsidiaries for any
amount of Taxes, no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to AIN or any of its
subsidiaries, and no Tax Return of or with respect to AIN has been, or is being,
audited by the Internal Revenue Service or any state, local or other taxing
authority other than those disclosed (and to which are attached copies of all
audit or similar reports) in Section 4.11 of the AIN Disclosure Schedule.
-------------
(c) The total amounts set up as liabilities for current and deferred
Taxes in the financial statements referred to in Section 4.07 of this Agreement
------------
are sufficient to cover the payment of all Taxes, whether or not assessed or
disputed, with respect to AIN or any of its subsidiaries up to and through the
periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due and for
Taxes being contested in good faith that have been disclosed in Section 4.11 of
------------
the AIN Disclosure Schedule and for which adequate provisions have been made in
the financial statements referred to in Section 4.07, no liens for Taxes exist
------------
upon the assets of AIN or any of its subsidiaries.
<PAGE>
(e) Neither AIN nor any of its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(f) Neither AIN nor any of its subsidiaries has made an election under
Section 341(f) of the Code. Except as disclosed in Section 4.11 of the AIN
------------
Disclosure Schedule, neither AIN nor any of its subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under the circumstances could obligate it to make any payments that will not be
deductible under Sections 162(m) or 280G of the Code.
(g) Neither AIN nor any of its subsidiaries has taken or agreed to take
any action that would create a material risk that the Merger would not qualify
as a tax free reorganization under the provisions of Section 368(a)(1)(A) of the
Code.
(h) Neither AIN nor any of its subsidiaries (i) has been a member of an
Affiliated Group (as defined in Section 1504 of the Code) other than a group the
common parent of which was AIN or (ii) has any liability for the Taxes of any
person (other than AIN or any of its subsidiaries) under Treas. Reg. 1.1502-6
(or any similar provision under state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
Section 4.12. Environmental Matters.
----------------------
(a) To the best knowledge of AIN all of the properties, operations and
activities of AIN comply with all applicable Environmental Laws (as defined in
Section 9.03).
- -------------
(b) To the best knowledge of AIN, none of AIN, its subsidiaries or
their properties and operations are subject to any existing, pending or, to the
knowledge of AIN, threatened action, suit, investigation, inquiry or proceeding
by or before any Governmental Authority or third party under any Environmental
Law.
(c) To the best knowledge of AIN, all notices, permits, licenses or
similar authorizations, if any, required to be obtained or filed by AIN or any
of its subsidiaries under any Environmental Law in connection with any aspect of
the business of AIN or its subsidiaries or the AIN Properties, including without
limitation those relating to the treatment, storage, disposal or release of a
hazardous substance or solid waste, have been duly obtained or filed and will
remain valid and in effect after the Merger, and AIN and its subsidiaries are in
compliance with the terms and conditions of all such notices, permits, licenses
and similar authorizations.
Section 4.13. Properties. Except as set forth in Section 4.13 of the
---------- ------------
AIN Disclosure Schedule, AIN and each of its subsidiaries has good, valid and
marketable title to all properties, rights, licenses, and other assets, tangible
and intangible, owned by it, including, without limitation, those listed on the
Financial Statements, free and clear of all mortgages, pledges, security
interests, liens, charges and other encumbrances, except liens for current taxes
not yet due. Except as set forth in Section 4.13 of the AIN Disclosure
-------------
Schedule, AIN and its subsidiaries' buildings, equipment, and other tangible
assets are in good operating condition in all respects and are fit for use in
the ordinary course of AIN's and its subsidiaries' business. AIN and each
subsidiary owns or has a valid leasehold interest in all assets and properties
(real or personal) necessary for the conduct of its business as possibly
conducted and proposed to be conducted.
Section 4.14. Insider Interests; Transactions with Management. Except
-----------------------------------------------
as set forth in Section 4.14 of the AIN Disclosure Schedule, no officer,
-------------
director, or employee of AIN or holder of more than five percent of AIN Common
Stock currently outstanding has any interest in any property, real or personal,
tangible or intangible, agreement, arrangement, or understanding, written or
oral, providing for the employment of, furnishing of services by, rental or
real or personal property from, or otherwise requiring payments to any such
shareholder, officer, director or employee used in or pertaining to the business
of AIN or any of its subsidiaries, except for the ordinary rights of a
stockholder or employee stock option holder. Except as set forth on Schedule
--------
4.14, no executive officer or director of AIN (except in his capacity as such)
- ----
has any direct or indirect material interest in (a) any competitor, customer,
supplier or agent of AIN or any of its subsidiaries, or (b) any person that is
a party to any contract or agreement with AIN or any of its subsidiaries.
<PAGE>
Section 4.15. Contracts and Agreements. Except as set forth in Section
------------------------
4.15 of the AIN Disclosure Schedule, the contracts and agreements listed in
AIN's audited financial statements for the period ending December 31, 1998 and
on Form 10Q filed with the Securities and Exchange Commission as of June 30,
1999, constitute all of the written and oral contracts, commitments, leases, and
other agreements (including, without limitation, promissory notes, loan
agreements, and other evidences of indebtedness) to which AIN or any of its
subsidiaries is a party or by which any of their properties are bound with
respect to which the obligations of or the benefits to be received by AIN or any
of its subsidiaries, individually or in the aggregate, could reasonably be
expected to have a value in excess of $25,000 (each a "Material Contract").
-----------------
Except as set forth in Section 4.15 of the AIN Disclosure Schedule, neither AIN
------------
nor any of its subsidiaries are and, to the best knowledge of AIN, no other
party thereto is in default (and no event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default) under any
Material Contract, and neither AIN nor any of its subsidiaries have waived any
right under any Material Contract. Neither AIN nor any of its subsidiaries have
received any notice of default or termination under any Material Contract and
neither AIN nor any of its subsidiaries has assigned or otherwise transferred
any rights under any Material Contract or any other contract, to the extent
default or termination could have an AIN Material Adverse Effect.
Section 4.16. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of AIN.
Section 4.17. Board Recommendations. By a unanimous vote of the
----------------------
directors present at a meeting of AIN's Board of Directors (which meeting was
duly called and held and at which a quorum was present at all times), the Board
of Directors of AIN (a) approved and adopted this Agreement and the other
transactions contemplated herein, and determined that the Merger is fair to the
stockholders of AIN, and (b) resolved to recommend approval and adoption of this
Agreement, including the Merger and the other transactions contemplated herein,
by the stockholders of AIN.
