Document:

Exhibit 10.2

 

OPTION AGREEMENT

 

RECITALS

 

                1.  This Agreement is entered into as of this 1st
day of August, 2007, by and between Able Radio Corporation (“Permittee”), a
Texas corporation, whose place of business is at 2801 Via Fortuna Drive, Suite 675,
Austin, Texas  78746, and Matinee Media Corporation (“Option
Holder”), a Texas corporation, whose place of business is at 2801 Via Fortuna
Drive, Suite 675, Austin, Texas 
78746.

 

                2.  Permittee holds or expects to hold a
construction permit issued by the Federal Communications Commission (“FCC”) for
the new FM radio station more fully described on Exhibit A attached
hereto (the “Station”).  Option Holder
desires to have the right to acquire the Station including, if applicable, any
related Station Assets (defined below), and Permittee is willing to grant
Option Holder an option to acquire the construction permit or other FCC
authorization for the Station and any related Station Assets, after the
applicable construction permit has been granted, and subject to the prior
consent of the FCC.

 

AGREEMENT

 

                3.  Now, therefore,
in consideration of the mutual promises and covenants herein exchanged, and for
other good and valuable consideration, the parties agree as follows:

 

Option Holder’s Option

 

                4.  Permittee hereby grants Option Holder an
exclusive option to acquire its FCC authorization for the Station, subject to
the prior approval of the FCC, in exchange for the sum of one million six
hundred fifty-nine thousand dollars ($1,659,000.00) (the “Purchase Price”).  Upon execution of this Agreement, Option
Holder will pay to Permittee the sum of ten dollars ($10.00) (the “Option Price”),
by certified or cashier’s check or wire transfer, for the exclusive right to
purchase the Station for the Purchase Price. 
Permittee agrees that it may not assign or sell the Station or the
Station Assets to any third party without Option Holder’s prior written
consent.  Such consent will not be
unreasonably withheld, but will require that the assignee or purchaser also
assumes Permittee’s obligations under this Agreement pursuant to Paragraph 13
hereof.

 

                5.  This option shall also include the right to
acquire all tangible and intangible assets used or held by Permittee for use in
the operation of the Station, including without limitation the equipment,
contracts, leases and the goodwill of the business of the Station (“Station
Assets”), free and clear of liens, claims and encumbrance, in exchange for
reimbursement of the actual out-of-pocket expenses incurred by Permittee as
contemplated in Section 7(b)(ii).

 

                6.  Permittee
will notify Option Holder within two business days after Permittee is granted a
construction permit by the FCC for the Station. 
Option Holder may exercise its option to purchase the Station and, if
applicable, the Station Assets by giving written notice to Permittee 

 

 

during a period
commencing one day after the grant of the construction permit and expiring five
(5) years thereafter.  Upon Option
Holder’s giving notice of exercise of its option, the parties will cooperate in
preparing and filing the necessary application for FCC consent, which will be
filed within twenty (20) days after Option Holder’s notice.  Each party will pay its own legal expenses
relating to the assignment application, and the FCC filing fee will be paid by
Option Holder.  Both parties will
prosecute the assignment application in good faith and will not knowingly take
any action or fail to take any action so as to jeopardize FCC approval of the
assignment except pursuant to the rights of termination set forth in Paragraph
12 hereof.  FCC consent to the
assignment application without any material adverse conditions other than those
of general applicability is referred to herein as the “FCC Consent.”  Buyer and Seller shall diligently prosecute the
FCC Application and otherwise use their commercially reasonable efforts to
obtain the FCC Consent as soon as possible after Option Holder’s exercise of
its option hereunder.  The FCC Consent
and other FCC actions described in this Agreement shall be “final” at such
times as any such action (i) has not been vacated, reversed, stayed, set
aside, annulled or suspended, (ii) is one with respect to which no timely
appeal, request for stay or petition for rehearing, reconsideration or review
by any party or by the FCC on its own motion, is pending, and (iii) is one
as to which the time for filing any such appeal, request, petition or similar
document or for the reconsideration or review by the FCC on its own motion
under the Communications Act of 1934, as amended, has expired.

