Document:

Exhibit 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made
and entered into as of April 3, 2006, among Matinee Media Corporation, a
Texas corporation (the “Company”), and the several purchasers signatory
hereto (each such purchaser is a “Purchaser” and collectively, the “Purchasers”).

 

This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and each Purchaser (the “Purchase
Agreement”).

 

The Company and each Purchaser hereby agrees as follows:

 

1.             Definitions.  Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 6(d).

 

“Effectiveness Date” means, with respect to the initial
Registration Statement required to be filed hereunder, the 180th
calendar day following the Effective Date of the Merger (as defined in the
Merger Agreement) and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 60th
calendar day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required
hereunder; provided, however, in the event the Company is notified by the
Commission that one of the above Registration Statements will not be reviewed
or is no longer subject to further review and comments, the Effectiveness Date
as to such Registration Statement shall be the fifth Trading Day following the
date on which the Company is so notified if such date precedes the dates
required above.

 

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

 

“Filing Date” means, with respect to the initial Registration
Statement required hereunder, the 60th calendar day following the
Effective Time of the Merger and, with respect to any additional Registration
Statements that may be required pursuant to Section 3(c), the 30th
day following the date on which the Company first becomes aware that such
additional Registration Statement is required hereunder.

 

“Holder” or “Holders” means the holder or holders, as the
case may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

 

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“Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

“Prospectus” means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

“Registrable Securities” means all of (i) the Shares, (ii) the
Warrant Shares, and (iii) any shares of Common Stock issued or issuable
upon any stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.

 

“Registration Statement” means the registration statements
required to be filed hereunder and any additional registration statements
contemplated by Section 3(c), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.

 

“Rule 415” means Rule 415 promulgated by the
Commission pursuant to the Securities Act, as such rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same purpose and effect as such rule.

 

“Rule 424” means Rule 424 promulgated by the
Commission pursuant to the Securities Act, as such rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same purpose and effect as such rule.

 

“Selling Shareholder Questionnaire” shall have the meaning set
forth in Section 3(a).

 

2.             Shelf Registration.

 

(a)           On or prior to the Filing Date, the
Company shall prepare and file with the Commission a “shelf” Registration Statement
covering the resale of the Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. 
Such Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration may be on another appropriate
form in accordance herewith) and will contain (unless otherwise directed by the
Holders of a majority of the Registrable Securities included in such
Registration Statement) the “Plan of Distribution” section substantially
in the form attached hereto as Annex A, with such changes as are
reasonably required to respond to the actual plan of distribution or any
comments to such section by the Commission and to comply with then applicable
securities laws.  The Purchasers each 

 

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acknowledge that the
Company is currently not eligible to register for resale the Registrable
Securities on Form S-3.  Subject to
the terms of this Agreement, the Company shall use its best efforts to cause a
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and shall use its best efforts
to keep such Registration Statement continuously effective under the Securities
Act until the earlier of (A) the date on which there ceases to be
outstanding any Registrable Securities, and (B) the date on which the
Company receives an opinion from its legal counsel to the effect that all Registrable
Securities can be freely traded without the continued effectiveness of a
Registration Statement,
addressed and reasonably acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness Period”).  The Company shall telephonically request
effectiveness of a Registration Statement as of 5:00 p.m. Eastern Time on
a Trading Day.  The Company will promptly
notify the Holders of the effectiveness of a Registration Statement no later
than the next Trading Day following the Effectiveness Date.  The Company shall, by 5:00 p.m. Central
Time on the Trading Day after the Effective Date (as defined in the Purchase
Agreement), file a final Prospectus with the Commission as required by Rule 424.