Section 4.18. Disclosure. No representation or warranty hereunder
----------
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants. Each of HTV and AIN hereby
----------------------
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by the other
party, it will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary course consistent
with past practices;
(b) use its best efforts to preserve intact its business organization,
maintain its rights and franchises, retain the services of its respective
officers and key employees and maintain its relationships with its respective
customers and suppliers;
(c) maintain and keep its properties and assets in as good a repair and
condition as at present, ordinary wear and tear excepted, and use its best
efforts to maintain supplies and inventories in quantities consistent with its
customary business practices;
<PAGE>
(d) use its best efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that currently maintained;
(e) promptly notify the other party of (i) any material adverse change
in the condition (financial or otherwise), of its business, properties, assets,
liabilities or prospects of HTV and its subsidiaries or in the operation of its
business or the properties and its subsidiaries, (ii) any litigation or
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) involving the party or any of its
subsidiaries, (iii) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would likely cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any respect when made
or at any time from the date of this Agreement to the Effective Time; (iv) any
failure such party to comply in any respect with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; or (v) any other event that could reasonably be expected to result in
a party Material Adverse Effect; provided, however, that no such notification
-------- -------
shall affect the representations and warranties of the other party or the
conditions to the obligations of the parties hereunder;
(f) (i) file all Tax Returns required to be filed on or before the
Closing Date by or with respect to it or any of its subsidiaries, (ii) include
in each such Tax Return all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return, (iii) timely pay in
full all Taxes that become due pursuant to such Tax Returns, and (iv) satisfy
all withholding requirements imposed on or with respect to it;
(g) to the extent legally and contractually authorized to do so, give
the other party and its attorneys and other representatives access at all
reasonable times to each other's properties and to it and any the subsidiaries'
records pertaining to the ownership and/or operation of each other's properties;
and
(h) cause all expenses and liabilities relating to the ownership or
operation of each other's property to be paid and discharged in the ordinary
course of business.
Section 5.02. Negative Covenants. Except as expressly contemplated by
------------------
this Agreement or otherwise consented to in writing by the other party from the
date of this Agreement until the Effective Time, neither AIN, nor HTV, nor shall
AIN, nor HTV permit any of its subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become payable to
any director; (ii) increase the compensation payable or pay bonuses to its
officers or employees or any of their subsidiaries other than in the ordinary
course of business and consistent with past practices; (iii) grant any severance
or termination pay (other than pursuant to agreements or arrangements in effect
on the date hereof) or enter into any employment or severance agreement with,
any director, officer or employee; (iv) establish, adopt or enter into any
employee benefit plan or arrangement; or (v) make any loans to any stockholders,
officers, directors or employees or make any change in its borrowing
arrangements;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock or other equity interests;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its subsidiaries' capital stock or any securities or obligations convertible
into or exchangeable for any shares of its or its subsidiaries' capital stock,
or any options, warrants or conversion or other rights to acquire any shares of
its or its subsidiaries' capital stock or any such securities or obligations,
(ii) effect any reorganization or recapitalization, or (iii) split, combine or
reclassify any of its or its subsidiaries' capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its or its subsidiaries' capital stock; provided,
--------
however, that nothing in this Section 5.02 shall prohibit the merger of a
-------------
wholly-owned, direct or indirect subsidiary with and into its parent
corporation;
<PAGE>
(d) issue (whether upon original issue or out of treasury), sell,
grant, award, deliver or limit the voting rights of any shares of any class of
its or its subsidiaries' capital stock, any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants or
options to acquire any such shares (except for the issuance of shares upon the
exercise of outstanding stock options or warrants in accordance with their
terms);
(e) acquire or agree to acquire (whether pursuant to a definitive
agreement, a non-binding letter of intent or otherwise), by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary course of business
and consistent with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of ("Transfer"), or agree to sell, lease, exchange, mortgage, pledge,
--------
transfer or otherwise dispose of, any of its assets or any assets of any of its
subsidiaries, except for Transfers of assets in the ordinary course of business
and consistent with past practice;
(g) take or permit any action that could adversely affect or delay the
ability of either party to obtain any necessary approvals of any Governmental
Entities required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement;
(h) sell, transfer or abandon any portion of its properties;
(i) take any action that would, or that reasonably could be expected
to, result in any of the representations and warranties set forth in this
Agreement becoming untrue or any of the conditions to the Merger set forth in
Article VI not being satisfied; and
(j) agree in writing or otherwise to do any of the foregoing.
Section 5.03. Access and Information.
------------------------
(a) HTV shall, and shall cause its subsidiaries to, (i) afford to AIN
and AIN's officers, directors, stockholders, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"AIN Representatives") access during ordinary business hours and at other
--------------------
reasonable times, upon reasonable prior notice, to the officers, employees,
accountants, agents, properties, offices and other facilities of HTV and its
subsidiaries and to the books and records thereof and (ii) furnish promptly to
AIN and the AIN Representatives such information concerning the business,
properties, contracts, records and personnel of HTV and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by AIN.
(b) AIN shall, and shall cause its subsidiaries to, (i) afford to HTV
and HTV's officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "HTV
---
Representatives") access during ordinary business hours and at other reasonable
- ---------------
times, upon reasonable prior notice, to the officers, employees, accountants,
agents, properties, offices and other facilities of AIN and its subsidiaries and
to the books and records thereof and (ii) furnish promptly to HTV and HTV
Representatives such information concerning the business, properties,
intellectual property assets, contracts, records and personnel of AIN and its
subsidiaries (including, without limitation, financial, operating and other data
and information) as may be reasonably requested, from time to time, by HTV.
(c) No investigation by the parties hereto made heretofore or hereafter
shall affect the representations and warranties of the parties that are
contained herein and each such representation and warranty shall survive such
investigation.
