CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 1996
CHANNEL AMERICA BROADCASTING, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 0-7870 59-3229961
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(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
1509 SOUTH FLORIDA AVENUE, SUITE 3, LAKELAND, FLORIDA 33803
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (941) 683-6467
EVRO CORPORATION
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(Former name, former address and former fiscal year, if changed since last
report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 30, 1996, Channel America Broadcast, Inc. (f/k/a EVRO
Corporation) (the "Company") acquired all of the shares of Hallmark Properties,
Inc. ("Hallmark"), a Florida corporation whose assets consist of two office
buildings located in Tampa, Florida. The Company issued 2,447,059 shares of its
common stock for all of Hallmark's issued and outstanding shares of common
stock, which shares were owned by Paul Pritchard. The Company intends to
relocate its offices to Tampa and to occupy approximately 2,500 square feet of
Hallmark's office buildings. The buildings contain 16,800 square feet of rental
space and are located on 4.6 acres. Other than the space to be occupied by the
Company, the office buildings are fully occupied. The Company intends to move
its corporate offices to Tampa by December 1996. The office buildings were
appraised at $1,440,000 by an MAI appraiser in April 1996 and the office
buildings are currently encumbered by mortgage debt in the amount of $744,000.
The parties to the transaction have agreed to have the buildings owned by
Hallmark reappraised and to the extent the net assets of Hallmark are greater
than or less than $700,000, the number of shares of the Company's common stock
issued to Mr. Pritchard will be adjusted accordingly.
On October 29, 1996 the Company acquired from North American Resorts, Inc.
("North American") certain inventory to be resold on the Company's shopping
network. The Company paid for the inventory by issuing to North American 50,000
shares of the Company's Series C Convertible Preferred Stock. The inventory
consists of 159,000 reproduction prints, such as floral prints, animal prints
and other nature scenes. The collection was appraised in October 1996 and valued
at $1,225,000. The appraisal was conducted by Bonnie Lindberg, ISA, a qualified
independent appraiser. The Company has valued this asset at $850,000 on its
balance sheet, which reflects the cost of the art collection to the Company. Max
P. Cawal, a director of the Company, is also a director of North American,
however, Mr. Cawal abstained from the vote by the Company's Board of Directors
approving the transaction between the Company and North American. Mr. Cawal owns
less than 1% of the Company's common or preferred stock and less than 1% of
North American's common or preferred stock.
The Company has granted "piggy-back" registration rights to each of Mr.
Pritchard and North American, as well as demand registration rights which are
effective one year after each respective date of issuance. The registration
rights grant to Mr. Pritchard and North American the right to have the common
stock, and the common stock received upon conversion of the Company's Series C
Convertible Preferred Stock, registered for resale to the public.
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ITEM 5. OTHER EVENTS
A. CONVERSION OF DEBENTURES.
During October 1996, the holders of the Company's convertible debentures,
having an adjusted principal balance of $784,000 and accrued interest owing
thereon of $49,297, or total indebtedness of $833,297, converted their
debentures into 2,404,914 shares of the Company's common stock.
Also during October 1996, the holders of the Company's convertible
debentures, having an adjusted principal balance of $4,157,000 and accrued
interest of $297,182, or a total indebtedness of 4,454,182, converted their
debentures into 445.4182 shares of the Company's Series B Preferred Stock. The
Series B Preferred Stock has a stated value of $10,000 per share, is nonvoting,
bears a dividend of 8.5% and is convertible into shares of the Company's common
stock at prices ranging between 50% to 70% of the market price of the Company's
common stock on the date of conversion.
The holders of certain of the Company's convertible debentures having a
principal balance of $1,420,000 and accrued interest of $106,968, or a total
indebtedness of $1,526,968, have not, as of the date of this Report, elected to
convert their debentures into the Company's Series B Preferred Stock. Two
persons hold these debentures and based upon management's conversations with
such holders, it is management's belief that the holders will, during November
1996, convert these debentures into the Company's equity. However, the Company
has not yet received written confirmation of such conversion.
B. ADDITIONAL ISSUANCE OF PREFERRED SHARES.
During October 1996, the Company also issued 11 shares of its Series A
Preferred Stock, receiving, net proceeds of $425,000. The Series A Preferred
Stock has a stated value of $50,000 per share, is nonvoting, does not bear a
dividend and is convertible into shares of the Company's common stock at a price
equal to 70% of the market price of the Company common stock at the time of
conversion, however, the conversion price shall not exceed $.75 per share. The
holders of the Series A Preferred Stock can "put" their shares to the Company
upon the occurrence of certain events such as the entry of a judgment against
the Company, the insolvency of the Company, the delisting of the Company's
securities from an exchange or the failure of the Company's securities to trade
in the over-the-counter market.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) The financial statements of Hallmark Properties, Inc. will be filed
with the Commission as soon as they are available.
(b) Pro forma financial statements reflecting the Company's acquisition
of Hallmark Properties, Inc. will be filed with the Commission as soon as they
are available.
(c) The following Exhibits are filed with this Report:
1. Exchange Agreement dated October 30, 1996, by and among Channel
America Broadcasting, Inc., Hallmark Properties, Inc. and Paul Pritchard.
2. Agreement for Purchase and Sale of Assets, dated October 29, 1996, by
and between Channel America Broadcasting, Inc. and North America Resorts, Inc.
3. Certificate of Designation, Rights and Preferences for the Company's
Series A Preferred Stock.
4. Certificate of Designation, Rights and Preferences for the Company's
Series B Preferred Stock.
All exhibits to the above documents have been omitted and are available
upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 31, 1996
CHANNEL AMERICA BROADCASTING,
By: /s/ O. DON LAUHER
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O. Don Lauher, Chief Financial Officer
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INDEX TO EXHIBITS TO THE
REPORT ON FORM 8-K
FOR
CHANNEL AMERICA BROADCASTING, INC.
FOR
EVENTS OCCURRING OCTOBER 21, 1996
1. Exchange Agreement dated October 30, 1996, by and among Channel
America Broadcasting, Inc., Hallmark Properties, Inc. and Paul Pritchard.
2. Agreement for Purchase and Sale of Assets, dated October 29, 1996, by
and between Channel America Broadcasting, Inc. and North America Resorts, Inc.