 

                7.  Closing on the assignment of the Station, and
if applicable the Station Assets, will be held at a time and place mutually
agreed to by the parties within five (5) business days after the
FCC Consent becomes final (as defined above), provided that, at Option Holder’s
sole option, the Closing may occur at an earlier date which is after the grant
of the initial FCC Consent but prior to finality of that consent. 
At the closing:

 

                a.  Permittee will assign and convey to Option
Holder, and will execute any documents required to do so:  the FCC construction permit or license for
the Station, any other governmental authorizations associated with the Station,
all of its right, title and interest in the call sign for that Station, and the
Station Assets, all free and clear of any lien or encumbrance of any kind.

 

                b.  Option Holder will pay to Permittee cash, by
certified or cashier’s check or wire transfer, in the amount of the sum of (i) the
Purchase Price; (ii) the actual out-of-pocket legal and other expenses,
including financing costs, incurred by Permittee prior to closing related to (A) processing
and prosecuting the FCC construction permit or license for the Station, (B) the
“build out” of the Station, including the purchase of the Station Assets or (C) the
assignment application with the FCC; and (iii) the portion, if any, of any
bidding credit that was received by Permittee when it purchased the FCC
construction permit for the Station which Permittee must repay to the FCC prior
to or as a result of the assignment of the Station hereunder, whether due to
the existence of this Agreement, the status of the assignee, the passage of
time or otherwise.

 

                c.  The parties will deliver to each other such
other documents and will take such other actions as may be appropriate to
fulfill the intent of this Agreement.

 

2

 

                8.  Compliance by Permittee with Paragraphs 7(a) and
(c) hereof will be a condition precedent to Option Holder’s obligation to
proceed at the closing.  Compliance with
Paragraphs 7(b) and (c) hereof by Option Holder will be a condition
precedent to Permittee’s obligation to proceed at the closing.

 

                9.  Prior to the closing, the operation and
control of the Station will be the sole right and responsibility of
Permittee.  After the closing, operation
and control of the Station will become the sole right and responsibility of
Option Holder, and Permittee will not directly or indirectly attempt to exercise
any control over the Station.

 

Warranties

 

                10.  Permittee hereby warrants that it was the
high bidder on the construction permit for the Station at an FCC auction; it
expects the construction permit to be granted in due course and to Permittee’s
knowledge there have been no objections to the grant of the construction permit
by the FCC or any third party; it is not subject to any FCC inquiry or
investigation to Permittee’s knowledge; that no consent is required by any
third party as a condition precedent to its execution of this Agreement; that
this Agreement is duly executed and delivered and is enforceable according to
its terms; that Permittee is a corporation duly organized and in good standing
under the laws of the State of Texas; and that any required corporate action
has been taken to enter into and to fulfill the terms and conditions of this
Agreement.

 

                11.  Option Holder hereby warrants to Permittee
that it is a corporation duly incorporated and in good standing under the laws
of the State of Texas; that any required corporate action has been taken to
enter into and to fulfill the terms and conditions of this Agreement; that no
consent is required by any third party as a condition precedent to its
execution of this Agreement; that this Agreement is duly executed and delivered
and is enforceable according to its terms; and that it knows of no reason why
it is not legally, financially, technically, and otherwise fully qualified to
become the permittee or licensee of the Station.

 

                Termination

 

                12.  This Agreement may only be terminated by
either party as follows:

 

                a.  If the FCC designates any assignment or other
application pertaining to the Station for hearing at any time for any reason,
or if the FCC has not acted on the assignment application within eighteen (18)
months after it is filed, or if a grant of the assignment application has not
become final and beyond administrative or judicial review within twenty-four
(24) months after it is filed, then Option Holder may immediately dismiss the
assignment application and terminate all aspects of this Agreement with respect
to the Station without any liability to Permittee.