<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Transfer Restrictions. Each of the HTV Securities
----------------------
Holders agrees he or it will not, directly or indirectly, during a period of 24
months, issue, sell offer or agree to sell, grant any option for the sale of,
pledge, or enter into any other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Shares or
otherwise dispose of any of the Shares; provided, however, subject to
restrictions of applicable securities laws, the Shares in the percentages
indicated below shall be free of the 24 month restriction of this Section 6.01
if and to the extent the conditions set forth below are met or in the event the
Shares are publicly registered by AIN.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
TIME PERIOD TRADING PRICE FOR A % OF SHARES
CONSECUTIVE 30-DAY PERIOD FREE OF RESTRICTIONS
<S> <C> <C>
0-6 months. . . $ 1.00 10%
7-12 months . . $ 2.00 20%
After 12 months N/A 20%
13-18 $ 3.00 30%
After 18 months N/A 30%
19-24 $ 4.00 40%
</TABLE>
Section 6.02. Name Change. Promptly following the Effective Time, AIN
-----------
will change its name to the name of Hispanic Television Network, Inc.
<PAGE>
ARTICLE VII
CLOSING CONDITIONS
Section 7.01. Additional Conditions to Obligations of AIN. The
-------------------------------------------------
obligations of AIN to effect the Merger and the other transactions contemplated
by this Agreement are subject to the satisfaction of the following conditions at
or prior to the Effective Time (any or all of which may be waived by AIN in
writing, in whole or in part, to the extent permitted by applicable law):
(a) Stockholder Approval. The Merger and this Agreement shall have
---------------------
been approved by the requisite vote of the stockholders of AIN in accordance
with the DGCL and AIN's Certificate of Incorporation.
(b) Representations and Warranties. Each of the representations and
--------------------------------
warranties of HTV contained in this Agreement shall have been true and correct
in all material respects at and as of the date made and, except as contemplated
or permitted by this Agreement, at and as of the Effective Time as if made at
and as of such time. AIN shall have received a certificate of the Chief
Executive Officer of HTV, in his capacity as such, dated the Closing Date, to
the effect that each of the representations and warranties of HTV contained in
this Agreement were true and correct in all material respects as of the date
made and, except as contemplated or permitted by this Agreement, at and as of
the Effective Time as if made at and as of such time.
(c) Agreements and Covenants. HTV shall have performed or complied in
-------------------------
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time. AIN shall have received a certificate of the Chief Executive Officer of
HTV, in his capacity as such, dated the Closing Date, to such effect.
(d) Release of Indebtedness. Alan P. Luckett and Bob J. Bryant shall
-------------------------
have executed a release of the $250,000 indebtedness for the benefit of AIN.
(e) Consents. All consents, authorizations, orders and approvals
--------
of, or filings or registrations with, any Governmental Entity required in
connection with the execution, delivery and performance of this Agreement shall
have been obtained or made, except for filings required under the TBCA in
connection with the Merger and HTV shall have obtained all consents,
authorizations, waivers and approvals required from third parties required under
all material agreements and instruments by reason of the Merger and the
consummation of the transactions contemplated hereby.
(f) No Governmental Proceedings or Litigation. There shall not be
---------------------------------------------
pending or threatened any action, proceeding, claim or counterclaim by any
Governmental Entity or by any third party which seeks to or would (i) prohibit
or restrict the consummation of the Merger, (ii) require the disposition of or
the holding separate of any of the stock or assets of HTV or its subsidiaries or
impose material limitations on the ability of AIN to control in any material
respect the business, assets or operations of either AIN or HTV, or (iii) have a
material adverse effect on AIN's business or materially impair the ability of
HTV to perform their obligations hereunder. There shall not be in effect any
order, decree or injunction (whether preliminary, final or appealable) of a
United States Federal or state court of competent jurisdiction, and no statute,
rule or regulation shall have been enacted or promulgated by any Governmental
Entity, which (i) prohibits or restricts consummation of the Merger or the
transactions contemplated hereby, (ii) requires AIN to hold separate or dispose
of any of the stock or assets of HTV or its subsidiaries or imposes material
limitations on the ability of AIN to control in any material respect the
business, assets or operations of either AIN or HTV or (iii) has a material
adverse effect on the business of AIN or on HTV and its subsidiaries or
materially impairs the ability of AIN to perform its obligations hereunder.
(g) Analysis from Valuation Consultant. HTV shall have received a
-------------------------------------
written valuation analysis of fair market value of the common equity of AIN from
a valuation consultant.
<PAGE>
(h) Cancellation of AIN Common Stock Held by HTV. HTV shall have
--------------------------------------------------
returned to AIN the 11,000,00 shares of AIN Common Stock for cancellation.
Section 7.02. Additional Conditions to Obligations of HTV. The
------------------------------------------------
obligations of HTV to effect the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions at or prior
to the Effective Time (any or all of which may be waived by HTV in writing, in
whole or in part, to the extent permitted by applicable law):
(a) Approval of HTV Stockholders and Other HTV Securities Holders. The
-------------------------------------------------------------
Merger and this Agreement shall have been approved by the requisite vote of the
stockholders of HTV in accordance with the TBCA and HTV's Articles of
Incorporation and by all other HTV Securities Holders.
(b) Representations and Warranties. Each of the representations and
--------------------------------
warranties of AIN contained in this Agreement shall have been true and correct
in all material respects at and as of the date made and, except as contemplated
or permitted by this Agreement, at and as of the Effective Time as if made at
and as of such time. HTV shall have received a certificate of the Chief
Executive Officer of AIN, in their capacities as such, dated as of the Effective
Time, to the effect that each of the representations and warranties of AIN
contained in this Agreement were true and correct in all material respects as of
the date made and, except as contemplated by this Agreement, at and as of the
Effective Time as if made at and as of such time.
(c) Agreements and Covenants. AIN shall have performed or complied in
-------------------------
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Effective
Time. HTV shall have received a certificate of the Chief Executive Officer of
AIN, in such capacities, dated the Closing Date, to that effect.
(d) Amendment to Certificate of Incorporation. The AIN Certificate of
------------------------------------------
Incorporation shall have been amended to increase the number of authorized
shares of AIN Common Stock from 20,000,000 to 200,000,000.
(e) Conversion of HTV Notes. All holders of the HTV Notes shall have
-------------------------
converted their Notes into HTV Preferred Stock, and such Preferred Stock into
HTV Common Stock.
(f) Consents. All consents, authorizations, orders and approvals of,
--------
or filings or registrations with, any Governmental Entity required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained or made, except for filings required under the DGCL in connection with
the Merger, and AIN shall have obtained all consents, authorizations, waivers
and approvals required from third parties required under all material agreements
and instruments by reason of the Merger and the consummation of the transactions
contemplated hereby, except for such consents, authorizations, waivers and
approvals where the failure to obtain such could not reasonably be expected to
result in a AIN Material Adverse Effect.