3. Certificate of Designation, Rights and Preferences for the Company's
Series A Preferred Stock.
4. Certificate of Designation, Rights and Preferences for the Company's
Series B Preferred Stock.
<PAGE>
EXHIBITS
EXHIBIT 1
EXCHANGE AGREEMENT
This Exchange Agreement is entered into as of October 30, 1996, by and
among PAUL W. PRITCHARD, as Trustee ("Pritchard"); CHANNEL AMERICA BROADCASTING,
INC., formerly EVRO Corporation, a Florida Corporation ("Channel America"); and
HALLMARK PROPERTIES, INC., a Florida corporation ("Hallmark").
WITNESSETH
WHEREAS, Pritchard, as Trustee of H.P.I. Qualified S Trust ("Trust") owns
all of the issued and outstanding stock of Hallmark.
WHEREAS, Hallmark's only asset is certain real property located in Pasco
County, Florida and more particularly described on Exhibit A attached hereto
together with all easements, rights of way, privileges, appurtenances and other
rights pertaining thereto (the "Property");
WHEREAS, Channel America would like to acquire an interest in the
Property; and
WHEREAS, Pritchard, as Trustee would like to diversify his holdings by
acquiring a stock interest in Channel America, a corporation listed on the
NASDAQ Exchange.
NOW THEREFORE, in consideration of the premises, the sum of One Dollar
($1.00) each to the other in hand paid, the receipt of which is hereby
acknowledged, and terms, conditions, covenants, and agreements hereinafter set
forth, the parties hereto agree as follows:
1. EXCHANGE OF SHARES. At the Closing, Pritchard shall deliver to Channel
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America a duly issued stock certificate representing all of the issued and
outstanding shares of Hallmark (the "Hallmark Shares"), which certificates shall
be delivered free and clear of all encumbrances, liens, security interests and
restrictions (other than the restrictions imposed by this Agreement and other
than a standard Securities Act legend which will appear on all such
certificates) together with a "Stock Power" which has been signed by Pritchard
and on which Pritchard's signature has been witnessed, and in exchange therefor
Channel America shall deliver to Pritchard a certificate representing that
number and type of shares of Channel America described in Paragraph 3 below free
and clear of all encumbrances, liens, security interests and restrictions (other
than restrictions imposed by this Agreement and other than a standard Securities
Act Legend).
2. EXCHANGE PRICE. The total value of the Hallmark Shares is Six Hundred
Fifty Thousand Dollars ($650,000.00) subject to adjustment as provided elsewhere
in this Agreement ("Exchange Price").
3. PAYMENT OF EXCHANGE PRICE. The Exchange Price shall be paid by Channel
America issuing to Pritchard 2,447,059 shares of Common Stock ("Common Shares")
of Channel America. The number of Common Shares constituting full Exchange Price
was determined in accordance with the following formula based upon a bid price
of 17/32 (.53125):
Exchange Price divided by (current bid price x 50%) = # Common Shares
650,000 divided by (.53125 x 50%) = # Common Shares
650,000 divided by (.265625) = # Common Shares
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2,447,058.80 = # Common Shares
Proof: 2,447,059 x $.53125 = $1,300,000
4. DELIVERY OF COMMON SHARES. At the Closing, Channel America shall
deliver to Pritchard duly issued stock certificate(s) representing that number
of Common Shares calculated pursuant to Paragraph 3 above, which certificate(s)
shall be delivered free and clear of all encumbrances, liens, security interests
and restrictions (other than the restrictions imposed by this Agreement and
other than a standard Securities Act legend which will appear on all such
certificates). The Common Shares of Channel America which will be issued to
Pritchard, as provided in this Agreement:
(a) have not been registered under the Securities Act of 1933, as
amended ("1933 Act") or under any state securities laws ("Blue Sky Laws");
(b) will be issued by Channel America in reliance upon exemptions from
registration under the 1933 Act and applicable Blue Sky Laws;
(c) may not be resold by the holder thereof unless such shares are
registered under the 1933 Act and any applicable Blue Sky Law unless exemptions
from such registration requirements are available; and
(d) will be represented by a certificate(s) which contains the
following or a similar legend:
The securities represented by this certificate may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration statement
under the Securities Act of 1933 (the "Act"), or pursuant to an exemption from
registration under the Act, the availability of which is to be established to
the satisfaction of the Company.
5. Intentionally omitted.
6. REGISTRATION REQUIREMENTS.
(a) COMMITMENT TO REGISTER WITHIN ONE YEAR. Channel America will:
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(i) upon Pritchard's request, within one year from the date of this Agreement,
at its expense, prepare and file with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the 1933 Act relating to the resale to
the public of the Common Shares held by Pritchard; (ii) use its best efforts to
have such Registration Statement become effective as promptly as possible; and
(iii) furnish Pritchard with copies of such Registration Statement and any
prospectus forming a part thereof as may be necessary in connection with the
resale or offering to the public of the Common Shares covered thereby.
(b) "PIGGYBACK" REGISTRATION RIGHTS. In addition to the registration
rights provided above, Channel America will advise Pritchard, at least ten days
prior to the filing of any Registration Statement for shares of Channel America
of the same class as the Common Shares held by Pritchard, and at Pritchard's
request, will include at Channel America's expense in such Registration
Statement, Pritchard's Common Shares; provided, however, in the event that
Pritchard shall elect not to include its Common Shares in such Registration
Statement, Channel America will have no further obligation with respect to the
filing of a Registration Statement with respect to the resale and offering to
the public of the Common Shares held by Pritchard either pursuant to
subparagraph (a) above or otherwise.
(c) In the event of transfer or sale of Pritchard's Share, Channel
America's duties with regard to registration shall accrue to the transferee.
7. REPRESENTATIONS AND WARRANTIES OF PRITCHARD AND HALLMARK. Pritchard
and Hallmark represent and warrant to Channel America that:
(a) TITLE. Hallmark has no assets other than the Property and owns
legal, beneficial, good and marketable title to the Property free and clear of
all liens and encumbrances except for: (i) those liens and encumbrances which
will be removed at Closing; (ii) utility easements and/or rights of way approved
by Channel America and of benefit to the Property; (iii) assignment of eminent
domain proceeds as specifically detailed in Schedule 7(a) and Paragraph 17
below; and (iv) an existing mortgage (the "Existing Mortgage") held by the
Village Bank of FLorida ("Lender") with an approximate outstanding balance of
Seven Hundred Forty-Four Thousand Dollars ($744,000.00). Hallmark will provide
Channel America with copies of those liens and encumbrances to be removed at
Closing, upon Channel America's request.