 

                b.  If the Station’s FCC authorization is revoked
or not renewed for any reason, effective at such time as the Station is
required to cease operation, provided, however, 

 

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that such an event will under no circumstances be deemed a default
hereunder by Permittee that leads to any liability by Permittee to Option
Holder.

 

                c.  If the other party is in default under this
Agreement, non-material defaults excluded, and such default is not cured by the
defaulting party with 30 days after receiving written notice of such default
from the non-defaulting party.

 

                d.  If any reinterpretation of this Agreement,
pursuant to Paragraph 21 hereof, to be consistent with FCC Rules and
Regulations and policy or any law or governmental order, would result in a
substantial change in the intent of the parties as to their respective economic
benefits and obligations hereunder that is reasonably deemed by the terminating
party to be materially detrimental to its interests.

 

Assignment

 

                13.  This Agreement may not be assigned by either
party except as follows:

 

                a.  Permittee may assign all its rights hereunder
to any legal entity that becomes the licensee of the Station and also assumes
all of Permittee’s obligations (including but not limited to Option Holder’s
option) under this Agreement, provided, however, that Permittee will guaranty such entity’s
performance under this Agreement.

 

                b.  Option Holder may assign all its rights
hereunder to any legal entity that also assumes all of Option Holder’s
obligations under this Agreement.  Option
Holder may also grant a security interest in its rights under this Agreement to
any legal entity.

 

Miscellaneous Provisions

 

                14.  Permittee acknowledges the unique value of
the Station to Option Holder. 
Accordingly, in the event of adjudication of a dispute relating to this
Agreement, Permittee agrees that Option Holder, subject to obtaining any requisite
approval of the FCC, may seek an order of specific performance from a court of
competent jurisdiction to enforce its option to acquire the Station, provided, however, that
specific performance, if granted, will be in lieu of monetary damages.

 

                15.  So long as this Agreement remains in effect,
Option Holder and Permittee will each notify and furnish the other with a copy,
within five (5) days of receipt from the FCC, of any Notice of Violation
or other inquiry or notification from the FCC or any other governmental
authority relating to any program material broadcast over the Station or any
other aspect of Station operation.

 

                16.  Unless otherwise provided herein, this
Agreement will be binding on, and inure to the benefit of, the heirs,
successors, and assigns of each party.

 

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                17.  Any notices under this Agreement will be in
writing and effective if given by first class or more rapid class of United
States mail, postage prepaid, and evidenced by a postal delivery receipt, at
the addresses first hereinabove set forth, or as otherwise specified by either
party from time to time.

 

                18.  This Agreement represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior written, or prior or contemporaneous
oral, understandings or agreements between the parties that relates in any way
to the subject matter hereof.  This
Agreement may be amended only by a written document signed by the party against
which enforcement is sought.

 

                19.  This Agreement may be signed in one or more
counterparts, each of which will constitute an original with full force and
effect and all of which will constitute one and the same Agreement.

 

                20.  Neither party will be liable to the other for
failure to fulfill its obligations hereunder because of force
majeure, including but not limited to Acts of God, strikes, war,
fire, flood, insurrection, other matters totally beyond the control of and not
involving fault by the defaulting party, and judicial or administrative orders
of bodies of competent jurisdiction.

 

                21.  Except where governed by federal law, this
Agreement will be construed in accordance with the laws of the State of Texas
applicable to transactions conducted entirely within that state.  This Agreement will be subject to the Rules and
Regulations and policies of the FCC and will be interpreted to the extent
possible to be consistent with such Rules and Regulations and policies as
they exist from time to time.

 

                22.  The headings in this Agreement are for the
convenience of the parties only and will not affect the substantive provisions
hereof.

 

                23.  The individual executing this Agreement on
behalf of Option Holder warrants that he is duly authorized to represent and to
bind Option Holder and that Option Holder has taken any and all corporate or
other action necessary to make this Agreement legally binding on it.

