EXHIBIT 4.1
ASSET PURCHASE AGREEMENT DATED FEBRUARY 16, 2004
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 16th day of February,
2004, by and between ValCom,. Inc. a Delaware corporation (hereinafter
"SELLER"), and Eye Span Entertainment Network, Inc., ("hereinafter BUYER").
WITNESSETH:
WHEREAS, Seller is the owner of a Delaware corporation ValCom, Inc. which
operates a entertainment facility located at 26030 Avenue Hall, Studio #5,
Valencia, California 91355 ("VACM");
WHEREAS, Seller desires to sell to Buyer certain assets , and Buyer desires
to purchase from Seller certain assets as outlined, on the terms and conditions
set forth herein..
WHEREAS, Seller desires to assign to Buyer the contracts, licenses,
permits, and authorizations issued to Seller on certain assets as outlined that
allow these assets to legally operate : and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties, and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1. - DEFINITIONS
Even though the business plan calls for operating the station purchases as low
power or small market television stations, once owned, the future opportunities
for use of the bandwidth are endless. For example, the bill Senator Conrad Burns
introduced in Congress, which now seems to be gaining support, would help Low
Power Television Stations provide two-way wireless high-speed data services.
Senator Burns has argued that the legislation will help bridge the digital
divide between those who have fast connections and those that don't. The bill
authorizes a low-power TV station to use part or its entire authorized spectrum
to provide digital data services to the public by subscription. It also
prohibits the FCC from authorizing any service that would displace/interfere
with a low-power station providing such services. As new technologies develop,
the opportunities for use of the limited bandwidth are sure to expand.
FILM AND VIDEO PROGRAM DISTRIBUTION DIVISION
Attractive opportunities exist for distributing ESEN's own programming.
Management will establish a distribution organization utilizing executives and
personnel that have the necessary experience, background and relationships to
launch new programs into the television syndication and network marketplace.
Other than pilot or presentation tapes, programs won't be produced unless they
are already pre-sold into the marketplace. As a result, a majority of the
marketing and production costs will not be incurred unless the show is actually
launched. ESEN will have complete control over the costs and marketing success
of its programming, while additionally having the ability to retain 100% of the
revenue generated from its programming.
1.1. DEFINITIONS. In this Agreement, the following terms shall be
defined as follows:
"ASSETS" shall mean the assets described in Sections 2.1.1
through 2.1.4 of this Agreement.
62
"AUTHORIZATIONS" shall mean the SEC Authorizations together with
all other governmental licenses, contracts, permits, or authorizations issued to
Seller relating to VACM.
"CLAIMANT" shall mean the party claiming indemnification under
this Agreement.
"CLAIMS AMOUNT" shall mean, in the event that Buyer is entitled
to indemnification by Seller hereunder and has made a claim against Seller
within the Holdback Period, as defined below, for such indemnification, the
portion of the Escrow Deposit, as defined below, necessary to satisfy all of
such indemnification obligations of Seller.
"CLOSING" shall mean the closing of the purchase by Buyer from
Seller of the Assets and Authorizations, as contemplated under this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"ESCROW AGENT" shall mean an escrow agent selected by Buyer and
reasonably acceptable to Seller.
"ESCROW AGREEMENT" shall mean the escrow agreement, in form and
substance attached hereto as EXHIBIT A.
"ESCROW DEPOSIT" shall mean _______________DOLLARS
($____,000.00).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"AUTHORIZATIONS" shall mean all contracts, licenses, permits, or
other authorizations issued by the SEC to Seller, all renewals or extensions
thereof and all additions thereto, and all applications of Seller before the
SEC, in each case, relating to VACM.
"GOVERNMENTAL BODY" shall mean any governmental body of competent
jurisdiction, including any court, legislative body, taxing authority, or
governmental agency of competent jurisdiction, as well as any arbitrators of
competent jurisdiction.
"INDEMNITOR" shall mean the party from whom indemnification is
sought under this Agreement.
"INTERIM PERIOD" shall mean the period beginning on the date
hereof and ending on the Closing Date.
"LAWS" shall mean all federal, state, local, and other
governmental laws, statutes, rules, regulations, ordinances, decrees, orders,
and requirements, including the Security Act of 1934 and the rules, regulations,
and policies of the SEC, all of the foregoing as amended and hereafter amended.
"LIENS" shall mean all liens, security interests, mortgages,
pledges, liabilities, debts, or encumbrances of any kind.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(i) the Assets, Authorizations, or operation, condition, business, revenue,
value, or prospects of VACM, (ii) the ability of Seller to perform its
obligations under this Agreement, or (iii) the validity or enforceability of
this Agreement.
"OBLIGATIONS" shall mean all obligations of Seller arising under
Section 6.2 of this Agreement.
63
"PURCHASE PRICE" shall mean the purchase price for the
Authorizations and Assets that is set forth in Section 3.1 of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"TAXES" shall mean all federal, state, local, foreign, gross
receipts, income, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, including taxes under Code
Section 59A, customs duties, capital stock, franchise, profits, withholding,
social security or similar, unemployment, disability, real property, personal
property, unclaimed property, escheat, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other taxes or government
charges of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes required to be
supplied, or actually supplied, to any Governmental Body, including any schedule
or attachment thereto, and including any amendment thereof.
ARTICLE 2. - SALE AND PURCHASE OF ASSETS
2.1. ASSETS. On the Closing Date, subject to the terms and conditions
set forth herein, Seller shall sell, assign, transfer, and deliver to Buyer, and
Buyer shall purchase from Seller, the Authorizations and the following Assets:
2.1.1. The Copyrights, trademarks, equipment, legal options,
supplies, spare parts, inventory, and all other tangible personal property
related to bingo owned and used or useful in the operation of Latino Bingo,
Satellite Bingo and all other related items including the tangible property
described in SCHEDULE 2.1.1 attached hereto, together with all replacements
thereof or additions thereto, if any, made during the Interim Period.
2.1.2. KVPS or ValCom Broadcasting ownership of property,
contracts, and other agreements and commitments of Seller that are set forth in
SCHEDULE 2.1.2 attached hereto and that are in effect on the Closing Date.
2.1.3. VACM's goodwill, licenses and permits, and other
tangible and intangible rights, including any and all rights to the 143 film or
film library.
2.1.4. 10% of real property specified in SCHEDULE 2.1.4
attached hereto.
2.2. CONVEYANCE. On the Closing Date, Seller shall cause to be
executed and delivered to Buyer all documents and instruments set forth in
Section 7.4 of this Agreement.
2.3. RECORDS. On the Closing Date, Seller shall deliver to Buyer all
operating and maintenance logs, records and reports, all accounting and sales
information, and all other financial records relating to the operation of the
Assets. Seller represents and warrants to Buyer that each of such logs, records,
reports, and information is in proper order, is complete, and covers at least
the period beginning one (1) year prior to the Closing Date and ending on the
Closing Date. After the Closing Date, Buyer shall provide Seller access to such
records under Buyer's control as may be reasonably necessary for Seller to
complete its financial statements, Tax Returns, and similar documents.
2.4. LIENS. Seller agrees that the Assets and Authorizations at
Closing are to be free and clear of all Liens.
2.5. BUYER'S ASSUMPTION OF CERTAIN FUTURE OBLIGATIONS. Notwithstanding
anything to the contrary contained in this Agreement, in the event of Closing,
Buyer on the Closing Date shall assume only the obligations of Seller that are
set forth in SCHEDULES 2.1.2 OR 2.1.4. With respect to such disclosed
obligations, (i) Seller shall pay current all contract obligations due prior to
the Closing Date and (ii) Buyer shall assume the
64
obligation for all such contract payments due on or after the Closing Date.
Seller shall execute and deliver to Buyer, and Buyer shall accept and execute as
necessary, all documents and instruments as may be reasonably required to
effectuate such assumption of future obligations.
2.6. PREPAID EXPENSES. Buyer shall reimburse Seller for the unexpended
portion as of the Closing Date of all Station expenses and obligations that
Seller prepaid prior to such time to the extent that such prepaid items are of
benefit to Buyer, and Seller shall reimburse Buyer for all accrued but unpaid
expenses and obligations of VACM as of such time. Income received by Seller for
post productions or other services on or after the Closing Date shall be paid by
Seller to Buyer.
ARTICLE 3. - PURCHASE PRICE;
ADJUSTMENTS; CERTAIN CONVENANTS
3.1. PURCHASE PRICE. The Purchase Price hereunder for the
Authorizations and Assets shall equal one million five hundred thousand dollars
($1,500,000.00). (Terms See 3.2)
3.2. PAYMENT TERMS. (i) to purchase specified assets as outlined
owned by the Company and its shareholders for 750,000 shares of common stock to
be paid as follows; (ii) to shareholders of record as of December 15, 2003. Upon
the consummation of the purchase, ESEN. soon to be a publicly traded company on
the Over the Counter Bulletin Board, shall own 100% of the assets purchased from
VACM. Expect this transaction to be completed no later than February 28, 2004.
CLOSING DATE TO BE FEBRUARY 28TH, 2004.
3.4. EXPENSES. On the Closing Date, to the extent reasonably
feasible, there shall be prorated all payments of rent, utilities, insurance,
regulatory fees, and all other operating expenses of VACM, and other charges
pertaining to the Assets, so that Seller shall be responsible for all such
expenses prior to the Closing Date and Buyer for all such expenses on the
Closing Date and thereafter, with final accounting and settlement of such
pro-rations to be completed within ninety (30) days after the Closing Date. In
this regard, Seller shall pay the costs of all ownership reports, employment
reports, or other reports or SEC filings required by virtue of Seller's
ownership of VACM prior to the Closing Date. Each party, however, shall be
responsible for its own expenses in connection with the transactions
contemplated under this Agreement, including the negotiation and preparation of
this Agreement and the preparation and prosecution of the Application, except
that Buyer shall pay all SEC filing fees, if any, pertaining to said
transactions.