(b) NO CONTRACT. Hallmark has entered into no contract to sell, assign
or otherwise convey the Property or any portion thereof or interest therein,
except a consent by Hallmark to an Order of Taking pursuant to an eminent domain
proceeding by the Florida Department of Transportation. There are no parties
with any rights of possession in the Property, except as to grantee's of the
aforesaid easements and/or rights of way, and except as to the tenancies as set
forth on Schedule 7(b) attached hereto and made a part hereof. At Channel
America's
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request, Hallmark agrees to furnish an estoppel certificate from each tenant, in
form and content satisfactory to Channel America.
(c) BOARD APPROVAL. The execution and delivery of this Agreement and
the conveyance herein contemplated have been, or as of Closing shall have been,
duly authorized by the Board of Directors of Hallmark.
(d) ORGANIZATION, STANDING AND POWER. Hallmark is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Hallmark has all necessary corporate power and authority to own, use
and transfer its properties and assets and to transact the business as now being
conducted. There is no other jurisdiction in which the character or use of
Hallmark's assets or the nature of the business makes necessary the licensing or
qualification of Hallmark to do business as a foreign corporation. Hallmark has
no subsidiaries.
(e) CAPITAL STRUCTURE. The authorized capital stock of Hallmark
consists of 1,000 shares of Common Stock, 1,000 shares of which are outstanding.
There are no shares of preferred stock issued and outstanding. All shares of
Hallmark's Common Stock now outstanding have been duly authorized and validly
issued and are fully paid and nonassessable. All shares of Hallmark's Common
Stock now outstanding are owned, of record by Pritchard, as Trustee, free and
clear of all encumbrances. Except for this Agreement, there are no outstanding
options, warrants, convertible securities or other rights obligating Hallmark or
Pritchard to issue, sell or deliver any shares of the capital stock of Hallmark,
or requiring Hallmark's shareholders to grant, extend or enter into any such
commitment.
(f) FINANCIAL STATEMENTS. Except as otherwise disclosed in Schedule
7(h), Schedule 7(f) comprises a true, correct and complete copy of the financial
statements which include the balance sheet of Hallmark as at December 31, 1995
(the "Ending Date") and the related statements of income and changes in
financial condition for the fiscal year then ended. The financial statements are
in accordance with the books of accounts and records of Hallmark. The financial
statements present fairly and with substantial accuracy Hallmark's financial
position as at the dates thereof and the results of Hallmark's operations,
changes in Hallmark's financial position and other information of Hallmark
included therein for the periods or as at the dates therein set forth, with no
material omissions or inaccuracy. The financial statements show all known
material assets and known material liabilities of any kind or nature, direct or
indirect, absolute or contingent, existing as of the dates indicated.
(g) NO UNDISCLOSED LIABILITIES. Except as disclosed in this Agreement,
Schedule 7(g) or in the financial statements, and except for liabilities or
obligations incurred since the Ending Date in the ordinary course of business
Hallmark does not have, nor are any of its assets or properties subject to, any
known material
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debt, liability, obligation or commitment of any kind or nature, whether
indirect, whether accrued, absolute or otherwise. To the best of Pritchard's
knowledge, there are no facts which could serve as the basis for any material
debt, liability, obligation or commitment of Hallmark not so disclosed.
(h) ABSENCE OF CERTAIN CHANGES. Since the Ending Date, there has not
been any material adverse change in the condition (financial or otherwise),
assets, liabilities or business of Hallmark, or any damage, destruction or loss,
whether or not covered by insurance, materially adversely affecting its
properties or the business. Except as set forth on Schedule 7(h) and except for
the transactions contemplated by this Agreement, since the Ending Date, to the
best of Pritchard's knowledge the Company has not:
(i) created, assumed or permitted to exist any lien or encumbrance
on any of its assets except for statutory liens such as for unpaid taxes not yet
owed;
(ii) sold, leased or otherwise transferred any of its assets, or
cancelled any of its rights or claims, other than in the ordinary course of
business for fair and adequate consideration in money or money's worth;
(iii) sold, assigned or transferred any patent, trademark, trade
name, copyright technology or software right or license or other intangible
assets;
(iv) incurred any other liability or obligation other than current
liabilities in an aggregate amount not exceeding $500, other than incurred in
the ordinary course of business;
(v) paid, prepaid or discharged any liability or obligation not in
the ordinary course of business;
(vi) lost, surrendered or had revoked or limited any license,
permit or other right granted by any governmental authority to operate any asset
in the manner in which it was intended to be operated;
(vii) entered into any contract not in the ordinary course of
business, or cancelled, modified adversely, assigned, encumbered or in any way
discharged or terminated (other than by performance) any contract not in the
ordinary course of business;
(viii) received any notice of termination of or default under any
contract;
(ix) allowed to occur or exist any event of default under any
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contract to which it is a party other than as set forth in Schedule 7(h).
(x) other than in the ordinary course of business made any loan or
advance, acquired any accounts receivable or otherwise extended any credit,
except to customers or acquired the securities or obligations of any person;
(xi) made any capital expenditure, or any commitment therefor, in
excess of $1,000;
(xii) made any material change in the rate of compensation payable
or to become payable by Hallmark to any of its officers, employees or agents or
in the formula for determining any such compensation, or entered into or amended
in any material respect any contract providing for compensation or benefits
outside the ordinary course of business, except for withdrawals of cash;
(xiii) made any commitment (through negotiations or otherwise) or
incurred any liability to any labor organization or became aware of any material
threat of strike or other interruption of work arising from labor difficulties;
(xiv) materially reduced or failed to carry insurance in at least
the respective amounts carried on the Ending Date;
(xv) experienced any adverse change in its relationship with any
of its suppliers, distributors, dealers or customers;
(xvi) experienced any other change in the business which could
have a material adverse effect on the ongoing operations or financial condition
of Hallmark; or
(vii) altered or revised any of its accounting principles,
procedures, methods or practices.