<PAGE>
(g) No Governmental Proceedings or Litigation. There shall not be
---------------------------------------------
pending or threatened any action, proceeding, claim or counterclaim by any
Governmental Entity or by any third party that seeks to or would (i) prohibit or
restrict the consummation of the Merger, (ii) require the disposition of or the
holding separate of any of the stock or assets of HTV or its subsidiaries or
impose material limitations on the ability of the Surviving Corporation to
control in any material respect the business, assets or operations of either the
Surviving Corporation or HTV, or (iii) have a material adverse effect on the
Surviving Corporation's business or materially impair the ability of HTV to
perform their obligations hereunder. There shall not be in effect any order,
decree or injunction (whether preliminary, final or appealable) of a United
States Federal or state court of competent jurisdiction, and no statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity,
which (i) prohibits or restricts consummation of the Merger or the transactions
contemplated hereby, (ii) requires AIN to hold separate or dispose of any of the
stock or assets of HTV or its subsidiaries or the Surviving Corporation or
imposes material limitations on the ability of AIN to control in any material
respect the business, assets or operations of either AIN or the Surviving
Corporation, or (iii) has a material adverse effect on the business of AIN or on
the Surviving Corporation or materially impairs the ability of AIN to perform
its obligations hereunder.
(h) No Adverse Change. There shall not have occurred any material
-------------------
adverse change in the business, results of operations or financial conditions of
AIN.
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This Agreement may be terminated and the
-----------
Merger hereby contemplated may be abandoned at any time notwithstanding approval
of this Agreement by the stockholders of HTV and/or AIN, but prior to the
Effective Time:
(a) by mutual written consent duly authorized by the Board of Directors
of AIN and the Board of Directors of HTV;
(b) by AIN, if there has been a material breach of the representations
and warranties of HTV contained in this Agreement or if HTV has failed to comply
in any material respect with any of its covenants or agreements set forth in
this Agreement, and HTV shall not have cured such breach or failure within ten
days of receipt of written notice thereof from AIN;
(c) by HTV, if there has been a material breach of the representations
and warranties of AIN contained in this Agreement or if AIN has failed to comply
in any material respect with any covenant or agreement on the part of AIN set
forth in this Agreement, and AIN shall not have cured such breach or failure
within ten days of receipt of written notice thereof from HTV;
(d) by either AIN or HTV, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting any of the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and non-appealable
preventing the consummation of the Merger;
(e) by either AIN or HTV, if the Effective Time shall not have occurred
on or before November 30, 1999; provided that neither HTV nor AIN shall be
--------
entitled to terminate this Agreement pursuant to this paragraph if such party's
material breach of this Agreement has been the cause of or resulted in the
failure of the Effective Time to occur at or prior to such time; or
(f) by either AIN or HTV, if this Agreement and the Merger shall fail
to be approved and adopted by the affirmative vote of the stockholders of AIN
and HTV required under the DGCL, TBCA and their respective Certificate and
Articles of Incorporation.
Section 8.02. Effect of Termination; Remedies. In the event of the
----------------------------------
termination of this Agreement pursuant to Section 8.01, this Agreement shall
------------
forthwith become void, there shall be no liability on the part of AIN or HTV or
any of their respective officers or directors to the other and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party from its obligations with respect to any breach of this
Agreement.
Section 8.03. Amendment. This Agreement may be amended by HTV and AIN
---------
by action taken by or on behalf of the Board of Directors of AIN, the Board of
Directors of HTV at any time prior to the Effective Time; provided, however,
-------- -------
that after approval of the Merger by the stockholders of HTV or the stockholders
of AIN, any such amendment shall be subject to the provisions of Section 252 of
the DGCL and Section 5.03 of the TBCA. This Agreement may not be amended except
by an instrument in writing signed by HTV and AIN.
Section 8.04. Waiver. At any time prior to the Effective Time, any
------
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party or parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other party or parties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party or parties with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
<PAGE>
Section 8.05. Fees and Expenses.
-------------------
(a) All fees and expenses incurred by the parties hereto shall be borne
solely and entirely by the party that has incurred such fees and expenses.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Effectiveness of Representations, Warranties and
----------------------------------------------------
Agreements.
- ----------
(a) Except as set forth in Section 9.01(b) of this Agreement, the
----------------
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any person controlling any such
party or any of their officers, directors, representatives or agents whether
prior to or after the execution of this Agreement.
(b) The representations and warranties in this Agreement shall
terminate at the Effective Time. This Section 9.01(b) shall not limit any
----------------
covenant or agreement of the parties hereto that by its terms contemplates
performance after the Effective Time.
Section 9.02. Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally, sent by nationally recognized
overnight courier service, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (
or at such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
<PAGE>
(a) If to AIN, to:
American Independent Network, Inc.
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
Attention: Chief Executive Officer
Facsimile No.: (817) 222-9809
with copies to:
Frederick Hoelke
1111 Bagby, Suite 2200
Houston, Texas 77002
Facsimile No.: (713) 650-1669
Mr. Dan R. Kirshbaum
Axelrod, Smith & Kirshbaum
5300 Memorial, Suite 700
Houston, Texas 77007
Facsimile No. (713) 552-0202
(b) If to HTV, to:
Hispano Television Ventures, Inc.
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
Attention: Alan Dan Luckett
Facsimile No.: (817) 222-9809
with copies to:
Cantey & Hanger, L.L.P.
801 Cherry Street, Suite 2100
Fort Worth, Texas 76102
Attention: Dean A. Tetirick
Facsimile No.: (817) 877-2807
Woodcrest Capital, L.L.C.
3113 South University Drive, 6th Floor
Fort Worth, Texas 76109
Attention: Doug Miller
Facsimile No.: (817) 927-1769
<PAGE>
Section 9.03. Certain Definitions. For purposes of this Agreement, the
-------------------
term:
(a) "Business day" means any day other than a day on which banks in the
------------
State of Texas are authorized or obligated to be closed;
(b) "Control" (including the terms "controlled," "controlled by" and
------- ---------- -------------
"under common control with") means the possession, directly or indirectly or as
---- -------------------
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "Environmental Laws": any all laws, rules, orders, regulations,
-------------------
statues, ordinances, guidelines, codes or decrees of the United States or any
other nation, or any state, local, municipal or other Governmental Authority or
other Laws (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
(d) "Knowledge" or "known" shall mean, with respect to any matter in
--------- -----
question, the actual knowledge of an executive officer of HTV or AIN, as the
case may be, of such matter after having made due and diligent inquiry with
respect to such matter of all appropriate personnel of the party in question who
would reasonably be expected to be familiar with the matter involved;
(e) "Subsidiary" or "subsidiaries" of HTV, AIN, the Surviving
---------- ------------
Corporation or any other person, means any corporation, partnership, joint
venture or other legal entity of which HTV, AIN, the Surviving Corporation or
any such other Person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity; and
(f) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
--- -----
levies, assessments, duties or other amounts payable to any federal, state,
local or foreign taxing authority or agency, including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes, (ii)
customs, duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with respect
thereto.