3.5. INTERIM OBLIGATIONS. Throughout the Interim Period: (i) Seller
shall maintain its qualifications under all applicable SEC requirements to be an
assignor of VACM, shall operate VACM in the normal course of business and in a
manner to maintain or increase the value of VACM , and shall comply in all
material respects with all applicable Laws and shall operate VACM in compliance
in all material respects with all applicable Laws.
3.6. PURCHASE PRICE ALLOCATION. Buyer and Seller agree to allocate
the consideration paid hereunder for federal income Tax purposes among the
Assets and Authorizations in accordance with SCHEDULE 3.6 attached hereto. Buyer
and Seller agree to file all Tax Returns, including Internal Revenue Service
Form 8594 and all disclosures that are required under Code Section 1060, if any,
in a manner consistent with such allocation.
3.7. SECURITIES FILINGS. At Buyer's request, Seller shall promptly,
throughout the Interim Period, provide such information and documents to Buyer
regarding VACM as may be necessary or appropriate for inclusion in any filing,
notification, or report required to be made by Buyer or any affiliate of Buyer
under the Securities Act or the Exchange Act, and shall cause Seller's counsel
and independent accountants to cooperate with Buyer, its affiliates, and their
investment bankers, counsel, and independent accountants in the preparation of
such filings, notifications, and reports. Seller represents, warrants, and
covenants to Buyer that no information or document provided by Seller for
inclusion in any filing, notification, or report made by Buyer or any affiliate
thereof under the Securities Act or the Exchange Act shall contain any untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements made therein not misleading.
65
3.8. PUBLIC ANNOUNCEMENTS. The parties shall consult and cooperate
with each other regarding and before issuing any press release or public
statement with respect to this Agreement or the transactions contemplated
hereunder; provided, however, that this Section 3.8 shall not prevent either
party from complying with the requirements of applicable Laws.
ARTICLE 4. - REPRESENTATIONS AND WARRANTIES
4.1. BUYER. Buyer agrees and represents and warrants to Seller as
follows:
4.1.1. BINDING OBLIGATION. This Agreement constitutes the
legal, valid, and binding obligation of Buyer enforceable in accordance with
this Agreement's terms, subject to applicable bankruptcy, reorganization,
insolvency, or similar laws affecting creditors' rights generally, and subject
to the application of equitable principles in any proceeding involving the
enforcement of any of the provisions of this Agreement and the discretion of the
court before which any such proceedings may be brought.
4.1.2. AUTHORITY. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada,
and has full power and authority to own its assets and to carry on its business
as it has been and is conducting. Buyer has full corporate power and authority
to make and perform this Agreement. Neither the making of this Agreement by
Buyer nor the consummation of the transactions contemplated hereunder conflicts
with or is prohibited by Buyer's Articles of Incorporation or Bylaws, or has
constituted or shall constitute a default under any contract or commitment to
which Buyer is a party or by which Buyer is bound.
4.1.3. NO CONFLICT. The execution, delivery, and
performance of this Agreement by Buyer shall not cause any breach of any of the
terms, conditions, or provisions of, or constitute a default under, any
indenture, mortgage, agreement, or other instrument to which Buyer is a party or
by which Buyer is bound.
4.1.4. ABSENCE OF LITIGATION. Buyer is aware of no
proceeding pending against Buyer before any Governmental Body that would prevent
Buyer from performing this Agreement in accordance with its terms.
4.2. SELLER. Seller agrees and represents and warrants to Buyer as
follows:
4.2.1. AUTHORITY. Seller has full power and authority to own
its assets and to carry on its business as it has been and is conducting. This
Agreement is a valid, legally binding, and enforceable obligation of Seller
enforceable in accordance with this Agreement's terms, subject to applicable
bankruptcy, reorganization, insolvency, or similar laws affecting creditors'
rights generally, and subject to the application of equitable principles in any
proceeding involving the enforcement of any of the provisions of this Agreement
and the discretion of the court before which any such proceedings may be
brought. Neither the making nor the performance of this Agreement by Seller nor
the consummation of the transactions contemplated hereunder conflicts with or is
prohibited by Seller's Articles of Association or Bylaws, or has constituted or
shall constitute a default under any contract or commitment to which Seller is a
party or by which Seller is bound, or has resulted or shall result in the
creation or imposition of any Liens in favor of any third party with respect to
any of the Assets or Authorizations.
4.2.2. RESTRICTIONS AND CONSENTS. The execution and delivery
of this Agreement and the performance of the transactions provided for herein by
Seller have been duly authorized by all necessary action and do not require the
consent, approval, or authorization of or filing with any person, entity, or
Governmental Body, other than the SEC Consent, and shall not violate any Laws or
any injunction, order, or decree of any Governmental Body or conflict with or
result in a breach of or constitute a default under any of the terms of any
mortgage, lease, note, indenture, commitment, contract, agreement, license, or
other instrument or obligation to which Seller is a party or by which Seller or
any of its properties is or may be bound. The execution and delivery of this
Agreement and the consummation of the transactions provided for herein by Seller
shall not give to others any interests or rights, including rights of
termination or cancellation, in or with respect to any property, asset,
mortgage, lease, note, bond, indenture, commitment, contract, agreement,
license, or other instrument or right of Seller.
66
4.2.3. TITLE TO ASSETS. Seller on the Closing Date shall
convey to Buyer good and marketable title to all of the Assets and
Authorizations, free and clear of all Liens, except as expressly set forth in
Section 2.4 hereof. Seller shall satisfy all liabilities as necessary to cause
the preceding sentence to be true.
4.2.4. AUTHORIZATIONS AND OTHER MATTERS. SCHEDULE 4.2.4
attached hereto is a true, complete, and correct description of all licenses,
permits, or authorizations currently held by Seller, including an inventory of
all equipment and cost originations of same held by Seller, all other
authorizations held by Seller. The Authorizations are, and throughout the
Interim Period shall be, (i) in good standing and in full force and effect and
(ii) validly held by Seller. To the best of Seller's knowledge, the
Authorizations include all licenses, contracts, permits, or authorizations
necessary to operate the purchased assets VACM as it is presently being operated
in accordance with all applicable Laws.
4.2.5. TANGIBLE ASSETS. SCHEDULE 2.1.1 is a true, complete,
and correct description of all tangible and physical assets owned by Seller
relating to purchased assets of VACM. The Assets, as well as all tangible assets
leased to Seller relating to purchased assets of VACM, if any, are in good
operating condition and shall, on the Closing Date, be in at least as good
condition as at present, reasonable wear and tear excepted, and are and shall on
the Closing Date be as required for VACM to be operated in accordance with its
Authorizations and all applicable Laws.
4.2.6. CONDITION OF ASSETS. The Assets include all the
equipment and other property necessary to operate the purchased assets of VACM
as it is presently being operated in accordance with all applicable Laws. The
Assets are sold where is and as is and no warranties, either express or implied,
are made with respect to the Assets.
4.2.7. CONTRACTS. Except as set forth in SCHEDULES 2.1.2 OR
2.1.4, Seller is not a party to any written or oral agreement of any kind
relating to the purchased assets of VACM. True, complete, and correct copies of
all of the agreements set forth in SCHEDULES 2.1.2 OR 2.1.4, including all
amendments, if any, to such agreements, have been delivered to Buyer and each of
such agreements is in full force and effect, and all such amendments, if any,
are also accurately set forth in SCHEDULES 2.1.2 OR 2.1.4. All such agreements
were entered into in the normal course of business on commercially reasonable
terms and no such agreement contains provisions that would be unduly burdensome
or unusual within the broadcast industry for businesses similar in size or
location to that of VACM. On the Closing Date, Seller shall assign such
agreements to Buyer, except for those agreements that have expired pursuant to
their terms. Throughout the Interim Period, Seller shall neither amend nor seek
amendment of any agreement set forth in SCHEDULE 2.1.2 OR 2.1.4.
4.2.8. NO DEFAULT. No person or entity with whom Seller has
an agreement that is of material importance to the businesses, properties, or
operations of VACM is in default there under or has given Seller notice of
termination thereof, and no condition exists or event has occurred that, with
notice or lapse of time, or both, would constitute such default and Seller shall
not willingly accept such notice of termination. Seller represents and expressly
warrants that it is not in default under any of such agreements.
4.2.9. REAL PROPERTY. Attached hereto as SCHEDULE 2.1.4 are
true, complete, and correct copies of all leases relating to VACM, including all
amendments thereto, if any, to which Seller is a party, for real property,
buildings and improvements thereon. Such leases are valid and in full force and
effect and there does not exist any default or event that with notice or lapse
of time, or both, would constitute a material default under any of such leases.
Such leases are assignable to Buyer and Seller shall obtain on or prior to the
Closing Date all necessary consents for assignment of all such leases to Buyer
on the Closing Date.
4.2.9. PUBLIC FILE AND RECORDS. All the material required by
FCC rules, regulations, or policies to be kept in VACM's public inspection file
is in such file in compliance with FCC rules, regulations, and policies. Such
file shall be maintained in proper order and shall be complete throughout the
Interim Period. All files and records relating to VACM required by applicable
Laws to be kept by Seller have been kept in proper order and shall be complete
throughout the Interim Period.
67
4.2.10. LITIGATION. . Seller is aware of no proceeding
pending against Seller before any Governmental Body that would prevent Seller
from performing this Agreement in accordance with its terms.
4.2.11. INSURANCE. SCHEDULE 4.2.13 attached hereto is a true,
correct, and complete schedule of all insurance policies relating to VACM,
including all amendments thereto, if any, issued to Seller as of the date of
this Agreement. True, correct, and complete copies of all such policies,
including all such amendments, have been delivered to Buyer. Such insurance is
adequate for the Assets and the operation of VACM. With respect to such
insurance, Seller shall maintain at least equivalent coverage in force
throughout the Interim Period. Such insurance is at least in such amounts and
covers at least such risks as is customary within the broadcast industry for
broadcast stations similarly situated to VACM.