(i) COMPLIANCE WITH LAWS. Hallmark is in full compliance in all
material respects with all applicable laws, rules, ordinances, orders and
regulations and there is no basis for any action, suit or proceeding arising out
of or in connection therewith. Hallmark has not received any notice of any
violation of any such law, rule, ordinance, order or regulation, and Hallmark is
not subject to any settlement agreement or consent decree with continuing
obligations or restrictions on Hallmark. Each item comprising Hallmark's assets
and the current uses thereof conform in all material respects to all such laws,
rules, ordinances, orders and regulations, all applicable franchises, permits,
licenses and other documents.
(j) ACCOUNTS RECEIVABLE. All of the accounts receivable (including the
accounts, obligations, contracts and instruments which underlie such accounts
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receivable) reflected in the financial statements set forth in Schedule 7(f),
net of the reserve for doubtful accounts shown thereon, and those accounts
receivable arising subsequent to the Ending Date and prior to the Closing Date
will be good and collectable on the Closing Date at their respective full
amounts, net of reserves excepting returns that occur in the ordinary course of
Hallmark's business consistent with historical practice. To the knowledge of
Pritchard, all of such accounts receivable are owned by Hallmark free of all
claims and encumbrances. Since the Ending Date, Hallmark has not modified or
otherwise compromised any accounts receivable, or any indebtedness due
thereunder, or any guarantee or repurchase obligation related thereto, except in
the ordinary course of business in accordance with prior practices.
(k) MATERIAL CONTRACTS. Hallmark has heretofore delivered to Channel
America true, correct and complete copies of all of Hallmark's material,
executed and written contracts listed in Schedule 7(k). Each of the material
contracts listed in Schedule 7(k) is valid and binding, in full force and
effect. There has not been under any such material contract any default by
Hallmark or of any other party thereto, nor any event which, after notice or
lapse of time, or both, would constitute any such default or result in a right
to accelerate against or a loss of rights by Hallmark.
(l) OTHER CONTRACTS. Hallmark is not a party to, or otherwise bound
by, any written material contract or other instrument requiring payments in
excess of $1,000 which cannot be terminated within 60 days. There has not been
any material default by Hallmark, nor any event which, after notice or lapse of
time, or both, would constitute any such material default or result in a right
to accelerate against or a loss of rights by Hallmark, in any obligation to be
performed by Hallmark under any material contract or other material instrument
now in effect relating to the assets or the business, nor has Hallmark waived
any right thereunder.
(m) LEGAL PROCEEDINGS, ETC. Except as disclosed in Schedule 7(h),
there is no legal, equitable, administrative or arbitration action, suit,
proceeding or known investigation pending or threatened against or affecting
Hallmark or any of its assets which, if adversely determined, could adversely
affect the business, the operations or properties, or the condition, financial
or otherwise, of Hallmark, or the ability of Hallmark to consummate the actions
contemplated hereby. There is no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Hallmark and there is no basis for any action,
suit, proceeding or investigation against Hallmark. No such action, suit,
proceeding, known investigation, judgment, decree, injunction, rule or order
arises out of the employment of labor, equal employment opportunity,
occupational health and safety, economic stabilization or environmental
protection. Hallmark is not in default with respect to any order, injunction or
decree of any court or governmental department, commission, board or agency, and
no such order, injunction or decree is now in effect which restrains the
operations or the use of the
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properties of Hallmark.
(n) TAX MATTERS. All returns or reports concerning taxes of any kind
required to be filed by Hallmark and any and all taxes, interest and penalties
which are disclosed by such returns or reports to be due to any taxing authority
or which may be required to be paid to any taxing authority, whether or not
disclosed by such returns or reports, with respect to any period up to the
Closing Date have been duly paid or are set forth on the financial statements.
No such return or report for any period up to and including the Closing Date has
been examined by any taxing authority, nor has Hallmark received any notice of
the intention of any taxing authority to conduct an examination thereof.
(o) INSURANCE. Schedule 7(o) contains a true, correct and complete
description of all material fire, theft, casualty, liability, life,
hospitalization, medical reimbursement and other insurance coverage insuring
Hallmark and its personnel, assets, properties and business operations,
specifying, with respect to each the risk insured against, the limits of
coverage, the deductible amount (if any) and the premium rate. All of such
policies, plans and programs are maintained by Hallmark. The insurance described
in Schedule 7(o) shall remain outstanding and duly in force, and the specific
coverages thereof shall be fully maintained, through and including the Closing
Date.
(p) LABOR RELATIONS AND EMPLOYMENT ISSUES. No material labor dispute,
strike or other work stoppage has occurred and is continuing or has been
threatened. Hallmark has not entered into any collective bargaining agreement
with any employee, union, labor organization or other employee representatives
or group of employees and no such organization or person has made or is making
any attempt to organize or represent employees of Hallmark.
(q) EMPLOYEE BENEFIT PLANS. With the exception of any plan described
in Schedule 7(q), Hallmark does not maintain, administer or contribute to, and
since the date of its incorporation has not maintained, administered or
contributed to, any pension plan, VEBA or any welfare plan, whether insured or
otherwise, or any benefit arrangement.
(r) AFFILIATED TRANSACTIONS. Except as set forth on Schedule 7(r),
Hallmark is not indebted in any amount whatsoever to, nor is there any business
relationship, whether under any contract or otherwise, between Hallmark and, any
person who is an officer, director or shareholder of Hallmark, or any of their
respective spouses, children, or "affiliated persons" as that term is defined
under the Securities and Exchange Act of 1934, other than indebtedness for
salaries or bonuses or employment relationships in the ordinary course of
business, nor is any of such persons indebted to Hallmark in any amount
whatsoever. Except as heretofore disclosed to Channel America in writing, no
officer, director or shareholder of
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Hallmark, nor any spouse, child or affiliated person, has any interest in any
competitor, supplier or customer of Hallmark, except for interests amounting to
less than 5% in any company.
(s) BROKERS AND FINDERS. Neither Hallmark, nor any of its respective
officers, directors, employees or agents has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(t) FAIR VALUE. The fair market value of Channel America's stock is at
least equal to the fair market value of the Common Stock of Hallmark.