 

                24.  The individual executing this Agreement on
behalf of Permittee warrants that he is duly authorized to represent and to
bind Permitee and that Permittee has taken any and all corporate or other
action necessary to make this Agreement legally binding on it.

 

25.  Nothing herein will be
deemed to make Permittee and Option Holder partners, joint venturers, or
principal and agent in any respect or to give any third party any rights
against either of them.

 

                26.  No waiver or forbearance by either party with
respect to any of its rights under this Agreement will constitute a waiver or
forbearance of any other right or will obligate either party to continue any
prior waiver or forbearance in effect.

 

5

 

 

                IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date
first hereinabove written.

 

	
  Option
  Holder

  	
  Permittee

  
	
   

  	
   

  	
   

  	
   

  
	
  Matinee
  Media Corporation

  	
  Able
  Radio Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert
  Walker

  	
   

  	
  By:

  	
  /s/ Stephen M.
  Hackerman

  	
   

  
	
   

  	
  Robert Walker,
  President

  	
   

  	
   

  	
  Stephen M.
  Hackerman, President

  
	
   

  	
   

  

 

6

 

Exhibit A

 

Aguila, Arizona

 

Service Designation: FM    ‘Full Service’ FM station
 
        Channel/Class: 297C2       Frequency:  107.3 MHz
 
        File No.:  BNPH-20070403ACO      Facility ID number: 170953
        CDBS Application ID No.: 1180192
        
          33° 49’ 53.00” N Latitude
        113° 01’ 38.00” W Longitude (NAD 27)
        

	
  Polarization:

  	
   

  	
  Horizontal

  	
   

  	
  Vertical

  	
   

  	
   

  	
   

  
	
  Effective Radiated Power (ERP):

  	
   

  	
  50.

  	
   

  	
  50.

  	
   

  	
  kW ERP

  	
   

  
	
  Antenna Height Above Average Terrain:

  	
   

  	
  150.

  	
   

  	
  150.

  	
   

  	
  meters HAAT

  	
   

  
	
  Antenna Height Above Mean Sea Level:

  	
   

  	
  866.

  	
   

  	
  866.

  	
   

  	
  meters AMSL

  	
   

  
	
  Antenna Height Above Ground Level:

  	
   

  	
  44.

  	
   

  	
  44.

  	
   

  	
  meters AGLExhibit 10.3

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH
THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase __________ Shares of Common Stock of

 

MATINEE MEDIA CORPORATION

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after April 3,  2006 (the “Initial Exercise Date”) and
on or prior to the close of business on the five year anniversary of the
Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Matinee Media Corporation, a Texas  corporation (the “Company”), up to
______ shares (the “Warrant Shares”) of Common Stock, no par value per
share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.               Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated March ___, 2006,
among the Company and the purchasers signatory thereto.

 

Section 2.               Exercise.

 

a)             Exercise of Warrant.  Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed  hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company); and, within
three Trading Days of the date said Notice of Exercise is delivered to the 

 

 

1

 

Company, the Company
shall have received  payment of the
aggregate Exercise Price of the Warrant Shares thereby purchased by wire
transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within
three Trading Days following the date the final Notice of Exercise is delivered
to the Company.  Partial exercises of
this Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. 
The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to
any Notice of Exercise Form within one Business Day following receipt of
such notice.  In the event of any dispute
or discrepancy, the records of the Company shall be controlling and determinative
in the absence of manifest error.  The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of
a portion of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than the amount
stated on the face hereof.

 

b)            Exercise Price.  The exercise price per share of the Common
Stock under this Warrant shall be $3.50, subject to adjustment hereunder (the “Exercise
Price”).

 

c)             Cashless Exercise.  If at any time after one year from the date
of issuance of this Warrant there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the Warrant Shares
by the Holder, then this Warrant may also be exercised at such time by means of
a “cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP (volume weighted average price of
the Common Stock at which a majority of the day’s trading took place) on the
Trading Day immediately preceding the date of such election;

 

(B) =  the
Exercise Price of this Warrant, as adjusted; and

 

(X) = the number of Warrant Shares issuable upon
exercise of this Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.