4.2.12. COMPLIANCE WITH LAWS. Seller, Seller's operations,
the Assets, and the Authorizations have been and are in compliance with all
applicable Laws, noncompliance with which could have a Material Adverse Effect,
and there are no material violations of any such Laws, existing or threatened.
4.2.14. BULK SALES. Neither the sale and transfer of the
Assets or Authorizations pursuant to this Agreement, nor Buyer's ownership,
possession, or use thereof from and after the Closing Date as a result of
such sale and transfer, shall result in or be subject to: (x) any law
pertaining to bulk sales or transfers or fraudulent conveyances that might
make such sale or transfer or any part thereof ineffective as to creditors
of or claimants against Seller; (y) any federal, state, local, or foreign
sales, use, transfer, excise, or license Tax, fee, or charge applicable to
any of the Assets or Authorizations; or (z) the imposition upon Buyer, or
any of the Assets or Authorizations, of any liability of any nature
whatsoever that has not been expressly assumed by Buyer under this
Agreement to any Tax, and (e) all written agreements Seller has entered
into with any Governmental Body relating to any Tax. change in personnel
policies, insurance benefits, or other compensation arrangements affecting
the employees of Seller;
ARTICLE 5. - REGULATORY MATTERS
5.1. FCC CONSENT TO ASSIGNMENT. Notwithstanding anything herein to the
contrary, the consummation of the purchase and sale of the Assets and
Authorizations contemplated under this Agreement is subject to and conditioned
upon the prior consent of the FCC.
5.2. APPLICATION FOR CONSENT. As promptly as practicable, but within
fifteen (15) days of the date hereof, Buyer and Seller shall file with the FCC
the Application seeking FCC consent to assignment of the FCC Authorizations to
Buyer without conditions adverse to Buyer, which Application shall include all
necessary waiver requests, if any, to enable the Application to be granted. The
parties shall promptly and diligently file and expeditiously prosecute all
necessary amendments, briefs, pleadings, documents, and supporting data to the
Application, and take such actions and give such notices as may be required or
requested by the FCC or as may be appropriate, all in an effort to expedite the
approval by the FCC of the Application with no conditions adverse to Buyer, and
shall promptly supply to each other such information in their respective
possession as may be reasonably requested by either party to expedite such
approval. In the event of the filing of any protest, petition to deny, petition
for reconsideration, or appeal of the FCC's consent and approval with respect to
the Application, or other action seeking review, reconsideration, or appeal of
such consent and approval, the parties mutually agree that each such filing or
action, if any, shall be opposed by each of them vigorously.
5.3. OPERATION OF VACM BEFORE CLOSING. Throughout the Interim Period,
Seller shall continue to operate the purchased assets of VACM in the
convenience, and necessity, and shall file with the SEC all documents required
to be filed in connection with the operation of VACM.
5.4. CONTROL. Throughout the Interim Period, Buyer shall not directly
or indirectly control, supervise, or direct, or attempt to control, supervise,
or direct, the operations of the purchased assets of VACM. Such operations shall
be the sole responsibility of Seller throughout the Interim Period.
68
5.5. HEARING DESIGNATION. If the Application is designated for hearing
by the FCC, then this Agreement may be terminated by either Buyer or Seller on
ten (10) days prior written notice to the other party so long as the terminating
party is not then in material breach hereunder.
ARTICLE 6. - RISK OF LOSS AND INDEMNIFICATION
6.1. RISK OF LOSS. The risk of loss or damage to the Assets and
Authorizations shall be on Seller at all times prior to the Closing, and
thereafter said risk shall be Buyer's.
6.2. INDEMNIFICATION BY SELLER. Throughout the period following the
Closing, Seller shall indemnify and hold harmless Buyer and its stockholders,
directors, officers, employees, agents, and consultants, and the successors and
assigns of each of the foregoing, against:
6.2.1. Any and all claims, liabilities, Taxes, and
obligations of any kind or nature, contingent or otherwise, including any
transferee liability, arising out of or relating to the operation or use of the
Assets, Authorizations, or VACM to the Closing or arising or required to be
performed prior to the Closing under any lease, contract, or agreement assumed
by Buyer hereunder;
6.2.2. Any and all damage or deficiency resulting from any
Seller misrepresentation, breach of warranty, or non-fulfillment of any
agreement, covenant, or obligation assumed or required to be performed by Seller
under this Agreement, or from any misrepresentation in or omission from any
certificate or other instrument furnished to Buyer pursuant to this Agreement or
furnished to Buyer by Seller or Seller's agents in connection with any of the
transactions contemplated hereunder; and
6.2.3. Any and all actions, suits, proceedings, damages,
assessments, judgments, costs, and expenses, including reasonable attorneys'
fees, incurred by Buyer as a result of Seller's failure or refusal to defend, to
compromise, or to pay any claim incident to the foregoing provisions of this
Section 6.2.
6.2.4. If any claim or liability shall be asserted against
Buyer that would give rise to a claim by Buyer against Seller for
indemnification under the provisions of this Section 6.2 and Buyer seeks to be
indemnified under such provisions, Buyer shall promptly notify Seller in writing
of the same and Seller shall be entitled at its own expense to compromise or to
defend such claim asserted against Buyer subject to Section 6.4 hereof;
provided, however, that Buyer's failure so to notify Seller shall not relieve
Seller of any indemnity obligation hereunder, except to the extent that Seller
is materially prejudiced by such failure.
6.3. INDEMNIFICATION BY BUYER. Throughout the period following the
Closing, Buyer shall indemnify and hold Seller harmless against:
6.3.1. Any and all claims, liabilities, Taxes, and
obligations of any kind or nature, contingent or otherwise, arising out of or
relating to the operation or use of the Assets, Authorizations, or Station
subsequent to the Closing or arising or required to be performed subsequent to
the Closing under any lease, contract, or agreement assumed by Buyer hereunder;
6.3.2. Any and all damage or deficiency resulting from any
Buyer misrepresentation, breach of warranty, or non-fulfillment of any
agreement, covenant, or obligation assumed or required to be performed by Buyer
under this Agreement, or from any misrepresentation in or omission from any
certificate or other instrument furnished to Seller pursuant to this Agreement
or furnished to Seller by Buyer or Buyer's agents in connection with any of the
transactions contemplated hereunder.
6.3.3. If any claim or liability shall be asserted against
Seller that would give rise to a claim by Seller against Buyer for
indemnification under the provisions of this Section 6.3 and Seller seeks to be
indemnified under such provisions, Seller shall promptly notify Buyer in writing
of the same and Buyer shall be entitled at its own expense to compromise or to
defend such claim asserted against Seller subject to Section 6.4 hereof;
provided, however, that Seller's failure so to notify Buyer shall not relieve
Buyer of any indemnity obligation hereunder, except to the extent that Buyer is
materially prejudiced by such failure.
69
6.4. PROCEDURE FOR INDEMNIFICATION. With respect to any third-party
claims or proceedings as to which the Claimant is entitled to and seeks
indemnification hereunder, the Indemnitor shall have the right, subject to the
provisions of this Section 6.4, to employ counsel reasonably acceptable to the
Claimant to defend against each such claim or proceeding, if any, or to
compromise, settle, or otherwise dispose of the same if the Indemnitor deems it
advisable to do so, all at the expense of the Indemnitor. The parties shall
fully cooperate in each such action, and shall make available to each other all
of their books or records, if any, useful for the defense of such claim or
proceeding. As a condition of tendering defense of such claim or proceeding to
the Indemnitor, the Claimant shall have the right to require the Indemnitor to
post a bond or provide other reasonable assurance to the Claimant that the
Indemnitor can and shall pay all liabilities arising from such claim or
proceeding in the event of an unsuccessful defense or any settlement. If the
Indemnitor fails to acknowledge in writing to the Claimant the Indemnitor's
obligation to defend against or settle such claim or proceeding or fails to
provide such bond or assurance, in each case within twenty (20) days after
receiving notice thereof from the Claimant, or such shorter time specified in
such notice as the circumstances of the matter dictate, the Claimant shall be
free to engage counsel of the Claimant's choice and defend against or settle the
matter, all at the expense of the Indemnitor. Notwithstanding anything herein to
the contrary, (i) the Claimant shall always be free to engage its own counsel
and participate fully in the defense of any claim or proceeding being defended
by the Indemnitor under the indemnification provisions hereof, it being
understood that the Indemnitor shall bear the expense of such counsel in the
event that such claim or proceeding seeks in whole or in part any nonmonetary
relief, and (ii) the Indemnitor shall not effect any settlement relating to any
claim or proceeding under the indemnification provisions hereof that seeks in
whole or in part any nonmonetary relief or that could adversely affect the
Claimant without the prior written consent of the Claimant.
ARTICLE 7. - CLOSING DATE;
CONDITIONS TO CLOSING; CLOSING DOCUMENTS
7.1. CLOSING DATE. The Closing shall be held at the offices of ValCom,
Inc. in Valencia, California or at such other location as the parties may
mutually specify, and shall be held on a mutually agreeable date within the then
(10) days immediately following the date on which the Consent has become a Final
Order, unless an earlier Closing (i) is necessary to comply with SEC
regulations, (ii) is mutually agreeable to the parties and is consistent with
SEC regulations, or (iii) is specified by Buyer by the giving of ten (10) days
prior written notice to Seller and is consistent with SEC regulations. The
Closing shall commence at 10:00 a.m. local time on the Closing Date March 31,
2004 at the Closing location.