(u) NO CONFLICT. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the compliance and/or
fulfillment of the terms and provisions hereof, will not violate or conflict
with or, with or without notice or passage of time any provisions of Hallmark's
Certificate of Incorporation, its Bylaws or any Resolution heretofore adopted
and still effective, or result in breach of or constitute a default under the
terms, conditions, or provisions of any agreement or instrument of which
Hallmark or Pritchard is a party, or by which the Property is bound, including,
but not limited to, the Existing Mortgage, or any applicable regulation, of any
governmental agency, or judgment, action or decree of any Court having
jurisdiction over Pritchard, Hallmark or the Property.
(v) NO MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or
warranty made herein, nor any statement or certificate given or to be given to
Channel America pursuant hereto or with respect to the transactions contemplated
hereby, contains or will contain any intentionally untrue statement of material
fact or intentionally omit or will intentionally omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
(w) NO MORTGAGE ACCELERATION/LENDER APPROVAL NOT REQUIRED. The
transfer of the Hallmark Shares will not constitute an event of default under
the Existing Mortgage, or otherwise accelerate repayment of amounts owed under
the Existing Mortgage, and the Lender's consent to the transactions contemplated
herein is not required.
(x) SALE OF STOCK. Pritchard has no present intention to dispose of
the Common Shares being acquired hereunder.
(y) SPECIFIC ADDITIONAL REPRESENTATIONS WITH RESPECT TO THE PROPERTY.
(i) The use and occupancy of the Property (and to the best of
Pritchard's and Hallmark's knowledge, that of Hallmark's predecessors) has been
in conformity with applicable law and regulations, Hallmark has not received any
notice
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of violation of any applicable law, and as of the date of Closing there will be
no conditions or circumstances of the Property that would constitute a violation
of existing laws or regulations.
(ii) The Property is zoned commercial, and Channel America's
planned use, does not violate any applicable deed restrictions affecting the
Property or any other covenants, restrictions or agreements, site plan
approvals, or subdivision regulations applicable to the Property;
(iii) Neither Hallmark or Pritchard has any knowledge of any
proposed change in the zoning classification for the Property;
(iv) no notices of violation of any law or municipal ordinances or
of federal, state, county or municipal or other governmental agency regulations,
orders or requirements relating to the Property have been entered or received by
Hallmark, and neither Hallmark or Pritchard has any reason to believe that any
such notice may or will be entered;
(v) there is no action or proceeding (zoning or otherwise) or
governmental investigation pending, or, to the knowledge of Pritchard or
Hallmark, threatened against or relating to the Property, nor, to the knowledge
of Pritchard or Hallmark, is there any basis for such action, except for a
certain eminent domain proceeding by the Florida Department of Transportation,
as referenced in Paragraph 7(a);
(vi) None of the activities of Hallmark, and to the best of
Pritchard's and Hallmark's knowledge none of the activities of any past owner or
past or present operator or tenant of the Property, have resulted in the
generation of any "Hazardous Substances" (Hazardous Substances shall mean any
and all hazardous or toxic materials, substances, pollutants, contaminants and
wastes, including but not limited to all elements and compounds defined as
"Hazardous Substances", "Hazardous Waste", "Hazardous Material", "oil" or
"petroleum products" under any governmental environmental law or regulation) nor
has Hallmark, or to the best of Hallmark's or Pritchard's knowledge has any past
owner, operator or tenant, stored, disposed of or released any Hazardous
Substance on the Property, nor used all or any part of the Property as a
depository for Hazardous Substances, nor do the improvements on the Property
contain asbestos, nor does any equipment contain polychlorinated biphenyls, and
there are not now, nor have there ever been, underground storage tanks on the
Property. Pritchard and Hallmark further certify, represent and warrant to
Channel America that neither the Property nor to the best of Pritchard's or
Hallmark's knowledge is any adjacent property listed on the National Priority
List of Suspected Hazardous Waste Sites, nor are they listed on any state report
of inactive hazardous waste sites, and that no event has occurred which, with
the passage of time or the giving of notice or both, would constitute
non-compliance
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with any governmental environmental law or regulation. Hallmark and Pritchard
hereby agree to provide Channel America with satisfactory proof of the foregoing
certifications, representations, and warranties, acceptable to Channel America's
and its legal counsel.
(vii) there are no contracts affecting the Property; and no
services, material or work have been supplied by Hallmark's contractors,
subcontractors or material persons with respect to the Property for which
payment has not been made in full. If, subsequent to the Closing Date, any
mechanic's or other lien, charge or order for the payment of money shall be
filed against the Property or against Channel America or Channel America's
assigns, based upon any act or omission, or alleged act or omission before or
after the Closing Date, of Hallmark, its agents, servants or employees, or any
contractor, subcontractor, material person connected with construction or
repairs made to the Property by or on behalf of Hallmark (whether or not such
lien, charge or order shall be valid or enforceable as such), within thirty (30)
days after notice to Hallmark of the filing thereof, Hallmark shall take such
action, by bonding, deposit, payment or otherwise, as will remove or satisfy
such lien of record against the Property.
(z) RELIANCE. The foregoing representations and warranties are made by
Hallmark with the knowledge and expectation that Channel America is placing
complete reliance thereon and all representations and warranties made by
Hallmark shall survive Closing.
8. REPRESENTATIONS AND WARRANTY OF CHANNEL AMERICA. Channel America
represents and warrants to Pritchard with respect to the Common Shares of
Channel America being issued that:
(a) BOARD APPROVAL. The execution and delivery of this Agreement and
the issuance of the Common Shares herein contemplated have been, or as of
Closing shall have been, duly authorized by the Board of Directors of Channel
America.
(b) LACK OF SHAREHOLDER APPROVAL. The execution and delivery of this
Agreement and the issuance of the Common Shares herein contemplated do not
require shareholder approval.
(c) NO CONFLICT. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the compliance and/or
fulfillment of the terms and provisions hereof, will not violate or conflict
with or, with or without notice or passage of time, any provisions of Channel
America's Certificate of Incorporation, its Bylaws or any Resolution heretofore
adopted and still effective,
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or result in breach of or constitute a default under the terms, conditions, or
provisions of any agreement or instrument of which Channel America is a party,
or any applicable regulation of any governmental agency, or judgment, action or
decree of any Court having jurisdiction over Channel America.