Section 9.04. Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.05. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 9.06. Entire Agreement. This Agreement (together with the
-----------------
Exhibits, the HTV Disclosure Schedule and the AIN Disclosure Schedule)
constitutes the entire agreement of the parties, and supersede all prior
agreements and undertakings, both written and oral, among the parties, with
respect to the subject matter of this Agreement.
Section 9.07. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise.
<PAGE>
Section 9.08. Parties in Interest. This Agreement shall be binding
---------------------
upon and inure solely to the benefit of each party, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative.
-------------------------------------------------------
No failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
Section 9.10. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
Section 9.11. Counterparts. This Agreement may be executed in multiple
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 9.12. Specific Performance. The parties hereby acknowledge and
--------------------
agree that the failure of any party to this Agreement to perform the provisions
in accordance with their specific terms or to otherwise breach such provisions,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger, will cause irreparable injury to the other parties
to this Agreement for which damages, even if available, will not be an adequate
remedy. Accordingly, each of the parties hereto hereby consents to the issuance
of injunctive relief by any court of competent jurisdiction to compel
performance of any party's obligations, including an injunction to prevent
breaches, and to the granting by any such court of the remedy of specific
performance of the terms and conditions hereof.
Section 9.13. Confidentiality Agreement.
--------------------------
(a) Each party hereto agrees that all Confidential Information (as
defined below) received by such party (the "Receiving Party") from the any other
party hereto (the "Disclosing Party") shall be kept confidential by the
receiving party and shall not be disclosed by the receiving party in any manner
whatsoever; provided, however, that (i) any of such Confidential Information may
be disclosed to such directors, (and, in the case of AIN, its stockholders)
officers, employees, and authorized representatives (including without
limitation attorneys, accountants, consultants, bankers, and financial advisors)
of the receiving party (collectively, the "Receiving Party's Representatives")
as need to know such information for the purpose of evaluating the Merger (it
being understood that such receiving party's representatives shall be informed
by the receiving party of the confidential nature of such information and shall
be required to treat such information confidentially), (ii) any disclosure of
Confidential Information may be made to the extent to which the disclosing party
consents in writing, (iii) Confidential Information may be disclosed by the
receiving party or any receiving party's representatives to the extent that, in
the opinion of counsel for the receiving party or such receiving party's
representatives is legally compelled to do so, provided that, prior to making
such disclosure, the party being legally compelled to disclose such information
advises and consults with the disclosing party regarding such disclosure and
provided further that the party being legally compelled to disclose such
information discloses only that portion of the Confidential Information as is
legally required, and (iv) any of such Confidential Information may be disclosed
to any banks or other financial institutions or other prospective investors that
may provide Financing if such banks or other financial institutions or other
prospective investors agree to comply with the provisions of this Section. The
term "Confidential Information", as used herein, means all information
(irrespective of the form of communication) obtained by or on behalf of a
receiving party from a disclosing party or its representatives, other than
information which (i) was or becomes generally available to the public other
than as a result of disclosure by the receiving party or any receiving party's
representative, (ii) was or becomes available to the receiving party on a
nonconfidential basis prior to disclosure to the receiving party or its
representatives, or (iii) was or becomes available to the receiving party from a
source other than the disclosing party or its representatives, provided that
such source is not known by the receiving party to be bound by a confidentiality
agreement with the disclosing party.
<PAGE>
(b) If this Agreement is terminated, each receiving party shall
promptly return, and shall use their reasonable best efforts to cause all
receiving party representatives to promptly return, all Confidential Information
to the disclosing party without retaining any copies thereof, provided that such
portion of the Confidential Information as consists of notes, compilations,
analyses, reports, studies, or other documents prepared by the receiving party
or the receiving party's representatives shall be destroyed.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN INDEPENDENT NETWORK, INC.
By: /s/ Randy Moseley
------------------------------------
Name: Randy Moseley
Title: Chief Financial Officer
HISPANO TELEVISION VENTURES, INC.
By: /s/ Patrick Alan Luckett
--------------------------------------
Name: Patrick Alan Luckett
Title: Chief Executive Officer
<PAGE>
SCHEDULE 3.01
ORGANIZATION AND QUALIFICATION
Subsidiaries: ATN Network, Inc., a Texas corporation, is a wholly owned
- ------------
subsidiary of HTV. ATN is not in good standing with the Texas Comptroller's
office for failing to file its franchise tax return due on May 1999.
<PAGE>
SCHEDULE 3.03
CAPITALIZATION
(b) Convertible Notes payable by HTV in the amount of $1 million are
currently outstanding (the "Notes"). The Notes are convertible into HTV
Preferred Stock. The Notes will be converted to HTV Preferred Stock and the
Preferred Stock into HTV Common Stock prior to the Closing Date.
<PAGE>
SCHEDULE 3.05
NO CONFLICT: REQUIRED FILINGS AND CONSENTS
(a) None.
<PAGE>
SCHEDULE 3.06
PERMITS/COMPLIANCE
None.
<PAGE>
SCHEDULE 3.07
FINANCIAL STATEMENTS
(b) (1) On September 1, 1999 the Company issued convertible notes
payable by HTV in the amount of $500,000 to the same Investors involved in the
May 28, 1999 transaction.
(2) Note payable to Walt Morris with an unpaid balance of $170,000, for
an 89% ownership interest in an Oklahoma television station.
<PAGE>
SCHEDULE 3.08
ABSENCE OF CERTAIN CHANGES OR EVENTS
None.
<PAGE>
SCHEDULE 3.09
LITIGATION
None.
<PAGE>
SCHEDULE 3.11
TAXES
(a) AIN Network, Inc. has not filed its franchise tax return due on May
1999. Penalties related to such failure to file may be assessed by the Texas
Comptroller's Office.