7.2. CONDITIONS TO OBLIGATIONS OF SELLER. The following are conditions
precedent to Seller's obligation to close hereunder, any or all of which may be
waived in whole or in part in writing by Seller to the extent permitted by
applicable Laws:
7.2.1. REPRESENTATIONS AND WARRANTIES TO BE TRUE AND
OBLIGATIONS PERFORMED. The representations and warranties of Buyer contained
herein shall be true in all material respects as of and on the Closing Date as
though made on such date. Buyer shall have performed and complied with all
obligations and covenants required under this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date.
7.2.2. CLOSING DOCUMENTS. Buyer shall have delivered to
Seller or caused the delivery to Seller of the Closing documents and items
described in Section 7.5 of this Agreement.
7.2.3. SEC CONSENT. The SEC Consent shall have been issued
and such consent shall be in full force and effect.
7.2.4. LITIGATION. Neither Seller nor Buyer shall be subject
to any order or injunction of any Governmental Body restraining or prohibiting
the consummation of the transactions contemplated hereunder, and no action or
proceeding shall have been instituted by third party and remain pending before a
Governmental Body to prohibit such transactions, nor shall any Governmental Body
have notified either party to this Agreement that the consummation of the
transactions contemplated hereunder may constitute a violation of applicable
Laws, which notification remains outstanding.
70
7.2.5. CERTIFICATE. Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date, signed by Buyer stating that the
representations and warranties of Buyer set forth in this Agreement and in the
instruments delivered by Buyer to Seller in connection with this Agreement are
true and correct as of the Closing Date in all material respects.
7.3. CONDITIONS TO OBLIGATIONS OF BUYER. The following are conditions
precedent to Buyer's obligation to close hereunder, any or all of which may be
waived in whole or in part in writing by Buyer to the extent permitted by
applicable Laws:
7.3.1. REPRESENTATIONS AND WARRANTIES TO BE TRUE AND
OBLIGATIONS PERFORMED. The representations and warranties of Seller contained
herein shall be true in all material respects as of and on the Closing Date as
though made on such date. Seller shall have performed and complied with all
obligations and covenants required under this Agreement to be performed or
complied with by Seller on or prior to the Closing Date.
7.3.2. CLOSING DOCUMENTS. Seller shall have delivered to
Buyer or caused the delivery to Buyer of the Closing documents and items
described in Section 7.4 of this Agreement.
7.3.3. LITIGATION. Neither Seller nor Buyer shall be subject
to any order or injunction of any Governmental Body restraining or prohibiting
the consummation of the transactions contemplated hereunder, and no action or
proceeding shall have been instituted by any third party and remain pending
before a Governmental Body to prohibit such transactions, nor shall any
Governmental Body have notified either party to this Agreement that the
consummation of the transactions contemplated hereunder may constitute a
violation of applicable Laws, which notification remains outstanding.
7.3.4. CERTIFICATE. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date, signed by Seller stating that the
representations and warranties of Seller set forth in this Agreement and in the
instruments delivered by Seller to Buyer in connection with this Agreement are
true and correct as of the Closing Date in all material respects and that the
Paxson Termination Date has occurred.
7.3.5. CONSENTS OBTAINED. Seller shall have obtained all
authorizations, consents, approvals, permits, and clearances that are necessary
to consummate the purchase and sale of the Assets and Authorizations
contemplated under this Agreement.
7.3.6. NO MATERIAL ADVERSE CHANGES. No event shall have
occurred since the date of this Agreement that has had or could result in a
Material Adverse Effect.
7.4. CLOSING DOCUMENTS DELIVERED BY SELLER. On the Closing Date,
Seller shall deliver or cause the delivery of the following instruments or items
to Buyer:
7.4.1. Bills of sale and assignments in form reasonably
satisfactory to Buyer, dated the Closing Date, executed by Seller, conveying to
Buyer all of Seller's right, title, and interest in and to all the Assets and
all the Authorizations, pursuant to the terms of this Agreement.
7.4.2. Assignments to Buyer of all leases described in
SCHEDULE 2.1.4 and warranty deeds and other instruments assigning to Buyer in
fee simple all real property described in SCHEDULE 2.1.4, pursuant to the terms
of this Agreement, which assignments, deeds, and instruments Seller agrees shall
be dated the Closing Date, executed by Seller, and in form reasonably
satisfactory to Buyer.
7.4.3. All necessary consents to assignment to Buyer of the
Assets under this Agreement.
7.4.4. The logs and records referred to in Section 2.3 of
this Agreement.
7.4.5. All keys, passcards, and other items, as well as a
list of all passcodes, passwords, combinations, account numbers, and other
information, necessary to access or operate any of the Assets,
71
access any property leased to Seller under leases set forth in SCHEDULES 2.1.2
OR 2.1.4, or access any FCC database to which Seller has or should have access
relating to VACM.
7.4.6. Duly authenticated copies of Seller's corporate
resolutions adopted by Seller's stockholders and directors authorizing the
execution, delivery, and performance of this Agreement by Seller.
7.4.7. A counterpart of the Escrow Agreement, dated the
Closing Date, executed by Seller.
7.4.08. Such other instruments or documents, including
estoppel certificates, Tax clearance certificates, and opinions of Seller's
attorneys, as Buyer may reasonably request to provide to Buyer the full rights
and benefits intended to be granted to Buyer hereunder, as are customary for
transactions of the type contemplated hereunder, or as Buyer's lenders may
reasonably require in connection with such transactions.
7.5. CLOSING DOCUMENTS DELIVERED BY BUYER. On the Closing Date, Buyer
shall deliver or cause the delivery of the following instruments or items to
Seller:
7.5.1. The Purchase Price in accordance with Sections 3.1
and 3.2 of this Agreement.
7.5.2. A counterpart of the Escrow Agreement, dated the
Closing Date, executed by Buyer.
ARTICLE 8. - MISCELLANEOUS
8.1. FINDERS' FEES. Seller represents and warrants to Buyer that no
broker, finder, or similar consultant has been involved with Seller in any
manner in the negotiations leading up to the execution and delivery of this
Agreement. Buyer represents and warrants to Seller that no broker, finder, or
similar consultant has been involved with Buyer in any manner in the
negotiations leading up to the execution and delivery of this Agreement. In no
event shall Buyer or Seller be liable to any broker, finder, or similar
consultant for any fees or similar obligations in connection with the
transactions contemplated hereunder.
8.2. FINAL DEADLINE FOR CLOSING. If the Closing Date has not occurred
on or before the date that is thirty (30) days after the date of this Agreement,
then this Agreement may be terminated by either Buyer or Seller by the giving of
written notice to the other party so long as the terminating party is not then
in material breach hereunder. Except as otherwise expressly permitted under this
Agreement, this Agreement shall not be terminated.
8.3. SELLER'S RIGHT TO TERMINATE. In the event of a material breach
hereunder by Buyer prior to the Closing Date of any Buyer agreement, covenant,
representation, or warranty hereunder, and the continuation of such breach
without cure for a period of fifteen (15) consecutive days following the date on
which Seller shall have given to Buyer written notice of such breach, then
Seller may in its discretion, without releasing Buyer from any liability for
such breach, terminate this Agreement by giving written notice of termination to
Buyer so long as Seller is not then in material breach hereunder. The rights
conferred by the foregoing sentence shall not be exercised unless Seller has
given Buyer fifteen (15) days written notice of the specific nature of such
Buyer breach and Buyer has failed to correct such breach within that period. In
the event of Seller's termination of this Agreement pursuant to this Section
8.3, Seller shall be entitled to all legal and equitable relief that Seller may
have available against Buyer.
8.4. BUYER'S RIGHT TO TERMINATE. In the event of a material breach
hereunder by Seller prior to the Closing Date of any Seller agreement, covenant,
representation, or warranty hereunder, and the continuation of such breach
without cure for a period of fifteen (15) consecutive days following the date on
which Buyer shall have given to Seller written notice of such breach, then Buyer
may in its discretion, by giving written notice of termination to Seller, so
long as Buyer is not then in material breach hereunder, terminate this Agreement
without cost, penalty, or liability on Buyer's part of any kind and without
releasing Seller from any liability for such Seller breach, whereupon Buyer
shall be entitled to all legal and equitable relief that Buyer may have
available against Seller. The rights conferred by the foregoing sentence shall
not be exercised unless Buyer has given Seller fifteen (15) days written notice
of the specific nature of such breach and Seller has failed to correct such
breach within that
72
period. Furthermore, in the event of a breach or threatened breach by Seller of
this Agreement prior to the Closing Date, Buyer shall be entitled to specific
performance of this Agreement, without any requirement for Buyer to post bond or
provide any other security, such requirement, if any, being hereby waived by
Seller.
8.5. NOTICES. All notices and communications hereunder or with respect
hereto shall be deemed to have been duly given to a party when in writing and
(i) actually delivered to such party as follows, or, (ii) if mailed, upon the
third (3rd) day following mailing via certified United States mail, postage
prepaid, addressed to such party as follows, or, (iii) if duly tendered to
Federal Express, or another overnight courier service generally operating and
recognized within the United States, for next business day delivery to such
party, upon the first (1st) business day following such tender to Federal
Express or such other overnight courier service, delivery fee prepaid or charged
to sender, addressed as follows:
If to Seller, to:
ValCom, Inc.
26030 Avenue Hall, Studio #5
Valencia, California 91355
If to Buyer, to:
Eye Span Entertainment Network, Inc.
41 North Mojave Road
Las Vegas, Nevada 89101
Provided, however, that if either party has designated a different address for
itself by ten (10) days prior written notice to the other party pursuant to this
Section 8.5, then, for purposes of notices and communications hereunder to the
designating party, to the last address so designated.
8.6. ASSIGNMENT. This Agreement and Seller's or Buyer's rights or
obligations hereunder shall not be assigned without the prior written consent of
the non-assigning party;
8.7. ENTIRE AGREEMENT. This Agreement, which includes the exhibits and
schedules hereto, if any, sets forth the entire understanding of the parties at
the time of execution and delivery hereof regarding the subject matter hereof,
and all prior agreements between them with respect to the subject matter hereof
shall be of no further force or effect. This Agreement may be amended only by an
instrument in writing executed by both parties.