(d) NO MATERIAL MISSTATEMENT OR OMISSIONS. No representation or
warranty made herein by Channel America nor any statement or certificate given
or to be given to Pritchard pursuant hereto or with respect to the transactions
contemplated hereby, contains or will contain any intentionally untrue statement
of material fact or intentionally omit or will intentionally omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
9. CONDITIONS PRECEDENT TO CHANNEL AMERICA'S CLOSING HEREUNDER. All
obligations of Channel America under this Agreement are subject to Hallmark and
Pritchard having performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by them prior to
Closing.
10. CONDITIONS PRECEDENT TO HALLMARK AND PRITCHARD'S CLOSING HEREUNDER.
All obligations of Pritchard and Hallmark under this Agreement are subject to
Channel America having performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by it prior to
Closing.
11. SPECIFIC TERMS, COVENANTS AND CONDITIONS WITH RESPECT TO THE PROPERTY.
(a) COVENANTS.
(i) Between the date hereof and the Closing Date, Hallmark will
not enter into any leases of any portion of the Property, nor enter into any
other agreements affecting the Property, in each case without the prior written
consent of Channel America; and
(ii) Hallmark will provide Channel America with the following
documents within thirty (30) days of the date hereof:
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(A) an up-to-date, Abstract of Title to the Property;
(B) a survey (as required by Subparagraph 11(c) below);
(C) an official real property tax search;
(D) copies of the real estate tax bills for the Property for the
current tax year(s);
(E) appropriate bankruptcy federal court searches.
(b) TITLE INSURANCE.
(i) Within thirty (30) days of Hallmark's delivery to Channel
America of the documents required pursuant to Subparagraph 11(a) above, Channel
America shall order a title insurance report for issuance of a fee title
insurance policy from a title company selected by Channel America (the "Title
Company"), at Channel America's sole cost and expense, and within ten (10) days
after receipt of such report, Channel America shall furnish a copy thereof to
Hallmark's attorneys. Upon receipt of the title report, Hallmark shall forthwith
undertake, with due diligence, to eliminate those exceptions which Channel
America is not required to accept under the terms of this Agreement. If Hallmark
is unable to eliminate such exceptions and to provide good and marketable title
in accordance with the terms of this Agreement within the Contingency Period (as
defined in Paragraph 13(a) below), Hallmark shall so notify Channel America and
Channel America may thereafter either (1) rescind this Agreement by notice given
to Pritchard and Hallmark, in which event the provisions of Paragraph 14 shall
apply or (2) elect to accept title and a title insurance policy subject to such
exceptions with a refund of a portion of the Exchange Price for any decrease in
market value of the Property as a result of such exceptions.
(ii) Pritchard shall eliminate any liens or encumbrances affecting
the Property which may be removed or satisfied by the payment of a liquidated
sum of money, and shall not be deemed unable to provide title in accordance with
the terms of this Agreement if he shall fail or refuse to eliminate any such
liens or encumbrances. Notwithstanding the foregoing, Pritchard, in lieu of
satisfying such liens or encumbrances, may deposit with the Title Company such
amount of money as may be determined by the Title Company as being sufficient to
induce it to insure Channel America against collection of such liens and/or
encumbrances, including interest and penalties, out of or against the Property,
in which event such liens and encumbrances shall not be objections to title.
(c) SURVEY. Within thirty (30) days of the date hereof, Hallmark shall
deliver to Channel America its existing 1994 Survey, together with an affidavit
from Pritchard, that there have been no changes that would effect a current
survey.
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All recorded easements shall be identified by the applicable recording
information. Except as specifically noted on the survey, there are no
encroachments of lot or building lines or obstructed easements. The Property is
located in any area designated as being within the 100 year flood plan, pursuant
to the Flood Disaster Act of 1973, as amended. Hallmark and Pritchard certify
that the flood hazard has been insured by Flood Insurance. The legal description
on the Survey will coincide exactly with that on the title commitment ordered
pursuant to Subparagraph 11(b).
12. CLOSING DATE. For all purposes of this Agreement, the "Closing Date"
shall be on or before the 30th day of October, 1996 at the offices of Channel
America or at such other place as the parties hereto shall mutually agree. At
Closing, the Hallmark Shares shall be exchanged for the Common Shares.
13. ADDITIONAL CONDITIONS SUBSEQUENT TO CLOSING.
(a) The Agreement is contingent upon Channel America's receipt of a
copy of a July 18, 1996 Phase I ASTM E 1528 Environmental Transaction Screening
Report. If the result of the aforementioned report or any phase thereof shall
not be satisfactory to Channel America, in its sole discretion, Channel America,
by written notice to Pritchard and Hallmark given within the Contingency Period,
may request a reduction in the Exchange Price in accordance with the provisions
of Paragraph 14 below.
(b) This Agreement is contingent upon Channel America verifying that
water, storm sewer, sanitary sewer, gas, electric and telephone services to the
Property are available in satisfactory condition and in capacities satisfactory
to Channel America for its planned use of the Property. In the event all such
utilities are not available, or are not in satisfactory condition, or the
capacities are not adequate, in Channel America's sole discretion, it, at its
option, by written notice to Pritchard and Hallmark given within the Contingency
Period, may request a reduction in the Exchange Price in accordance with the
provisions of Paragraph 14 below.
(c) This Agreement is contingent upon Purchaser's ascertaining that
the current zoning classification of the Property will permit Channel America's
planned use of the Property. Nothing contained in this Subparagraph, however,
shall in any way restrict Channel America's use of the Property once this
exchange is consummated, nor shall it restrict Channel America from changing its
intended use of the Property prior to Closing.
14. REFUND OF EXCHANGE PRICE. In the event any of the contingencies set
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forth in Paragraph 13 have not been satisfied within three (3) months from the
date hereof (the "Contingency Period"); the exceptions to title arising as
described in Paragraph 11 have not been remedied to Channel America's
satisfaction; Pritchard or Hallmark has failed to comply with any other term of
this Agreement; or any of the representations or warranties contained in this
Agreement are false or misleading (all of the aforementioned items hereinafter
referred to as "Triggering Events"), then upon receipt of notice, Pritchard
shall promptly return to Channel America that number of Common Shares of Channel
America which have an equivalent value to the reduction in value to the Property
caused by the Triggering Event, as determined by mutual agreement of the
parties. For purposes of this paragraph, equivalent value shall be determined
using the same formula used to determine payment of the Exchange Price.