 

(b)           If:  (i) a Registration Statement is not filed
on or prior to its Filing Date, or (ii) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days of the date that
the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed,” or not subject
to further review, or (iii) a Registration Statement filed or required to
be filed hereunder is not declared effective by the Commission by its
Effectiveness Date, or (iv) after the Effectiveness Date, a Registration
Statement ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the Holders
are otherwise not permitted to utilize the Prospectus therein to resell such
Registrable Securities for more than 10 consecutive calendar days or more than
an aggregate of 15 calendar days during any 12-month period (which need not be
consecutive calendar days) (any such failure or breach being referred to as an “Event”,
and for purposes of clause (i) or (iv) the date on which such Event
occurs, or for purposes of clause (ii) the date on which such five Trading
Day period is exceeded, or for purposes of clause (iv) the date on which
such 10 or 15 calendar day period, as applicable, is exceeded being referred to
as “Event Date”), then in addition to any other rights the Holders may have
hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have
been cured by such date) until the applicable Event is cured, the Company shall
pay to each Holder an amount in cash, as partial liquidated damages and not as
a penalty, equal to 1.00% of the aggregate purchase price paid by such Holder
pursuant to the Purchase Agreement for any Registrable Securities then held by
such Holder; provided, that in no event shall such partial liquidated damages
accrue for a period in excess of 24 months. 
If the Company fails to pay any partial liquidated damages pursuant to
this Section in full within seven days after the date payable, the Company
will pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder, accruing
daily from the date such partial liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full. The 

 

 

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partial
liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event.

 

3.             Registration Procedures

 

In connection with the Company’s registration obligations hereunder,
the Company shall:

 

(a)           Not less than three Trading Days
prior to the filing of each Registration Statement and not less than one
Trading Day prior to the filing of any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall, (i) furnish
to each Holder copies of the “Principal and Selling Stockholders” and “Plan of
Distribution” sections of such Registration Statement or other documents
proposed to be filed, if such sections have been revised since the previous
filing of such Registration Statement or any amendment or supplement thereto,
which documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder, to conduct a
reasonable investigation within the meaning of the Securities Act.  The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities included in such
Registration Statement shall reasonably object in good faith, provided that,
the Company is notified of such objection in writing no later than two Trading
Days after the Holders have been so furnished copies of such documents.  Each Holder agrees to furnish to the Company a
completed Questionnaire in the form attached to this Agreement as Annex B (a “Selling
Securityholder Questionnaire”) not less than ten days after written request
therefore has been made by the Company.

 

(b)           (i)   Prepare and file with the Commission such
amendments, including post-effective amendments, to a Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly
as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and, upon written
request by any Holder of at least 25% of the Registrable Securities included in
such Registration Statement, as promptly as reasonably possible provide such
Holders with true and complete copies of all material written correspondence
from and to the Commission relating to a Registration Statement(provided that
the Company may excise any information contained therein which would constitute
material non-public information as to any Holder which has not executed a
confidentiality agreement with the Company); and (iv) comply in all
material 

 

 

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respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration Statement
during the applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders thereof set
forth in such Registration Statement as so amended or in such Prospectus as so
supplemented.

 

(c)           If during the Effectiveness Period,
the number of Registrable Securities at any time exceeds 100% of the number of
shares of Common Stock then included in a Registration Statement, then the Company
shall file as soon as reasonably practicable, but in any case prior to the
applicable Filing Date, an additional Registration Statement covering the
resale by the Holders of not less than 100% of the number of such Registrable
Securities.

 

(d)           Use its best efforts to notify the
Holders (which notice shall, pursuant to clauses (iii) through (vi) hereof,
be accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably possible and (if
requested by any Holder of at least 25% of the Registrable Securities included
in a Registration Statement) confirm such notice in writing (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement has been filed; (B) when the Commission notifies
the Company whether there will be a “review” of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement; and
(C) with respect to any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other federal or
state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and (vi) the
occurrence or existence of any pending corporate development with respect to
the Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of the Company
to allow continued availability of a Registration Statement or Prospectus;
provided that any and all of such information shall be kept confidential by
each Holder until such information otherwise becomes public, unless disclosure
by a Holder is required by law; provided, further,
notwithstanding each Holder’s agreement to 

 

 

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keep such information
confidential, the Holders make no acknowledgement that any such information is
material, non-public information.

 

(e)           Use its best efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order
suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.

 

(f)            Furnish to each Holder, without
charge, to the extent requested in writing by such Holder, at least one
conformed copy of each such Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to such
Registration Statement (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.