<PAGE>
SCHEDULE 3.13
INSIDER TRANSACTIONS
1. Employment Agreement between HTV and P. Alan Luckett, dated May 28, 1998.
2. Consulting Agreement between Woodcrest Capital LLC and HTV dated May 28,
1999.
<PAGE>
SCHEDULE 3.14
CONTRACTS AND AGREEMENTS
1. Loan Agreement, dated May 28, 1999 by and among HTV, certain Investors
named therein.
2. Security Agreement between HTV, the Investors, and Woodcrest.
3. Employment Agreement between A. Luckett and HTV, dated May 28, 1999.
<PAGE>
SCHEDULE 4.01
ORGANIZATION AND QUALIFICATION
None.
<PAGE>
SCHEDULE 4.08
ABSENCE OF CERTAIN CHANGES OR EVENTS
None.
<PAGE>
SCHEDULE 4.09
None.
<PAGE>
SCHEDULE 4.11
TAXES
None.
<PAGE>
SCHEDULE 4.14
INSIDER INTERESTS, TRANSACTIONS WITH MANAGEMENT
None.
<PAGE>
SCHEDULE 4.15
CONTRACTS AND AGREEMENTS
None.
<PAGE>
Attachment"B"
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of ss.251 of this title.
<PAGE>
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to ss.251, 252, 254, 257, 258,
263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under ss.253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
<PAGE>
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
<PAGE>
(2) If the merger or consolidation was approved pursuant to ss.228 or ss.253
of this title, each constituent corporation, either before the effective date of
the merger or consolidation or within ten days thereafter, shall notify each of
the holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or consolidation
and that appraisal rights are available for any or all shares of such class or
series of stock of such constituent corporation, and shall include in such
notice a copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be given by
the surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is required
to give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than 10
days prior to the date the notice is given, provided, that if the notice is
given on or after the effective date of the merger or consolidation, the record
date shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the date of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
<PAGE>
(g) At the hearing on such petition, the Court shall determine the
stockholders who having complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
<PAGE>
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE>
Attachment"C"
Valuation Analysis
VALUATION ANALYSIS OF
AMERICAN INDEPENDENT NETWORK, INC.
AS OF OCTOBER 12, 1999
<PAGE>
PREPARED BY
BUSINESS VALUATION SERVICES, INC.
OCTOBER 13, 1999
<PAGE>
October 13, 1999
Mr. Randy Moseley
American Independent Network, Inc.
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
Dear Mr. Moseley:
Pursuant to your authorization, Business Valuation Services, Inc. ("BVS") has
conducted a Valuation Analysis of American Independent Network, Inc. ("A.I.N."
or the "Company") as of October 12, 1999. The purpose of the analysis was to
determine the fair market value of 100% of the common equity of A.I.N. on a
controlling interest basis, without consideration of any potentially synergistic
buyers. We understand this report will be used as part of a proxy statement for
a proposed merger. No other purpose is intended or should be inferred.
For purposes of this report, fair market value is defined as the price at which
property would change hands between a willing buyer and a willing seller when
the former is not under any compulsion to buy and the latter is not under any
compulsion to sell, both parties having reasonable knowledge of the relevant
facts.
PROCEDURES
Our analysis was performed in accordance with generally accepted appraisal
principles and included such tests and procedures as we considered necessary
under the circumstances. Our analysis included, but was not limited to, the
consideration of the following:
1. Review and analysis of the Company's compiled financial statements for the
years ended December 31, 1995 through December 31, 1998, and for the six
months ended June 30, 1999;
2. Meetings and discussions concerning the Company's history and outlook with
current and former Company management personnel;
3. Meetings and discussions concerning the Company's history and outlook with
the Company's legal counsel and with the Company's public accountant;
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 2
4. Review of schedules of accounts and notes payable;
5. Review of various other legal, operational, and financial documents as
provided to us by the Company; and
6. Financial review and analysis of publicly traded companies engaged in the
television cable or broadcast industry.
We relied on various information received regarding the operations of the
Company as fairly reflecting its operations and have made limited investigation
as to the accuracy and completeness of such information. We, as valuation
consultants, have not verified this information as part of this appraisal.
Therefore, we express no opinion or other form of assurance regarding the
accuracy of this source data.
FINANCIAL REVIEW
We reviewed the Company's historical financial statements for the years ended
December 31, 1995 through December 31, 1998 and for the six months ended June
30, 1999. This financial data is included in the exhibits attached to this
letter report. Exhibit I-1 provides historical and common-size balance sheets.
Exhibit I-2 provides historical and common size income statements.
BALANCE SHEET
- --------------
The Company's total assets declined substantially from $3.7 million at December
31, 1997 to a reported $1.5 million at June 30, 1999. The decrease was due to a
$1.6 million impairment of note receivable relating to a canceled transaction
with Media Fund, Inc. and due to amortization of the Company's investment in the
Copyright of the Senior Channel (the "Senior Channel"). During the same period
of time, cash balances fell from $35 thousand to less than one thousand dollars
and accounts receivable increased from $2 thousand to $18 thousand.
Depreciation caused total plant, property and equipment (PP&E) to decrease over
the same period from $867 thousand to $770 thousand. The fair market value of
each asset account is discussed on page 5 of this report.
The Company's total non-contingent liabilities declined from $3.5 million at
December 31, 1997 to $2.7 million at June 30, 1999. The decrease in liabilities
was due to the elimination of a deferred tax liability created as part of a
transaction with Media Fund, Inc. Conversion of debt to common equity was the
primary cause of notes payable, including accrued interest on notes payable,
decrease during the same time period from $2.3 million to $2.0 million.
Accounts payable increased from $177 thousand at December 31, 1997 to $437
thousand at June 30, 1999.
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 3
In addition to liabilities reported on the balance sheet, A.I.N. is subject to
contingent and incalculable liabilities arising from potential legal actions by
creditors, minority shareholders, customers or other parties.
Continued losses caused shareholder's equity to fall from $143 thousand at
December 31, 1997 to negative $1.2 million at June 30, 1999.