15. APPORTIONMENTS AND CLOSING EXPENSES.
(a) The Exchange Price shall be adjusted by the following, which are
to be apportioned as of the Closing Date as to the Property:
(i) real property taxes;
(ii) water rates and charges; and
(iii) sewer taxes and rents;
(b) The apportionment of taxes shall be made on the basis of the last
ascertainable tax bill.
(c) If, on the Closing Date, the Property or any part thereof, shall
be or shall have been affected by assessments which are, or which may become,
payable in annual installments, Pritchard shall pay all such installments due
and payable on or before Closing Date and Channel America shall pay all such
installments due and payable after the Closing Date.
(d) Pritchard/Hallmark shall take all actions as may be necessary in
order to fully comply with the applicable provisions of the Tax Law of the State
of Florida, and any rules regulations or orders which may be promulgated
thereunder.
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16. ADDITIONAL POST-CLOSING DOCUMENTS. Within thirty (30) days after the
Closing, Pritchard, at his sole cost and expense (other than title insurance in
(d) below which shall be paid for by Channel America), shall deliver to Channel
America the documents, instruments, items and payments required by this
Agreement to be delivered by Pritchard or Hallmark, including, without
limitation, the following (each document hereafter mentioned to be in form and
substance reasonably satisfactory to Channel America and its legal counsel):
(a) An affidavit with respect to tenancies, certifying that there are
none, except as set forth in Schedule 7(b) hereof.
(b) Tenant estoppel certificate as required in Paragraph 7(b) above.
(c) Any other affidavit required by the Title Company in order to
deliver title insurance coverage to Channel America.
(d) An affidavit with respect to mechanics' liens certifying that
there are no unpaid bills for services rendered or materials furnished to the
Property and an agreement indemnifying Channel America against claims for any
such services or materials.
(e) Certification that the Representations and Warranties set forth in
Paragraph 5 are true and correct as of the date of Closing.
17. CONDEMNATION. Awards received as a result of any eminent domain
condemnation by the Florida Department of Transportation have been previously
assigned to a third party as set forth on Schedule 7(a) and such third party
shall have the right to represent Hallmark in connection with any litigation
proceeding arising out of such eminent domain proceeding.
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18. SELLER COMPLIANCE WITH REAL ESTATE REPORTING REQUIREMENT OF 1986 TAX
REFORM ACT. Pritchard agrees to comply with the real estate reporting
requirement, if any, of the Internal Revenue Code of 1986, as amended, and, if
required, to file with the Internal Revenue Service a Form 1099 or such other
form acceptable to the Internal Revenue Service. Pritchard shall indemnify,
defend and hold harmless Channel America from and against any and all claims,
liabilities, costs and expenses resulting from failure to comply with said real
estate reporting requirement.
19. INDEMNIFICATION.
(a) PRITCHARD'S INDEMNIFICATION. Pritchard shall be responsible for,
and hereby indemnifies Channel America and holds it and its agents, successors
and assigns harmless, at all times from and after the Closing Date, from,
against and in respect of:
(i) all material losses, damages and deficiencies resulting from
any breach of any representation or warranty, or any breach or non-fulfillment
of any covenant or agreement of Pritchard or Hallmark made in this Agreement;
and
(ii) all material actions, suits, proceedings, claims, demands,
assessments, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including reasonable attorneys' fees and expenses) incident to any of
the foregoing, including actions, suits, proceedings, claims and demands
asserted by Buyer against the Shareholder except for matters which may be
unenforceable by virtue of a complete defense as a result of being time-based.
(b) CHANNEL AMERICA INDEMNIFICATION. Channel America shall be
responsible for, and hereby indemnifies Hallmark and Pritchard and holds each of
them and their respective agents, successors and assigns harmless, at all times
from and after the Closing Date, from, against and in respect of:
(i) all losses, damages and deficiencies resulting from any
failure or breach of any representation or warranty, or any breach or
non-fulfillment of any covenant or agreement, of Channel America made in this
Agreement; and
(ii) all actions, suits, proceedings, claims, demands,
assessments, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including reasonable attorneys' fees and expenses) incident to any of
the
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foregoing, including actions, suits, proceedings, claims and demands asserted by
Hallmark or Pritchard against Channel America.
(c) PROCEDURES FOR INDEMNIFICATIONS. Whenever a claim shall arise for
indemnification under this Agreement, the party alleging indemnification (the
"Indemnified Party"), shall notify the party from whom indemnification is sought
(the "Indemnifying Party") of such claim and stating in reasonable detail the
nature thereof the facts constituting the basis for such claim. In the event of
any such claim or action by a third party, the Indemnifying Party may assume the
defense thereof; provided however, that no settlement of any such claim or
action shall be made without the prior written consent of the Indemnified Party
(which consent may not be unreasonably withheld). If any Indemnifying Party
assumes the defense of any such claim or action, the Indemnifying Party shall be
entitled to select counsel and take all steps necessary in the settlement or
defense thereof; provided, however, that the Indemnified Party may, at its own
expense, participate in any such action with the counsel of its choice. The
Indemnified Party shall not compromise or settle such claim or action without
the prior written consent of the Indemnifying Party (which consent may not be
unreasonably withheld). If the Indemnifying Party does not assume the defense of
any such claim or action in accordance with the terms hereof, the Indemnified
Party may defend against such claim or action in such manner as it may deem
appropriate, including, but not limited to, settling such claim or action (after
giving notice of the same to an Indemnifying Party) on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Party will promptly
indemnify the Indemnified Party in accordance with the provisions of this
Paragraph 19.
(d) NOTICE OF CLAIM BETWEEN PARTIES. If any party believes that it has
suffered or incurred any loss, damage or deficiency as referenced above, such
party shall notify the other promptly in writing in accordance with the Notice
provisions set forth in this Agreement, describing such loss, damage or
deficiency, the amount thereof, and the method of computation of such loss,
damage or deficiency, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such loss,
damage or deficiency shall have occurred.