 

(g)           Promptly deliver to each Holder,
without charge, as many copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Holder may reasonably request in writing in connection with resales by such
Holder.  Subject to the terms of this
Agreement, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the Holders in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving of any notice pursuant
to Section 3(d).

 

(h)           If NASDR Rule 2710 requires any
broker-dealer to make a filing prior to executing a sale by a Holder, the
Company shall (i) make an Issuer Filing with the NASDR, Inc.
Corporate Financing Department pursuant to proposed NASDR Rule 2710(b)(10)(A)(i),
(ii) respond within five Trading Days to any comments received from NASDR
in connection therewith, and (iii) pay the filing fee required in
connection therewith.

 

(i)            Prior to any resale of Registrable
Securities by a Holder, use its commercially reasonable efforts to register or
qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by each Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.

 

(j)            If requested by the Holders,
cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be 

 

 

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delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered
in such names as any the Holders may request.

 

(k)           Upon the occurrence of any event
contemplated by this Section 3, as promptly as reasonably possible under the
circumstances taking into account the Company’s good faith assessment of any
adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in
accordance with clauses (iii) through (vi) of Section 3(d) above
to suspend the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such
Prospectus.  The Company will use its
best efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable.  The Company
shall be entitled to exercise its right under this Section 3(k) to
suspend the availability of a Registration Statement and Prospectus subject to
the payment of partial liquidated damages pursuant to Section 2(b) for
a period not to exceed 60 calendar days (which need not be consecutive days) in
any 12 month period.

 

(l)            Comply with all applicable rules and
regulations of the Commission.

 

(m)          The Company may require each selling
Holder to furnish to the Company a certified statement as to the number of
shares of Common Stock beneficially owned by such Holder and, if required by
the Commission, the natural persons thereof that have voting and dispositive
control over such shares. During any periods that the Company is unable to meet
its obligations hereunder with respect to the registration of the Registrable
Securities solely because any Holder fails to furnish such information within
three Trading Days of the Company’s request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and any Event that
may otherwise occur solely because of such delay shall be suspended as to such
Holder only, until such information is delivered to the Company.

 

(n)           Notwithstanding
any provision of this Agreement to the contrary, it shall not be a breach or
violation of any obligation of the Company hereunder if the Company fails to
take any action otherwise required hereunder because, in its reasonable
determination, such action would require the Company to disclose material,
non-public information that the Company has a bona fide  business or legal reason for not
disclosing regardless of whether the Company caused such material, non-public
information to exist.

 

 

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4.             Registration Expenses.  All fees and
expenses incident to the performance of or compliance with this Agreement by
the Company shall be borne by the Company whether or not any Registrable
Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with any Trading Market on which the
Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws reasonably agreed to by the Company
in writing (including, without limitation, fees and disbursements of counsel
for the Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested in
writing by the Holders), and (C) if not previously paid by the Company in
connection with an Issuer Filing, with respect to any filing that may be
required to be made by any broker through which a Holder intends to make sales
of Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710,
so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is
reasonably requested by the Holders of a majority of the Registrable Securities
included in a Registration Statement), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement.  In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any Trading Market as required hereunder.  In no event shall the Company be responsible
for any broker or similar commissions of any Holder or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

 

5.             Indemnification

 

(a)           Indemnification by the Company.  The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, members, partners, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees (and any other Persons with a functionally equivalent role
of a Person holding such titles, notwithstanding a lack of such title or any
other title) of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, shareholders, members, partners,
agents and employees (and any other Persons with a functionally equivalent role
of a Person holding such titles, notwithstanding a lack of such title or any
other title) of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, “Losses”), as incurred, arising out of or
relating to (1) any untrue or alleged untrue statement of a material fact 

 

 

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contained in a
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, or (2) any
violation or alleged violation by the Company of the Securities Act, Exchange
Act or any state securities law, or any rule or regulation thereunder, in
connection with the performance of its obligations under this Agreement, except
to the extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved or was not objected to in writing by such Holder expressly for use in
a Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that each Holder has
expressly approved Annex A hereto for this purpose) or (ii) in the case of
an occurrence of an event of the type specified in Section 3(d)(iii)-(vi),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d).  The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding arising from or in connection with the transactions contemplated by
this Agreement of which the Company is aware.