INCOME STATEMENT
- -----------------
The Company suffered operating losses of $952 thousand on sales of $337 thousand
for the twelve months ending December 31, 1998 compared to operating losses of
$29 thousand on sales of $1.2 million for the twelve months ending December 31,
1997. Revenues are derived primarily from the Company's programming services,
sales of advertising and programming time, and leasing of digital satellite
channels. The decline in revenues from 1997 to 1998 resulted from a decrease in
the leasing of digital channels to third parties. Operating costs include
satellite rental, programming and production expenses, rental expenses,
depreciation and amortization and administrative expenses. Operating costs
increased from $1.27 million in 1997 to $1.33 million in 1998. The increase was
due to an increase of $118 thousand in administrative expenses and an increase
of $160 thousand in depreciation and amortization charges. These expense
increases were offset by a decrease of $222 thousand in satellite rental
resulting from the reduction of the Company's reduced satellite space.
The Company's net losses for 1997 and 1998 were $2.6 million and $2.2 million
respectively. Non-operating expenses includes $1.6 million provisions for
doubtful accounts in both 1997 and 1998 and interest expenses of $382 thousand
in 1997 and $232 thousand 1998.
For the six months ended June 30, 1999, the Company's net loss was $580 thousand
with operating losses of $415 thousand on $73 thousand in sales. The Company
incurred interest expenses of $141 thousand for the six months ended June 30,
1999.
FINANCIAL REVIEW SUMMARY
- --------------------------
A firm is in financial distress when the liquid assets of the firm are not
sufficient to meet the current requirements of its hard contracts. A.I.N.'s
continued operating losses, working capital deficit and financial obligations
clearly place the Company in a position of financial distress. Discussed on page
6 are potential responses to financial distress and the implications of distress
on the value of the Company's equity.
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 4
VALUATION METHODOLOGY
The three generally accepted approaches used in determining the fair market
value of a business or business interest are the income, market, and cost
approaches. Depending upon the facts and circumstances of a particular
appraisal, applying the three approaches independently of each other can yield
conclusions which are substantially different. Where feasible, simultaneous
application of at least two of the three approaches allows an appraiser to
arrive at mutually supporting conclusions indicating a reasonable range of
company values. As the appraisal is performed, the strengths of the individual
approaches are considered, and the influence of each approach in the appraisal
process is weighed according to its likely accuracy. The following is a brief
description of the three general approaches to value.
INCOME APPROACH
- ----------------
The income approach measures the present worth of anticipated future net cash
flows generated by the business. The net cash flows are forecast for an
appropriate period and then discounted to present value using an appropriate
discount rate. In business valuations, net cash flow forecasts require analysis
of all variables influencing revenues, expenses and capital investment. An
income approach methodology is generally useful because it accounts for the
specific contribution of fundamental factors driving these variables to the
value of the company.
MARKET APPROACH
- ----------------
The market approach is performed by observing the price at which companies
comparable to a subject company, or shares of those comparable companies, are
bought and sold. Adjustments are made to the data to account for differences
between the subject company and the comparables and for the timing and
circumstances of the comparable companies. The market approach is most
applicable to assets which are homogeneous in nature and are actively traded.
Relative to other approaches to value, the key strength of the market approach
is that it provides objective indications of value while requiring that
relatively few assumptions be made. Assessing relative values under a market
approach can be difficult where significant differences exist in the fundamental
outlook of the subject and the comparable firms.
COST APPROACH
- --------------
The cost approach considers replacement cost as an indicator of value. The cost
approach is based on the assumption that a prudent investor would pay no more
for an asset than the amount for which he could replace or re-create it. The
cost approach is sometimes performed by estimating the replacement cost of an
asset similar to the subject with adjustments for any physical deterioration or
functional and economic obsolescence of the appraised asset. One variation of
the cost approach is the adjusted book value approach where book values of
assets are restated to fair market values to arrive at a conclusion of the fair
market value of the total assets the subject company. The fair market value of
the equity can then be determined by subtracting the subject company's
liabilities from the fair market value of the total assets.
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 5
APPLICATION OF VALUATION APPROACHES
With respect to the valuation of A.I.N., the income approach does not yield
meaningful results because the Company is unlikely to generate positive cash
flows in the future. The market approach does not yield any meaningful results
because the Company's economic outlook is significantly different than the
outlook of any comparable firm. Accordingly, we relied on the results of the
cost approach using the adjusted book value method.
Exhibit II-1 of the exhibit provides a summary of adjustments made to the June
30, 1999 book values of the Company's assets to arrive at a fair market value
estimate of the Company's total assets as of the valuation date.
CURRENT ASSETS
- ---------------
We assumed that the stated value of the current assets at June 30, 1999
reasonably approximated their fair market value as of the valuation date.
PP&E
- ----
The Company reported $770 thousand, net of depreciation, in PP&E at June 30,
1999. We assumed that the depreciated values of the PP&E one the June 30, 1999
balance sheet were equal to fair market value as of the valuation date (1).
TRADE CREDITS RECEIVABLE
- --------------------------
A trade credit represents the right to receive one U.S. dollar worth of goods or
services rather than cash. Because trade credits do not generate any income and
because they are less liquid than cash, the fair market value of the credits is
less than the face value of the credits. We note that the Company has
established a valuation reserve of $125 thousand against the face value of the
credits. Accordingly, we assumed the stated value of trade credits as of June
30, 1999 reasonably approximates their fair market value as of the valuation
date.
(1) The Board of Directors of A.I.N. has acknowledged the Company's contractual
obligation to transfer and assign all uplink and satellite transponder
equipment to Hispanic Television, Inc. pursuant to an August 1999
agreement. Thus, the Company's PP&E has no value in liquidation..
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 6
OTHER INVESTMENTS
- ------------------
The Company's other investment is the Senior Channel. The Company acquired the
Senior Channel in exchange for accounts receivable in the amount of $690
thousand due to the Company from owners of the Senior Channel. We assumed the
Senior Channel has no value because the Company currently does not anticipate
recovering any of the costs of the Senior Channel.
INTANGIBLE ASSETS
- ------------------
The Company does not have any intangible asset value reported as of June 30,
1999. We note that the Company may possess some intangible assets such as (1)
customer relationships with affiliate stations, or (2) corporate value as a
potential reverse merger candidate. The value of the Company's customer
relationships is negligible to the extent that this value is dependent upon the
ability to generate positive cash flows from the existing customers.
Furthermore, any value as a reverse merger candidate is correspondingly offset
by contingent liabilities arising from potential legal actions by creditors,
minority shareholders, customers or other parties. Accordingly, we have not
placed any value on the Company's intangible assets.