 

Notwithstanding anything herein to the contrary, on
the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c), to the extent any
Warrants Shares would be issued pursuant to such exercise.

 

 

2

 

d)          Exercise Limitations.

 

i.      Holder’s Restrictions.  The Company
shall not effect any exercise of this Warrant, and a  Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2(c) or otherwise,
to the extent that after giving effect to such issuance after exercise as set
forth on the applicable Notice of Exercise, such Holder (together with such
Holder’s Affiliates, and any other person or entity acting as a group together
with such Holder or any of such Holder’s Affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such Holder or any
of its Affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without
limitation, any other  Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by such Holder or any of its affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 2(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by a Holder that the Company is not representing to such
Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and such Holder is solely responsible for any schedules
required to be filed in accordance therewith.  
To the extent that the limitation contained in this Section 2(d) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and of which a
portion of this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of a Notice of Exercise shall be deemed to be each
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder together with any Affiliates) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d),
in determining the number of outstanding shares of Common Stock, a Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be,
(y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company’s Transfer Agent setting forth the 

 

 

3

 

number of shares of
Common Stock outstanding.  Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall
be 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant.  The Beneficial
Ownership Limitation provisions of this Section 2(d)(i) may be waived
by such Holder, at the election of such Holder, upon not less than 61 days’
prior notice to the Company to change the Beneficial Ownership Limitation to
9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon exercise of this
Warrant, and the provisions of this Section 2(d) shall continue to
apply.  Upon such a change by a Holder of
the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(d)(i) to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

e)             Mechanics of Exercise.

 

i.      Authorization of Warrant Shares.  The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

ii.     Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system
if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise
within three 

 

 

4

 

Trading Days from the
delivery to the Company of the Notice of Exercise Form, surrender of this
Warrant (if required) and payment of the aggregate Exercise Price as set forth
above (“Warrant Share Delivery Date”). 
This Warrant shall be deemed to have been exercised on the date the Exercise
Price is received by the Company.  The
Warrant Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance
of such shares, have been paid.

 

iii.    Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

 

iv.    Rescission Rights.  If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share
Delivery Date, then the Holder will have the right to rescind such exercise.

 

v.     Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise
at issue times (B) the price at which the sell order giving rise to such
purchase obligation was executed, and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common 

 

 

5

 

Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company, evidence
of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to
it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

vi.    No Fractional Shares or Scrip.  No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
at its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or round
up to the next whole share.

 

vii.   Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and
the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

 

viii.  Closing of Books.  The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

Section 3.               Certain  Adjustments.

 

a)             Stock Dividends and Splits. If the Company, at
any time while this Warrant is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon exercise of this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of 

 

 

6

 

shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. 
Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

b)            [RESERVED].

 

c)             Subsequent Rights Offerings.  If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders of
Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP at the record
date mentioned below, then the Exercise Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered (assuming receipt by the Company in full of all
consideration payable upon exercise of such rights, options or warrants) would
purchase at such VWAP.  Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

d)            Fundamental Transaction. If, at any time while
this Warrant is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of
this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder, (a) upon
exercise of this Warrant, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization,
reclassification, 

 

 

7

 

merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event or (b) if the Company is acquired in an all cash transaction, cash
equal to the value of this Warrant as determined in accordance with the
Black-Scholes option pricing formula.  For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. 
To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing
provisions and evidencing the Holder’s right to exercise such warrant into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(d) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

e)             Calculations. All calculations under this Section 3
shall be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.

 

f)             Voluntary Adjustment By Company. The Company may
at any time during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.

 

g)            Notice to Holders.

 

i.      Adjustment to Exercise Price. Whenever the Exercise
Price is adjusted pursuant to any provision of this Section 3, the Company
shall promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).