8.8. HEADINGS AND TABLE OF CONTENTS. The headings and the table of
contents, if any, of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part of this Agreement.
8.9. SURVIVAL. The representations and warranties set forth in this
Agreement and in the other instruments delivered hereunder shall survive the
Closing Date.
8.10. WAIVER. The waiver by either party of any matter provided for
herein shall be in writing in order to be effective and shall not be deemed to
be a waiver of (i) any such matter on any other occasion or (ii) any other
matter.
8.11. NO STRICT CONSTRUCTION. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent. In the event that an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
person or entity by virtue of the authorship of any of the provisions of this
Agreement.
8.12. GOVERNING LAW AND VENUE. This Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
regard to its choice of law rules. Exclusive venue and jurisdiction with respect
to each lawsuit or court action, if any, arising under this Agreement shall be
in the state or
73
federal courts of the State of California, it being understood, however, that
judgments, orders, or decrees resulting from such lawsuits or court actions may
be appealed to or enforced in any competent court.
8.13. BEST EFFORTS. Without in any way limiting their other obligations
hereunder, Buyer and Seller shall act in good faith hereunder and use their best
efforts consistent with commercial reasonableness in the timely performance and
prompt fulfillment of all terms and conditions of this Agreement, in filing the
Application and seeking the FCC Consent, and in bringing about a prompt Closing,
and shall provide such information and execute and deliver such other and
further documents, whether before, at, or after the Closing Date, as may be
reasonably required to carry out their intent as expressed hereunder.
Furthermore, Seller shall use its best efforts consistent with commercial
reasonableness to fulfill as soon as practicable the conditions set forth in
Sections 7.2.6 and 7.3.6 hereof.
8.14. ATTORNEYS' FEES. Notwithstanding anything herein to the contrary,
in the event of commencement of suit by either party with respect to any of the
provisions of this Agreement, the prevailing party in such suit shall be
entitled to receive attorneys' fees and costs that the court in which such suit
is adjudicated may determine reasonable in addition to all other relief granted.
8.15. SEVERABILITY. In the event that any term or provision of this
Agreement is determined to be void, unenforceable, or contrary to law, the
remainder of this Agreement shall continue in full force and effect provided
that such continuation would not materially diminish the benefits of this
Agreement for either party.
8.16. COUNTERPARTS. The parties may execute more than one counterpart
of this Agreement and each fully executed counterpart of this Agreement shall be
deemed an original of this Agreement.
8.17. AUTHORITY OF SIGNATORY. Each individual signing this Agreement
below in a signature block for Buyer or Seller personally represents and
warrants that such individual has full power and authority to execute and
deliver this Agreement on behalf of the entity whose name appears directly above
the signature of such individual in such signature block.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER: BUYER:
VALCOM, INC. EYE SPAN ENTERTAINMENT NETWORK, INC.
By: By:
--------------------------- --------------------------------------
Name: Name:
-------------------------- -----------------------------------
Title: Title:
------------------------- ----------------------------------
74
ASSET PURCHASE AGREEMENT
SCHEDULE 2.1.1
ALL BINGO RIGHT AND EQUIPMENT
PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, FRANCHISES, CONCESSIONS,
ROYALTY AGREEMENTS OR LABOR CONTRACTS, INCLUDING DURATION
The Company has no patent rights. It has the following service marks:
SATELLITE BINGO:
International Class 41 (production and distribution of television game shows)
granted Registration Number 1,473,709 on January 19, 1988 to Satellite Bingo,
Inc. 20 years.
LATINO BINGO:
International Class 41 (production and distribution of television game shows)
applied for on September 24, 1993, by SBI Communications, Inc.
RICO BINGO:
International Class 41 (production and distribution of television game shows)
applied for on September 24, 1993, by SBI Communications, Inc.
C-NOTE:
International Class 41 (production and distribution of television game shows)
applied for on September 24, 1993, by SBI Communications, Inc.
The Company obtained an assignment to a copyright for "The Works," copyright
registrations for Latino Bingo and derivatives: Number PAU 855-931 (June 10,
1986); Number Pau 847-876 (March 11, 1986); Number PAU 788-031 (September 19,
1985); Number PAU 927-410 (November 4, 1986); Number PA 370-721 (February 9,
1988); Number PA 516-494 (January 17, 1991); Number PA 533-697 (January
17,1991); from Satellite Bingo, Inc. to SBI Communications, Inc., dated
September 14, 1993.
The Company applied for registration of copyright of "The Final Round-The
Gabriel Ruelas Story" on December 2, 2000. The Company obtained an assignment of
copyright of "The Life",Txu 744-678 June 12, 1996. The Company obtained a
copyright by assignment of "PCH" Pau 2-040-426 September 12, 1995.
EXHIBIT A
1. BROADCAST AND INTERNET
The Company has experience in the interactive communications and entertainment
fields, which brings together elements of the Internet and World Wide Web. It
has created and broadcast interactive national television programs using
computer technology, proprietary software programs, satellite communications,
and advanced telecommunications systems.
The Company's management believes that its experience in developing and
delivering interactive television programs, as well as its ownership of
proprietary systems and software, provide an advantage in its ability to launch
new entertainment and information programs based on comparable resources.
A. LATINO BINGO & SATELLITE BINGO
INTRODUCTION
75
Latino Bingo and Satellite Bingo are proprietary interactive Bingo games, which
were broadcast by the Company in the past via satellite to participating cable
and television stations. The Company plans to resume expanded broadcasts in the
near future.
The use of telephones for game card distribution makes it possible for home
viewers to also participate in the Company's broadcast programs. The Latino
Bingo program was designed to provide larger jackpots than participating
operations could individually pay, permitting participating cable and broadcast
stations to attract larger viewing audiences, increase profits and attract
commercial sponsors.
OPERATION
In order to play the game each player must be playing a different card or cards.
Latino Bingo has developed a "Super Jackpot Bingo" computer program that can
generate a series of one billion individual cards without duplication. Each card
is unique and all cards are serially numbered to preclude anyone from submitting
a fraudulent cards and/or counterfeiting.
Latino Bingo cards may be obtained by telephone until a specified time. At that
point the Company provides the serial number of cards obtained for that night's
game to its central processing office.
When broadcasts resume, the game will pay the first person that attains Bingo
each broadcast night an advertised cash prize. The prizes will involve a chance
to win $1,000,000 by being the first participant to cover the correct 8 numbers
in 16 calls (the term call referring to the first 16 numbers selected in the
game) or less (the "Quick Pick 8" game) or, guaranteed second prizes of $25,000.
If there is no winner in the $1,000,000 game, the Company will pay the first
person to cover the shaded area or complete the Quick Pick 8 game $5,000. In
addition to the Quick Pick 8 game, the Company will award a $20,000.00 dollar
grand prize to the first person covering an entire card. Cards obtained to play
the Company's 24-hour program will be good for the entire week, including the
Saturday Million Dollar Latino game.
As additional players participate, the Company plans to increase the grand prize
to $50,000.
When the televised game begins, each number being called on the televised show
is also recorded by the master computer. The computer system, by monitoring all
of the cards in play, is able to determine when a Bingo has occurred and provide
the location of the winning card holder. The viewing audience is immediately
shown the image of the winning card.
All games are called at the rate of approximately one Bingo number every 12-15
seconds in order to allow players to play multiple cards. If it is determined
that, based on the cards in play, the call is too fast or too slow, an
adjustment is made.
The national winner will be called during the broadcast by the program's host,
or, may call the Latino Bingo 800 number shown on the program. Upon contact, the
winner will provide the Company's staff with his or her serial number and other
necessary identification, including name and address. The winner is then
instructed on how to claim the prize.
If for reasons beyond the control of Latino Bingo the regular telecast and game
cannot be broadcast, all prize moneys announced for that week will be added to
the jackpot for the next succeeding game. All elements of the broadcast game are
being conducted on the Company web site.
TECHNOLOGY
The Company will use proprietary technologies that enable viewers at home to
participate in Bingo games televised live in specific English speaking Hispanic
markets in the US and Worldwide (local laws permitting).
76
Latino Bingo has a special telephone number, which is an access code to gain
entry into long distance network. Upon dialing the number a caller hears a 45
second message disclosing who the caller has reached, providing information
about Latino Bingo, the caller's options and how to receive Latino Bingo playing
cards by telephone (including the cost and method of billing). A caller must
have a prepaid calling card in order to obtain free Latino Bingo playing cards
via the phone, which must be purchased from the Company. The prepaid calling
card also permits the purchaser to make long distance telephone calls at savings
of up to 70% from regular long distance rates and will provide access to other
services, which the Company plans to make available in the future.
In the event the caller, (who must be 18 or over), wishes to proceed after the
45 second announcement he or she must activate the system. Upon activation by
the caller, the call is automatically switched to the Latino Bingo card
distribution center, and charges for the call begin. The time necessary to
receive three Latino Bingo playing cards by telephone is eight minutes and the
caller is charged $9.00 or $1.00 per minute. The charge for the call is deducted
from the caller's prepaid calling card. The prepaid calling card may be obtained
from the Tele-communications switch via credit cards or by sending in payment to
the Company.
Interactive players will also be able to obtain a strip of three cards FREE of
any charge by sending a stamped, self-addressed envelope to the Company.
The Company has established a winner's hot-line that will allow cardholders to
obtain information concerning winning cards. This will allow players to play and
win even if they didn't have an opportunity to see the show.