 

(b)           Indemnification by Holders.  Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees (and any other Persons with a functionally equivalent role of a
Person holding such titles, notwithstanding a lack of such title or any other
title), each Person who controls the Company (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles, notwithstanding a
lack of such title or any other title) of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such
Holder’s failure to comply with the prospectus delivery requirements of the
Securities Act, or (y) in the case of an occurrence of an event of the
type specified in Section 3(d)(iii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or 
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d) or (z) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading (i) to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that such information relates to such
Holder’s proposed method of distribution of Registrable Securities and 

 

 

9

 

was reviewed and
expressly approved or was not objected to in writing by such Holder expressly
for use in a Registration Statement (it being understood that each Holder has
expressly approved Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto.  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

(c)           Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party
shall have the right to assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have prejudiced the
Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless:  (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and counsel to such Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld, conditioned or delayed.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within ten Trading Days following
written notice thereof to the Indemnifying Party; provided, 

 

 

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that the Indemnified Party shall promptly reimburse the Indemnifying
Party for that portion of such fees and expenses applicable to such actions for
which such Indemnified Party is judicially determined to be not entitled to
indemnification hereunder.

 

(d)           Contribution.  If the indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission.  The amount paid or payable by
a party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in this Agreement, any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. 
Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, except in
the case of fraud by such Holder.

 

The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

6.             Miscellaneous

 

(a)           Remedies.  In the event of a breach by the Company or by
a Holder, of any of their respective obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further 

 

 

11

 

agrees that, in the event
of any action for specific performance in respect of such breach, it shall not
assert or shall waive the defense that a remedy at law would be adequate.

 

(b)           No Piggyback on Registrations.  Except for (i) up to 150,000 shares of
Common Stock held by shareholders of Filtering after the Merger, and (ii) 30%
of the shares of Common Stock currently held by the principal shareholders of
the Company, neither the Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the initial Registration Statement other than the Registrable
Securities.  The Company will not file
any other registration statements (other than registration statements on Form S-8
relating to the Company’s employee stock incentive plans) until the initial
Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the
Company from filing amendments to registration statements already filed.

 

(c)           Compliance.  Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a Registration Statement.

 

(d)           Discontinued Disposition.  Each Holder agrees by its acquisition of
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(d), such Holder
will forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.  The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as it
practicable.

 

(e)           Piggy-Back Registrations.  If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the stock option
or other employee benefit plans, then the Company shall send to each Holder a
written notice of such determination and, if within fifteen days after the date
of such notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that, the
Company shall not be required to register any Registrable Securities pursuant
to this Section 6(e) that are eligible for resale pursuant to Rule 

144(k) promulgated under the Securities Act or that are the subject of a
then effective Registration Statement.

 

 

12

 

(f)            Amendments and Waivers.  The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of 75% of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of
the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

 

(g)           Notices.  Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(h)           Successors and Assigns. 
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder.  The Company may
not assign its rights or obligations hereunder without the prior written
consent of all of the Holders of the then-outstanding Registrable Securities
except in the case of a merger (or similar transaction) in which case the
surviving entity shall succeed to the rights and obligations of the
Company.  Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement, provided however that at least 100,000 shares of
Registrable Securities, subject to adjustment for splits, stock dividends,
recapitalizations, are assigned to an assignee who seeks to assert registration
rights under this Agreement.

 

(i)            No Inconsistent Agreements. 
Neither the Company nor any of its Subsidiaries has entered, as of the
date hereof, nor shall the Company or any of its Subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its
securities, that would have the effect of impairing the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions
hereof.  Except as set forth on Schedule
6(i), neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person that have not been satisfied in full.

 

(j)            Execution and Counterparts.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 
In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

 

 

13

 

(k)           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
in accordance with the provisions of the Purchase Agreement.

 

(l)            Cumulative Remedies.  The remedies provided herein are cumulative
and not exclusive of any other remedies provided by law.