 

 

8

 

ii.     Notice to Allow Exercise by Holder.
If (A) the Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of the
Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; provided that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such
notice.  The Holder is entitled to
exercise this Warrant during the 20-day period commencing on the date of such
notice to the effective date of the event triggering such notice.

 

Section 4.                                            Transfer of
Warrant.

 

a)                                           Transferability. 
Subject to compliance with any applicable securities laws and the
conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1
of the Purchase Agreement, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer.  Upon such
surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing 

 

 

9

 

the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

 

b)                                          New Warrants. This Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with Section 4(a),
as to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.

 

c)                                           Warrant Register. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.

 

d)                                          Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such transfer (i) that
the Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee
be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7), or (a)(8) promulgated under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities
Act.

 

Section 5.                                              Miscellaneous.

 

a)                                           No Rights as Shareholder Until Exercise. 
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof as set
forth in Section 2(e)(ii).

 

b)                                          Loss, Theft, Destruction or Mutilation of
Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant or any stock certificate relating to the Warrant Shares, and in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it (which, in the case of the Warrant, shall not include the posting of any
bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or
stock 

 

 

10

 

certificate of like tenor
and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

 

c)                                      Saturdays, Sundays, Holidays, etc. 
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next
succeeding Business Day.

 

d)                                     Authorized Shares.

 

The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant.  The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the rights of
Holder as set forth in this Warrant against impairment.  Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

 

Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

 

 

11

 

e)                                      Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.

 

f)                                        Restrictions. 
The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, will have restrictions upon resale
imposed by state and federal securities laws.

 

g)                                     Nonwaiver and Expenses. 
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the
fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails
to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.

 

h)                                     Notices.  Any notice,
request or other document required or permitted to be given or delivered to the
Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

 

i)                                         Limitation of Liability. 
No provision hereof, in the absence of any affirmative action by Holder
to exercise this Warrant to purchase Warrant Shares, and no enumeration herein
of the rights or privileges of Holder, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

 

j)                                         Remedies.  Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant.  The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive and not to assert the defense in any action for specific performance
that a remedy at law would be adequate.

 

k)                                      Successors and Assigns. 
Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and permitted assigns of
Holder.  The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.

 

l)                                         Amendment.  This Warrant
may be modified or amended or the provisions hereof waived with the written
consent of the Company and the Holder.

 

m)                                   Severability. 
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any 

 

 

12

 

provision of this Warrant
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

 

n)                                     Headings.  The headings
used in this Warrant are for the convenience of reference only and shall not,
for any purpose, be deemed a part of this Warrant.

 

********************

 

 

13

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly
authorized.

 

 

Dated:   April 3, 2006

 

 

	
  MATINEE MEDIA CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

14

 

NOTICE OF EXERCISE

 

TO:         MATINEE MEDIA CORPORATION

 

(1)   The undersigned hereby elects to purchase
________ Warrant Shares of the Company pursuant to the terms of the attached
Warrant (only if exercised in full), and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes, if any.

 

(2)   Payment shall take the form of (check
applicable box):

 

o   in lawful money of the
United States; or

 

o  [if permitted] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

 

(3)   Please issue a certificate or certificates
representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:

 

                                                _______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:

 

                                                _______________________________

 

                                                _______________________________

 

                                                _______________________________

 

                                (4) 
Accredited Investor.  The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.

 

[SIGNATURE OF
HOLDER]

 

	
  Name of Investing Entity: 

  	
   

  
	
  Signature of Authorized Signatory of Investing
  Entity:

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED,
[____] all of or [_______] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

 

_______________________________________________________________

 

                                                                                                                Dated:  ______________, _______

 

	
   

  	
  Holder’s
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Signature Guaranteed: 
___________________________________________

 

 

NOTE:  The signature to this
Assignment Form must correspond with the name as it appears on the face of
the Warrant, without alteration or enlargement or any change whatsoever, and
must be guaranteed by a bank or trust company. 
Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.

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