The Company also has the ability to receive long distance calls from 65
countries for Latino Bingo playing cards, provided in the same manner as
domestic callers except that service is provided in the predominant language
used in the originating country. The cost for such calls will differ depending
on the country of origin. The Company receives a portion of each call paid,
payment being different in each originating country. International callers can
obtain play information over the Internet.
The Company's software and communications technology eliminates the need and
minimizes the expense related to the printing and distribution of Bingo cards by
permitting viewers to receive up to four "cards" (numbers) by phone; and, allows
its telephone switching network to handle thousands of calls simultaneously,
permitting optimum viewer participation in each game. The use of these
technologies also eliminates the need for live operators.
The Company's production offices and computer center are located at 41 North
Mojave Road, Las Vegas, Nevada, 89101. Each strip of three cards gives the
holder nine chances to win the Super Jackpot Prize.
INTERNET
One of the Company's Web sites are located at www.frontierpalace.com Shopping,
travel, bingo games and other items are currently available.. A club membership
will be required, and membership fee will be $19.95 per month. To gain access to
the site and take advantage of services and games available you must be a
member. All bingo games are free and anyone may acquire free game cards by
sending the Company a request and a Self Addressed Stamped Envelope. Bingo games
will be player 24 hours a day, 7 days a week. Members may play all games
available. Upon winning, the player will be sent an e-mail disclosing the game
number, amount of winnings and be featured in the winner's circle.
1. BROADCAST
INTERACTIVE TECHNOLOGY
A number of important trends support management's belief that the Company is
entering the interactive television programming market at the right time with
the right products. As the phenomenons known as the Internet and the World Wide
Web continue to shape the way people communicate with one another, receive
information and facilitate transactions, a number of events are beginning to
occur.
77
Numerous books and recent articles indicate that people are becoming more
comfortable with services and entertainment offered in the privacy of their own
home through their telephones or personal computers. The World Wide Web is
facilitating this trend by linking homes, offices and entertainment sources into
one big network.
The World Wide Web and its ability to reach tens of millions of consumers is
providing unprecedented opportunities for manufacturers and marketers of
products and services. These companies are being challenged to find ways to use
advanced technology, like interactive technology, to make it easy for consumers
to find out about and purchase their products and services.
Popular examples of interactive technology in the consumer market include
on-line computer services (like America Online and MSN), voice automated
telephone services (like consumer banking and financial services), and at-home
television shopping services (like the Home Shopping Network). The success of
these have convinced management that interactive television programming like
that being offered will be well received by a public that continues to accept
more and more interactive technology into their daily lives.
THE BINGO AND GAMING INDUSTRY
Bingo is derived from as Italian lottery game initiated in 1530, and still held
every Saturday in Italy. It grew throughout Europe over the next two centuries.
In 1929, a game called "Beano" was played at a carnival near Atlanta, Georgia.
The game was played with dried beans, a rubber number stamp and some cardboard.
Players won when they filled a line of numbers on their card.
The game of "Bingo" moved to New York, and quickly spread up and down the East
Coast. By 1934, an estimated 10,000 bingo games were played every week. In 1996,
approximately $6 Billion was spent on active bingo in North America alone. There
are 64,000 charitable bingo centers in North America with over 60,000
organizations licensed to operate bingo. Bingo is the most accepted form of
gaming by the public. There are approximately 60 millions people who visit a
bingo facility each month and spend an average of $18.00 per visit. Bingo is
expected to maintain or possibly increase its market share of total gaming
industry receipts consistent with an aging U.S. population, which has more
disposable income and time and enjoys playing bingo more than other age groups.
Management believes that the past success of the Company's interactive bingo
programs is evidence that the game is as popular as ever among people around the
world. Recent statistics generated by the United States government seem to
strongly support this belief. According to a recent survey of American Gambling
Attitudes and Behavior conducted by the United States Commission on the Review
of a National Policy Toward Gambling, bingo is the fourth leading "entertainment
sport" in the United States, generating some 60,000,000 spectators and/or
participants each month. A $7 billion dollar industry. This figure represents
7.3 million more participants/spectators than Major League Baseball attracts and
almost 40 million more participants/spectators than attracted by NFL Football
and NBA Basketball.
The survey also shows that the game has equal appeal among genders.
Approximately 30% of bingo players have an income of $25,000 and over, and bingo
players are more likely to use their leisure time by doing indoor activities
such as reading books, newspapers and magazines.
As Americans become older as a population and choose to spend more time at home,
management believes that interactive television programs like those it plans to
offer will increase in popularity. Current statistics indicate that persons 65
and older that play Bingo play the game at least once a week.
These research findings and past experience support management's belief that
bingo is as popular as ever and that there is a viable market opportunity for
the Company's nationally and internationally interactive broadcast programs
THE COMPANY'S COMPETITIVE POSITION
BROADCAST BINGO
78
The Company competes with all broadcast game shows and, more generally, all
types of broadcast promotions designed to increase audience share and
advertising revenues. Management is not aware of any nationally broadcasted
bingo shows. Some locally-originated shows exist in various locations.
Management believes, without assurance, that it has a competitive edge over
other broadcast bingo promotions since Ron Foster originated the concept and has
been promoting it since 1984. Management believes that the Company has
established a reputation of equitable and complete service to the broadcast and
gaming industry.
With respect to game shows and other types of broadcast promotion, management
believes that the simplicity of the bingo game and its mass audience appeal
enables the Company to successfully compete with other game shows.
1. LATINO BINGO
INTRODUCTION
Latino Bingo and Satellite Bingo are proprietary interactive Bingo games
which were broadcast by the Registrant in the past via satellite to
participating cable and television stations. The Registrant plans to resume
expanded broadcasts in the near future, when it repairs required telephone
switching equipment.
There are two methods of distribution which makes it possible for home
viewer to participate and win the announced prizes. First through participating
sponsors by purchasing the game cards through a advertising package for traffic
generation and giving the game cards to their customer base. Second the use of
telephones for game card distribution making it possible for home viewers to
also participate in the Registrant's broadcast programs. The Latino Bingo
program was designed to provide larger jackpots than participating operations
could individually pay, permitting participating cable and broadcast stations to
attract larger viewing audiences, increase profits and attract commercial
sponsors.
A broadcast took place on October 25, 2003 and each Saturday thereafter
until the end of 2003 at which time the program was suspended to move the
broadcast to Las Vegas to broadcast live from a local casino. Future plans
include expanding the game to other week nights. The game was broadcast over
Telemundo Television Network and weekly broadcasts are expected to resume during
the second quarter of 2004.
OPERATION
In order to play the game each player must be playing a different card or
cards. Latino Bingo has developed a "Super Jackpot Bingo" computer program that
can generate a series of one billion individual cards without duplication. Each
card is unique and all cards are serially numbered to preclude anyone from
submitting a fraudulent cards and/or counterfeiting.
Latino Bingo cards may be obtained by telephone until a specified time. At
that point the Registrant provides the serial number of cards obtained for that
night's game to its central processing office.
In order to encourage participation and to develop a broad playing
audience, Latino Bingo developed a special Million Dollar Latino game, designed
to air each Saturday evening at 11:00 a.m. (Pacific Time). The first broadcast
took place on October 25, 2003 over the Telemundo Television Network produce at
the Telemundo Broadcast facility in Palm Desert, California.
79
When broadcasts resume, the game will pay the first person who attains
Bingo each broadcast night an advertised cash prize. The prizes will involve a
chance to win $10,000 by being the first participant to cover the correct 8
numbers in 16 calls (the term call referring to the first 16 numbers selected in
the game) or less (the "Quick Pick 8" game) or, guaranteed second prizes of
$1,000. If there is no winner in the $10,000 game, the Registrant will pay the
first person to cover the shaded area or complete the Quick Pick 8 game $1,000.
In addition to the Quick Pick 8 game, the Registrant will award a $2,500.00
dollar grand prize to the first person covering the four corners of the card.
Cards obtained to play the Registrant's 24 hour program will be good for the
entire week, including the Saturday Latino game.
As additional players participate, the Registrant plans to increase the
grand prize to $25,000.
When the televised game begins, each number being called on the televised
show is also recorded by the master computer. The computer system, by monitoring
all of the cards in play, is able to determine when a Bingo has occurred and
provide the location of the winning card holder. The viewing audience is
immediately shown the image of the winning card.
All games are called at the rate of approximately one Bingo number every
6-9 seconds in order to allow players to play multiple cards. If it is
determined that, based on the cards in play, the call is too fast or too slow,
an adjustment is made.
The national winner will be called during the broadcast by the program's
host, or, may call the Latino Bingo toll free (866) number shown on the program.
Upon contact, the winner will provide the Registrant's staff with his or her
serial number and other necessary identification, including name and address.
The winner is then instructed on how to claim the prize.
If for reasons beyond the control of Latino Bingo the regular telecast and
game cannot be broadcast, all prize moneys announced for that week will be added
to the jackpot for the next succeeding game.
TECHNOLOGY
The Registrant will use proprietary technologies that enable viewers at
home to participate in Bingo games televised live in specific Hispanic and
English speaking markets in the US and Worldwide (local laws permitting).
Latino Bingo will have a special telephone number, which is an access code
to gain entry into long distance network. Upon dialing the number a caller hears
a 45 second message disclosing who the caller has reached, providing information
about Latino Bingo, the caller's options and how to receive Latino Bingo playing
cards by telephone (including the cost and method of billing). A caller must
have a prepaid calling card in order to obtain free Latino Bingo playing cards
via the phone, which must be purchased from the Registrant. The prepaid calling
card also permits the purchaser to make long distance telephone calls at savings
of up to 70% from regular long distance rates and will provide access to other
services which the Registrant plans to make available in the future.
In the event the caller, (who must be 18 or over), wishes to proceed after
the 45 second announcement he or she must activate the system. Upon activation
by the caller, the call is automatically switched to the Latino Bingo card
distribution center, and charges for the call begin. The time necessary to
receive three Latino Bingo playing cards by telephone is eight minutes and the
caller is charged $9.60 or $1.20 per minute. The charge for the call is
80
deducted from the caller's prepaid calling card. The prepaid calling card may be
obtained from the tele-communications switch via credit cards or by sending in
payment to the Registrant.