 

(m)          Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.  It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(n)           Headings.  The headings in this Agreement are for
convenience only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.

 

(o)           Independent Nature of Holders’
Obligations and Rights.  The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible
in any way for the performance of the obligations of any other Holder
hereunder.  Nothing contained herein or
in any other agreement or document delivered at any closing, and no action
taken by any Holder pursuant hereto or thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Holders are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement.  Each Holder shall be
entitled to protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Holder to be joined as an additional party in any proceeding for such
purpose.

 

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

 

 

14

 

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

 

	
   

  	
  MATINEE
  MEDIA CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert Walker

  	
   

  
	
   

  	
  Name: Robert Walker

  
	
   

  	
  Title: President

  

 

 

[SIGNATURE PAGE OF
HOLDERS FOLLOWS]

 

 

15

 

[SIGNATURE PAGE OF
HOLDERS]

 

Name of Holder:
__________________________

 

Signature of Authorized Signatory
of Holder:
__________________________

 

Name of Authorized
Signatory: _________________________

 

Title of Authorized
Signatory: __________________________

 

[SIGNATURE PAGES
CONTINUE]

 

 

16

 

ANNEX A

 

Plan of Distribution

 

Each Selling Stockholder (the “Selling Stockholders”)
of the common stock and any of their pledgees, assignees and successors-in-interest
may, from time to time, sell any or all of their shares of common stock on the
principal Trading Market or any other stock exchange, market or trading
facility on which the shares are traded or in private transactions.  These sales may be at fixed or negotiated
prices.  A Selling Stockholder may use
any one or more of the following methods when selling shares:

 

·                  ordinary
brokerage transactions and transactions in which the broker dealer solicits
purchasers;

 

·                  block trades in
which the broker dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

·                  purchases by a
broker dealer as principal and resale by the broker dealer for its account;

 

·                  an exchange
distribution in accordance with the rules of the applicable exchange;

 

·                  privately
negotiated transactions;

 

·                  settlement of short
sales entered into after the effective date of the registration statement of
which this prospectus is a part;

 

·                  broker dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;

 

·                  through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;

 

·                  a combination
of any such methods of sale; or

 

·                  any other
method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell shares under Rule 144
under the Securities Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.

 

Broker dealers engaged by the Selling Stockholders may
arrange for other brokers dealers to participate in sales.  Broker dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with NASDR Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with NASDR IM-2440.

 

 

 

17

 

In connection with the sale of the common stock or
interests therein, the Selling Stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the Common Stock in the course of hedging the positions they
assume.  The Selling Stockholders may
also sell shares of the common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. 
The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to
such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

 

The Selling Stockholders and any broker-dealers or
agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.  Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).

 

The Company is required to pay certain fees and
expenses incurred by the Company incident to the registration of the
shares.  The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act including Rule 172
thereunder.  In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than under this
prospectus.  There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale
shares by the Selling Stockholders.

 

We agreed to keep this prospectus effective until the
earlier of (i) the date on which the shares may be resold by the Selling
Stockholders without registration and without regard to any volume limitations
by reason of Rule 144(k) under the Securities Act or any other rule of
similar effect or (ii) all of the shares have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of
similar effect.  The resale shares will
be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the
resale shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the resale shares may
not simultaneously engage in market making activities with respect to the
common stock for the applicable restricted period, as defined in 

 

 

 

18

 

Regulation M, prior to the commencement of the
distribution.  In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the common stock by the
Selling Stockholders or any other person. 
We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.

 

 

 

19

 

Annex B

 

MATINEE MEDIA CORPORATION

 

Selling Securityholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock, (the
“Common Stock”), of Matinee Media Corporation, (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form SB-2 (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of April 3,
2006 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a
selling securityholder in the Registration Statement and the related
prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the
Registrable Securities owned by it and listed below in Item 3 (unless otherwise
specified under such Item 3) in the Registration Statement.