We conclude that the fair market value of the Company's total assets is
approximately $1.0 million dollars as of October 12, 1999.
CONCLUSION OF VALUE
A.I.N. is financially distressed and the enterprise value of a company can be
diminished by this distress. A company may respond to financial distress by:
1. Wholly or partially liquidating assets to generate additional liquid assets
to meet current obligations;
2. Restructuring financial contracts by (a) reducing the amount of the current
obligation, (b) delaying payment of the current obligation, or (c)
replacing hard contracts with soft contracts; or
3. Making additional financial claims against future cash flows generated by
the assets.
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 7
A.I.N.'s ability to respond to financial distress is severely restricted for the
following reasons:
ASSET LIQUIDATION
- ------------------
A.I.N.'s assets are not sufficiently valuable to satisfy current cash
requirements through liquidation. The Company's only potentially liquid assets
are receivables, most of which are trade credits. Because trade credits are
less liquid than cash, a creditor is unlikely to accept trade credits at face
value in lieu of cash payments.
The Company no longer owns any valuable PP&E (2) and its investment in the
Senior Channel is virtually worthless. The fair market value of the Company's
total assets, including consideration of the potentially valuable intangible
asset values of the corporate charter and affiliate station relationships, are
worth significantly less than the total current obligations, especially in light
of contingent and incalculable liabilities.
RESTRUCTURING OF FINANCIAL CONTRACTS
- ---------------------------------------
A.I.N. has been able to restructure certain financial agreements, especially
numerous bridge loans, by replacing the hard contracts with common equity.
However, each successive issue of additional common equity further dilutes the
Company's stock and limits the effectiveness of this consideration in subsequent
negotiations.
ISSUE NEW FINANCIAL CLAIMS AGAINST FUTURE CASH FLOWS
- -----------------------------------------------------------
The Company has not had a positive operating cash flow in the past and has
virtually no prospect producing of a positive operating cash flow in the
foreseeable future. The Company's lack of prospective profits and poor credit
history make attracting additional funds extremely costly if not impossible.
(2) The Company is contractually obligated to transfer and assign uplink and
satellite transponder capital leases (and equipment) to Hispanic Television,
Inc. pursuant to an August 1999 agreement.
<PAGE>
Mr. Randy Moseley
Exhibit II-1
Page 8
Because A.I.N. is unlikely to emerge from financial distress, the enterprise
value of the Company is limited by the liquidation value of the remaining
assets. As mentioned above, the liquidation value of the remaining assets is
far less than the Company's current obligations to creditors. Accordingly, the
common equity of A.I.N. is worthless in the absence of the Company being
purchased as part of a strategic acquisition. Even in the presence of a
strategic acquisition, the fair market value of the common equity is highly
speculative and has a greater than 50% probability of having no value. Thus,
the Fair Market Value of 100% of the common equity of American Independent
Network, Inc., as of October 12, 1999, can be reasonably stated as
$0
ZERO DOLLARS
We are independent of the parties involved in the subject matter. We have no
current or prospective interest, directly or beneficially, in the issues
considered in this analysis. Our fee for this appraisal was in no way
influenced by the results of our analysis. The attached Statement of Limiting
Conditions and the Appraisal Certification are integral parts of this valuation
letter.
Respectfully submitted,
BUSINESS VALUATION SERVICES INC.
By:
______________________
Scott D. Hakala, Ph.D.
<PAGE>
STATEMENT OF LIMITING CONDITIONS
--------------------------------
This value opinion report has been prepared pursuant to the following general
assumptions and general limiting conditions:
1. We assume no responsibility for the legal description or matters including
legal or title considerations. Title to the subject assets, properties, or
business interests are assumed to be good and marketable unless otherwise
stated.
2. The subject assets, properties, or business interests are appraised free
and clear of any or all liens or encumbrances unless otherwise stated.
3. We assume responsible ownership and competent management with respect to
the subject assets, properties, or business interests.
4. The information furnished by management is believed to be reliable.
However, we issue no warranty or other form of assurance regarding its
accuracy.
5. We assume that there is full compliance with all applicable Federal, state,
and local regulations and laws unless noncompliance is stated, defined, and
considered in the appraisal report.
6. We assume that all required licenses, certificates of occupancy, consents,
or legislative or administrative authority from any local, state, or
national government, private entity or organization have been or can be
obtained or renewed for any use on which the valuation opinion contained in
this report is based.
7. Possession of this valuation report, or a copy thereof, does not carry with
it the right of publication. It may not be used for any purpose by any
person other than the party to whom it is addressed without our written
consent and, in any event, only with proper written qualifications and only
in its entirety.
<PAGE>
8. We, by reason of this valuation, are not required to give testimony, or to
be in attendance in court with reference to the assets, properties, or
business interests in question unless arrangements have been previously
made.
9. This valuation report has been prepared in conformity with, and is subject
to, the requirements of the code of professional ethics and standards of
professional conduct of the professional appraisal organizations of which
we are members.
10. Disclosure of the contents of this valuation report is governed by the
bylaws and regulations of the Association for Investment Management and
Research and the American Society of Appraisers.
11. No part of the contents of this report, especially any conclusions of
value, the identity of the appraisers, or the firm with which the
appraisers are associated, shall be disseminated to the public through
advertising, public relations, news, sales, or other media without our
prior written consent and approval.
12. We assume no responsibility for any financial reporting judgments which are
appropriately those of management. Management accepts the responsibility
for any related financial reporting with respect to the assets, properties,
or business interests encompassed by this appraisal.
<PAGE>
APPRAISAL CERTIFICATION
------------------------
We hereby certify the following statements regarding this appraisal:
1. We have not inspected the assets, properties, or business interests
encompassed by this appraisal.
2. We have no present or contemplated future interest in the assets,
properties, or business interests that are the subject of this appraisal
report.
3. We have no personal interest or bias with respect to the subject matter of
this report or the parties involved.
4. Our compensation for making the appraisal is in no way contingent upon the
value reported.
5. To the best of our knowledge and belief, the statements of facts contained
in this report, upon which the analyses, conclusions and opinions expressed
herein are based, are true and correct.
6. No persons other than appraisers of Business Valuation Services, Inc. have
prepared the analyses, conclusions and opinions concerning the assets,
properties, or business interests set forth in this report.
Scott D. Hakala, Ph.D.
Stephen Campbell
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