Interactive players will also be able to obtain a game card free of any
charge by sending a stamped, self addressed envelope to the Registrant.
The Registrant has established a winners hot-line that will allow card
holders to obtain information concerning winning cards. This will allow players
to play and win even if they didn't have an opportunity to see the show.
The Registrant also has the ability to receive long distance calls from 65
countries for Latino Bingo playing cards, provided in the same manner as
domestic callers except that service is provided in the predominant language
used in the originating country. The cost for such calls will differ depending
on the country of origin. The Registrant receives a portion of each call paid,
payment being different in each originating country. International callers can
obtain play information over the internet.
The Registrant's software and communications technology eliminates the need
and minimizes the expense related to the printing and distribution of Bingo
cards by permitting viewers to receive "cards" (numbers) by phone; and, allows
its telephone switching network to handle thousands of calls simultaneously,
permitting optimum viewer participation in each game. The use of these
technologies also eliminates the need for live operators.
The Registrant's production offices and computer center are located at 41
North Mojave Road, Las Vegas, Nevada 89101. Its phone number is (702) 651-9100.
Each card gives the holder three chances to win the announced Prize.
REQUIRED GOVERNMENT APPROVALS FOR PRODUCTS OR SERVICES
The Registrant has requested several law firms to investigate the legal
parameters for its operations, and has also reviewed several legal opinions
provided to other companies offering gaming related programming. In conjunction
with such research, the Registrant has compiled the following information.
Copies of the opinions summarized below are filed as exhibits to this
registration statement. The following summaries thereof are qualified in their
entirety by reference to such exhibits.
Fletcher, Heald & Hidreth advised the Registrant's president by letters
dated March 19 and April 10, 1992 (referencing communications with Cynthia
Young, Assistant Chief, Support of Litigation, ORGANIZED CRIME AND RACKETEERING
SECTION OF THE CRIMINAL DIVISION, UNITED STATES DEPARTMENT OF JUSTICE)
concerning the applicability of 18 USC Sections 1084, 1301, 1302, 1304, 1952,
1953, 1955 and 1962 to the Company's proposed programs. They noted that 18 USC
1307 and 25 USC 2720 provide exemptions from the restrictions reflected in
Sections 1301, 1302, 1303 and 1304; however, the firm opined that such
exemptions would not apply to the proposed programming. The letters discussed
certain observations of Edythe Wise, CHIEF OF THE COMPLAINTS AND INVESTIGATIONS
BRANCH OF THE ENFORCEMENT DIVISION OF THE MASS MEDIA BUREAU, FEDERAL
COMMUNICATIONS COMMISSION, in which, based on stated assumptions concerning the
proposed operations (including the encrypted nature of distribution) the staff
opined that the program as described did not involve a broadcast to the public,
and thus would not invoke the prohibitions of 18 USC 1304. Noting that
consideration could not flow from the player to
81
the promoter, the author indicated that the proposed programs did not appear to
violate federal law unless they violated a state law as well. No opinions were
provided as to state law implications.
In correspondence between the Federal Communications Commission and
Putbrese, Hunsaker & Ruddy, dated September 14, 1990 through February 11, 1991,
the Federal Communications Commission issued a declaratory ruling on the
legality of advertising interactive bingo games on cable systems. It found that
if such games provide persons interested in participating with an option to play
for $2.00 per call over a 900 line, or for free, after obtaining a personal
identification number, over 800 lines, the program would not appear to violate
applicable Federal Communications Commission regulations.
Based on correspondence between Sutherland, Asbill & Brennan and the
Federal Communications Commission, from July 28, 1986, until some undetermined
time in 1987, Edythe Wise, CHIEF, COMPLAINTS AND INVESTIGATIONS BRANCH,
ENFORCEMENT DIVISION, MASS MEDIA BUREAU, FEDERAL COMMUNICATIONS COMMISSION,
opined that the proposed activities would conform the Federal Communications
Commission decision dated November 25, 1986 and reported at 2 Federal
Communications Commission Rcd 1001 (1987). The program described involved free
participation by players, who were eligible to receive cash and other prizes,
through cable companies as a basic (no charge) service, including paid
commercials; and, a pay per view cable program. Ms. Wyse opined that both
methods appeared legal in that the first involved no consideration, and the
second involved non-public broadcast.
An opinion letter dated December 15, 1987, from Chamberlain, Hardlicka,
White, Johnson & Williams, to Travis Enterprises, Inc., regarding a "Million
Dollar Bingo Game" originating on sovereign Indian reservations and transmitted
by encrypted closed circuit television and telephone lines to bingo halls, also
on sovereign Indian reservations, reflects that applicable legal issues involve
jurisdiction over Indian affairs, federal and state anti-gaming laws, and,
statutes and regulations governing mail, wire, television and radio
communication. The opinion noted that a number of federal criminal statutes
outlaw gaming activities prohibited under state laws and could technically
impact the proposed game; however, it notes that a DEFACTO exception appears to
have been carved out for high stakes bingo games, making the issue unclear. It
notes that licenses from the Federal Communications Commission and Department of
the Interior (Indian Affairs) will probably be required and that safe harbor
negotiations in such licensing proceedings would be prudent. The opinion
concludes that federal pre-emption of regulation over Indian affairs, as well as
over wire, radio and television communications will, in most cases, preclude
application of state regulatory legislation. However, it notes that the effect
of certain federal statutes and regulations require careful consideration in
structuring and implementing the proposed operations to maintain special bingo
related exceptions.
An opinion letter dated July 28, 1987, from Ginsburg, Feldman and Bress to
the Bingo Network, Inc., involving planned satellite transmission of Bingo games
between Indian reservations addressed applicable federal law and concluded that
such game is legally permissible.
Opinion letters to Ron Foster, the Registrant's president, from Sutherland,
Asbill & Brennan dated July 11 and 15, 1986, dealt with the legality of a
program involving free participation by players, who were eligible to receive
cash and other prizes, through cable companies as a basic (no charge) service,
including paid commercials; and, a pay per view cable program. The opinion
concluded that the free cable access program would be permissible but further
questions about pay per view aspect.
82
In a letter involving the Registrant's C-Note game, dated June 18, 1993,
the State of Nebraska discussed a prohibition under Nebraska Statute Section
9-701(1(a) to the offer of games of Bingo and keno in Nebraska, but noted that
such statute would not appear to prohibit the broadcast of the games into
Nebraska, or, the location in Nebraska of telephone banks involving offers of
the games outside of Nebraska.
An opinion letter issued by Wiley, Rein & Fielding (Washington, D.C.) on
November 16, 1995, addressed the probable legality of the Registrant's
pay-per-view Bingo projects. The opinion was limited to certain federal statutes
(18 U.S.C. Sections 1084, 1301, 1302, 1304, 1307; 1951-1968; and, 25 U.S.C.
Section 2720) and to Federal Communications Commission regulations. The opinion
concluded that, under the specific circumstances described, the proposed
activities did not appear to violate the prohibition against gaming activities
contained in the cited federal statutes or the regulations promulgated
thereunder.
NONE OF THE AUTHORS OF THE FOREGOING OPINIONS OR THE GOVERNMENT PERSONNEL
WITH WHOM THEY DEALT HAVE CONSENTED TO THE USE THEREOF IN THIS REGISTRATION
STATEMENT, THEREFORE, SUCH PERSONS SHOULD NOT BE DEEMED EXPERTS ON WHICH
INVESTORS MAY RELY. RATHER, SUCH OPINIONS MERELY FORM THE BASIS FOR THE DECISION
BY THE REGISTRANT'S MANAGEMENT THAT THE REGISTRANT CAN LEGALLY CONDUCT ITS
CURRENT ACTIVITIES. BECAUSE NEITHER THE FOREGOING OPINIONS OR OBSERVATIONS BY
GOVERNMENT PERSONNEL ARE BINDING, NO ASSURANCES CAN BE PROVIDED THAT, AT SOME
FUTURE TIME, GOVERNMENT PERSONNEL WILL NOT REACH DIFFERENT CONCLUSIONS, TO THE
REGISTRANT'S DETRIMENT.