 

 

 

20

 

The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                  Full Legal Name of Selling Securityholder

 

	
   

  

 

(b)                                 Full Legal Name of Registered Holder (if
not the same as (a) above) through which Registrable Securities Listed in
Item 3 below are held:

 

	
   

  

 

(c)                                  Full Legal Name of Natural Control Person
(which means a natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the questionnaire):

 

	
   

  

 

2.                                      Address for Notices to Selling
Securityholder:

 

	
   

  
	
   

  
	
   

  
	
  Telephone:

  	
   

  
	
  Fax:

  	
   

  
	
  Contact Person:

  	
   

  
				

 

 

3.                                      Beneficial Ownership of
Registrable Securities:

 

(a)                                  Type and Number of Registrable Securities
beneficially owned (not including the Registrable Securities that are issuable
pursuant to the Purchase Agreement):

 

	
   

  
	
   

  
	
   

  

 

 

 

21

 

4.                                      Broker-Dealer Status:

 

(a)                                  Are you a broker-dealer?

 

Yes   o  No   o

 

(b)                                 If “yes” to Section 4(a), did you
receive your Registrable Securities as compensation for investment banking
services to the Company.

 

Yes   o  No   o

 

Note:                   If no, the Commission’s staff has
indicated that you should be identified as an underwriter in the Registration
Statement.

 

(c)                                  Are you an affiliate of a broker-dealer?

 

Yes   o  No   o

 

(d)                                 If you are an affiliate of a
broker-dealer, do you certify that you bought the Registrable Securities in the
ordinary course of business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?

 

Yes   o  No   o

 

Note:                   If no, the Commission’s staff has
indicated that you should be identified as an underwriter in the Registration
Statement.

 

5.                                     Beneficial Ownership of Other
Securities of the Company Owned by the Selling Securityholder.

 

Except as set forth below in this
Item 5, the undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities listed above in
Item 3.

 

(a)                                  Type and Amount of Other Securities
beneficially owned by the Selling Securityholder:

 

	
   

  
	
   

  

 

 

 

22

 

6.                                      Relationships with the Company:

 

Except as set forth below,
neither the undersigned nor any of its affiliates, officers, directors or
principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during the
past three years.

 

State any exceptions
here:

 

	
   

  
	
   

  

 

The undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the Registration
Statement remains effective.

 

By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
							

 

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

Kevin W. Mischnick

Chief Financial Officer

Matinee Media Corporation

2801 Via Fortuna, Suite 675

Austin, Texas 78746

Fax (512) 329-5847

 

 

 

 

23Exhibit 10.1

 

OPTION AGREEMENT

 

RECITALS

 

                1.  This Agreement is entered into as of this 1st
day of August, 2007, by and between Ace 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 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 four
hundred fifty-two thousand ninety dollars ($1,452,090.00) (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.  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 date of this agreement 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 of exercise.  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 that
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 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; its
construction permit for the Station is in full force and effect, and 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, 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.

 

 

3

 

                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.

 

                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 

 

 

4

 

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 Permittee 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.

 

[signature page follows]

 

 

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

 

Morristown, Arizona

 

Service Designation: FM   ‘Full Service’ FM station
 
Channel/Class: 258C2  Frequency:  99.5 MHz
 
File No.:    BMPH-20070119AHF     Facility ID number: 166065
CDBS Application ID No.: 1168006
 
34° 07’ 56.” N Latitude         

112° 45’ 0” W Longitude (NAD 27)
 

	
  Polarization:

  	
   

  	
  Horizontal

  	
   

  	
  Vertical

  	
   

  	
   

  	
   

  
	
  Effective Radiated Power (ERP):

  	
   

  	
  50.0

  	
   

  	
  50.0

  	
   

  	
  kW ERP

  	
   

  
	
  Antenna Height Above Average Terrain:

  	
   

  	
  150.

  	
   

  	
  150

  	
   

  	
  meters HAAT

  	
   

  
	
  Antenna Height Above Mean Sea Level:

  	
   

  	
  1164.

  	
   

  	
  1164.

  	
   

  	
  meters AMSL

  	
   

  
	
  Antenna Height Above Ground Level:

  	
   

  	
  218.

  	
   

  	
  218.

  	
   

  	
  meters AGL

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