83
ASSET PURCHASE AGREEMENT
SCHEDULE 2.1.2
TELEVISION AND FILM PRODUCTION DIVISION
The rise of co-productions and specialty programming for many cable and
broadcast markets continues to drive significant growth in television
production. The Television & Film Production/Distribution division will endeavor
to retain ownership and control distribution of its developed properties in
order to build the asset library of its content-based divisions:
THE COMPANY'S LIBRARY HAS 143 FILMS AND 10 TV SERIES THAT ARE READY FOR
WORLDWIDE DISTRIBUTION, AND SEVERAL MAJOR SERIES THAT ARE EITHER IN PRODUCTION
OR DEVELOPMENT. THESE INCLUDE:
1. ABILENE TOWN 1946 BW
2. ADMIRAL WAS A LADY 1950 BW
3. ALGIERS 1938 BW
4. ALICE SWEET ALICE 1977 CO
5. AMBASSADOR'S DAUGHTER 1956 CO
6. ANGEL ON MY SHOULDER 1946 BW
7. ANGRY BREED, THE 1969 CO
8. ARIZONA KID 1939 BW
9. AS YOU LIKE IT 1936 BW
10. BABY & THE BATTLESHIP 1957 CO
11. BARON, THE 1977 CO
12. BATTLE OF THE EAGLES 1981 CO
13. BATTLE OF THE STARS 1979 CO
14. BEHAVE YOURSELF 1951 BW
15. BELLS OF SAN ANGELO 1947 CO
16. BENEATH THE TWELVE MILE REEF 1953 CO
17. BETWEEN THE LINES 1977 CO
18. BIG CAT, THE 1949 CO
19. BIG LIFT, THE 1950 BW
20. BIG TREES, THE 1952 CO
21. BIG WHEEL, THE 1949 BW
22. BLOOD ON THE SUN 1945 BW
23. BORDERLINE 1950 BW
24. CAIN'S CUTTHROATS 1959 CO
25. CAPTAIN KIDD 1945 BW
26. CAPTAIN SCARLETT 1953 CO
27. CAPTAIN SIRROCO 1949 BW
28. CARNIVAL STORY 1954 CO
29. CATHERINE THE GREAT 1934 BW
30. CHEERS FOR MISS BISHOP 1941 BW
31. CHILDREN OF SANCHEZ, THE 1978 CO
32. CYRANO DE BERGERAC 1950 BW
33. D.O.A. 1949 BW
34. DANIEL BOONE, TRAILBLAZER 1956 BW
35. DECAMERON NIGHTS 1953 CO
36. DELIGHTFULLY DANGEROUS 1945 BW
37. DEMENTIA 13 1964 BW
84
38. DEMONIOD 1981 CO
39. DIAMOND THIEVES (AKA THE SQUEEZ) 1980 CO
40. DINNER AT THE RITZ 1937 BW
41. DISHONORED LADY 1947 BW
42. DIVORCE OF LADY X 1938 CO
43. DRUMS OF THE DEEP SOUTH 1949 CO
44. ELIZABETH OF LADYMEAD 1949 CO
45. ETERNALLY YOURS 1939 BW
46. FALLEN IDOL, THE 1949 BW
47. FAREWELL TO ARMS, A 1932 BW
48. FEAR IN THE NIGHT 1973 CO
49. FINAL JUSTICE 1984 CO
50. FLYING DEUCES, THE 1939 BW
51. FOUR DUECES, THE 1975 CO
52. GIRLS AT SEA 1958 CO
53. GOD'S GUN 1973 CO
54. GORILLA, THE 1942 BW
55. GREAT DAN PATCH, THE 1949 BW
56. GREEN GLOVE, THE 1952 BW
57. GREEN GROW THE RUSHES 1951 BW
58. GREGORIO AND THE ANGEL 1968 CO
59. GUILTY OF TREASON 1949 BW
60. GUNG HO 1943 BW
61. HAIRY APE, THE 1944 BW
62. HANGMEN ALSO DIE 1943 BW
63. HAPPY GO LOVELY 1951 CO
64. HE WALKED BY NIGHT 1948 BW
65. HEIDI 1968 CO
66. HIGH COMMAND 1938 BW
67. IMMORTAL BATTILION 1944 BW
68. IN HOT PURSUIT 1976 CO
69. JACK LONDON 1943 BW
70. JAMAICA INN 1939 BW
71. JOE LOUIS STORY, THE 1953 BW
72. JULIUS CAESAR 1970 CO
73. KANSAN, THE 1943 BW
74. KANSAS CITY CONFIDENTIAL 1952 BW
75. KANSAS PACIFIC 1953 CO
76. LETTER OF INTRODUCTION 1938 BW
77. LIFE WITH FATHER 1947 CO
78. L'IL ABNER 1940 BW
79. LITTLE LORD FAUNTLEROY 1936 BW
80. LITTLE PRINCESS, THE 1939 CO
81. LONG JOHN SILVER 1954 CO
82. LOST HONEYMOON 1947 BW
83. LOVE LAUGHS AT ANDY HARDY 1947 BW
84. MASSACRE AT FORT HOLMAN 1974 CO
85. MEET JOHN DOE 1941 BW
86. MISSLE TO THE MOON 1959 BW
87. MOHAWK 1956 CO
88. MOON RAINBOW 1981 CO
89. MR. IMPERIUM 1952 BW
90. MR. SCARFACE 1978 CO
85
91. MY DEAR SECRETARY 1948 BW
92. MY PAL TRIGGER 1946 BW
93. MY SISTER MY LOVE 1978 CO
94. NICHOLAS NICKELBY 1947 BW
95. NIGHT OF THE LIVING DEAD 1968 BW
96. NIGHT TRAIN TO MUNICH 1940 BW
97. OF HUMAN BONDAGE 1934 BW
98. OLIVER TWIST 1933 BW
99. ON THE TOWN 1950 CO
100. OPEN CITY 1946 BW
101. OUTLAW, THE 1949 BW
102. PALOOKA 1934 BW
103. PANIC IN THE CITY 1968 CO
104. PARIS EXPRESS, THE 1953 CO
105. PENNY SERENDADE 1941 BW
106. PERILS OF PAULINE 1947 CO
107. PIED PIPER OF HAMELIN, THE 1957 CO
108. PRIVATE LIFE OF HENRY VIII, THE 1933 BW
109. PROJECT KILL 1977 CO
110. PROUD AND THE DAMNED, THE 1972 CO
111. QUICKSAND 1950 BW
112. RAGE AT DAWN 1955 CO
113. RAGE OF PARIS 1938 BW
114. RAIN 1932 BW
115. RED HOUSE, THE 1947 BW
116. RIDE THE HIGH WIND 1967 CO
117. RING, THE 1952 BW
118. ROYAL WEDDING, A 1951 CO
119. SALT OF THE EARTH 1953 BW
120. SANTE FE TRAIL 1940 BW
121. SECOND WOMAN, THE 1951 BW
122. SHERLOCK HOLMES & THE SECRET WEAPON 1942 BW
123. SIDEWALKS OF LONDON 1938 BW
124. SON OF MONTE CRISTO, THE 1940 BW
125. SPANISH GARDENER, THE 1956 CO
126. STATE DEPT. FILE #649 1949 CO
127. STRANG LOVE OF MARTHA IVERS 1946 BW
128. STRANGER, THE 1946 BW
129. SUBTERFUGE 1969 CO
130. SUDDENLY 1954 BW
131. SUNDOWN 1942 BW
132. SUNDOWNERS, THE 1950 CO
133. TERROR, THE 1963 CO
134. THAT UNCERTAIN FEELING 1941 BW
135. THEY MADE ME A CRIMINAL 1939 BW
136. THINGS TO COME 1936 BW
137. THREE CAME HOME 1950 BW
138. TULSA 1949 CO
139. UNDER CALIFONIA STARS 1948 BW
140. VENGENCE IS MINE 1975 CO
141. VENGENCE VALLEY 1951 CO
142. WATERFRONT 1950 BW
143. WE DIVE AT DAWN 1943 BW
86
ASSET PURCHASE AGREEMENT
SCHEDULE 2.1.3
JOINT VENTURE AGREEMENT WITH NEW GLOBAL COMMUNICATIONS, INC. - VALCOM
BROADCASTING, LLC
In May 2002, VACM entered into a joint venture agreement with New Global
Communications, Inc. ("Global") whereby Global agreed to contribute $500,000 to
the joint venture in exchange for a 55% equity interest in a new entity known as
ValCom Broadcasting, LLC, a New York limited liability company, and VACM would
contribute certain fixed assets and manage the operations of the joint venture
for a 45% equity interest in ValCom Broadcasting, LLC. The joint venture
operates a newly developed low power television broadcast station K08MX-LP in
Indio-Palm Springs, California operating on Channel 8. VACM believes that the
investment in the joint venture adds to the Company's infrastructure of becoming
a full-service television and motion picture company. The amount contributed to
the joint venture by Global will be used to purchase the license for the
television station from the licensee. The effectiveness of the joint venture
agreement was dependent on approval by the Federal Communications Commission
(the "FCC"). On September 20, 2002, the FCC approved the transaction.
CHANNEL 8 IN PALM SPRINGS, CALIFORNIA
In connection with its joint venture with New Global Communications, Inc., VACM
owns a 45% equity interest in ValCom Broadcasting, LLC, a New York limited
liability company, which operates KVPS (Channel 8), an independent television
broadcaster in the Palm Springs, California market, which is strategically
located in the middle of four major markets including Los Angeles, Phoenix, Las
Vegas and San Diego.
The Company plans to acquire additional television stations and utilize the
infrastructure of full-service television and motion picture studios. This would
enable Channel 8 to operate at a fraction of the cost compared to other
broadcasters in the market.
TELEVISION STATION DIVISION
On March 25, 2002, ValCom agreed to acquire the assets of KVPS (Channel 8), an
independent broadcaster in the Palm Springs, CA market. Currently a PAX
affiliate, ESEN intends to re-format the programming to include entertainment,
sports and local news. The plan is to consolidate TV stations in high-growth
secondary cities with Channel 8 being the initial acquisition. By utilizing the
Company's production and studio assets, Channel 8 as well as future acquired
stations, can generate higher profit margins. The Palm Springs TV advertising
market is $20 million strong and Channel 8 anticipates obtaining a significant
share of that market. ESEN joined with a group of outside investors who have
supplied the capital for the Channel 8 acquisition in exchange for a 55%
ownership interest in the station.
The Company intends to acquire six additional low-power television stations
(LPTV) in the course of 3 years. In many parts of the country with high
population urban areas the demand for television stations exceeds the frequency
capacity, given the interference restrictions, and LPTV solves the problem. LPTV
stations principally serve urban areas with populations substantial enough to
provide enough viewers and potential customers to make advertising worthwhile
for businesses wanting to sell products or services in the area. ESEN's business
strategy is to purchase LPTVs located in areas on the outskirts of major
metropolitan areas or in growing midsize markets.
87
ASSET PURCHASE AGREEMENT
SCHEDULE 2.1.4
10% OF THE LAS VEGAS STUDIOS LOCATED AT 41 NORTH MOJAVE ROAD, LAS VEGAS, NEVADA
89101 THE REAL ESTATE WAS PURCHASED BY VALCOM, INC. (VACM) FOR $4,000,000.
88