20. LIABILITY OF PAUL W. PRITCHARD AS TRUSTEE. The liability of Pritchard
shall be limited to that which would accrue to him in his capacity as trustee
only and he shall be deemed to incur no personal liability in regard to this
transaction.
21. NOTICES. All notices, demands and requests required or permitted to be
given hereunder shall be deemed duly given if mailed by certified or registered
mail,
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postage prepaid, and pending designation of another address, addressed as
follows:
Paul W. Pritchard
P.O. Box 274147
Tampa, Florida 33688-4147
Channel America Broadcasting, Inc.
1509 S. Florida Avenue, Suite 3
Lakeland, Florida 33803-2293
With a copy to:
Stephen H. Cohen, Esq.
Scolaro, Shulman, Cohen,
Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202
22. ADDITIONAL DOCUMENTS. The parties hereto agree that they will at any
time, and from time to time, after the Closing and upon the request of the
other, execute, acknowledge, and deliver or cause to be executed, acknowledged
and delivered further assignments, transfers, conveyances, powers of attorney,
acts, and assurances as may be reasonably required in accordance with this
Agreement to more fully effect the transactions contemplated by this Agreement.
23. SURVIVAL OF WARRANTIES. Each of the covenants, representations and
warranties of each of the parties to this Agreement, as contained herein, shall
be true and correct as of the Closing Date and beyond during the Contingency
Period as though such covenants, representations and warranties were made at and
as of such time, except for changes occurring in the ordinary course of
business. Each of the parties shall on or before the Closing Date perform all of
their undertakings herein in accordance with the terms hereof.
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24. ENTIRE AGREEMENT AND COUNTERPARTS. This Agreement contains the entire
Agreement between the parties, superseding in all respects any and all prior
oral or written agreements or understandings, and shall be amended or modified
only by written instruments signed by both parties hereto. This Agreement may be
executed in counterparts and by facsimile signature, each of which shall be
deemed an original and all of which, taken together, shall constitute one
Agreement.
25. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
26. GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the internal laws of the State of Florida without
regard to the principals of conflicts of law.
IN WITNESS WHEREOF, the parties have hereto set their hands and seals the
day and date first above written.
/s/ PAUL W. PRITCHARD
-------------------------------------------
Paul W. Pritchard, as Trustee
HALLMARK PROPERTIES, INC.
By: /s/ PAUL W. PRITCHARD
-----------------------------------------
Paul W. Pritchard, President
CHANNEL AMERICA BROADCASTING, INC.
By: /s/ THOMAS L. JENSEN
-----------------------------------------
Thomas L. Jensen, Chief Executive Officer
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EXHIBIT A
DESCRIPTION OF PROPERTY
22
<PAGE>
EXHIBIT B
AMENDED CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES C CONVERTIBLE PREFERRED STOCK,
NO PAR VALUE OF EVRO CORPORATION
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SCHEDULES
7(a) Assignment of Condemnation Proceeds
7(b) List of Tenancies
7(f) Financial Statements
7(g) Undisclosed Liabilities
7(h) Changes, Defaults, Legal Proceedings
7(k) List of Material Contracts
7(o) Insurance Policies
7(q) Employee Benefit Plans
7(r) Affiliated Loans or Transactions
24
EXHIBIT 2
ASSET EXCHANGE AGREEMENT
This Asset Exchange Agreement is entered into as of October 29, 1996
between NORTH AMERICAN RESORTS, INC., a Colorado Corporation, ("North American")
and CHANNEL AMERICA BROADCASTING, INC., formerly EVRO Corporation, a Florida
Corporation, ("Channel America").
WITNESSETH
WHEREAS, North American owns certain items of artwork which are listed on
Exhibit A attached hereto (the "Artwork");
WHEREAS, North American would like to sell the Artwork and Channel America
would like to acquire the Artwork; and
WHEREAS, North American would like to diversify its holdings by acquiring a
stock interest in Channel America.
NOW THEREFORE, in consideration of the premises, the sum of One Dollar
($1.00) each to the other in hand paid, the receipt of which is hereby
acknowledged, and terms, conditions, covenants, and agreements hereinafter set
forth, the parties hereto agree as follows:
1. SALE OF ARTWORK. North American agrees to sell, convey, transfer,
assign, and deliver to Channel America, and Channel America agrees to purchase,
acquire and accept the Artwork free and clear of all liens.
2. PURCHASE PRICE. The total purchase price for the Artwork being conveyed
is One Million Dollars ($1,000,000.00) subject to downward adjustment as
provided below ("Purchase Price"). If the Artwork appraises pursuant to
subparagraph 11(b) below for less than One Million Dollars ($1,000,000.00) then
the Purchase Price shall be reduced to the appraised value of the Artwork.
<PAGE>
3. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Channel
America issuing to North American that number of shares of Series C Convertible
Preferred Stock, no par value with a stated value of Ten Dollars ($10.00)
("Preferred Shares") of Channel America, which has an equivalent value to the
Purchase Price. The number of Preferred Shares constituting full purchase price
will be determined in accordance with the following formula:
Purchase Price/10 (stated value) x 50% (conversion rate to common
stock) = # of Preferred Shares to be issued
For example, if the Purchase Price is $1,000,000, then 50,000 Preferred
Shares would be issued, calculated as follows:
1,000,000/10 x 50% = 50,000 Preferred Shares
4. DELIVERY OF PREFERRED SHARES. At the Closing, Channel America shall
deliver to North American duly issued stock certificate(s) representing that
number of Preferred Shares calculated pursuant to Paragraph 3 above, which
certificate(s) shall be delivered free and clear of all encumbrances, liens,
security interests and restrictions (other than the restrictions imposed by this
Agreement and other than a standard Securities Act legend which will appear on
all such certificates). The Preferred Shares of Channel America which will be
issued to North American, as well as common stock of Channel America which will
be issued upon conversion of the Preferred Shares in accordance with Paragraph 5
below (the "Common Shares"), as provided in this Agreement:
(a) have not been, and with respect to the Common Shares may not have
been registered under the Securities Act of 1933, as amended ("1933 Act") or
under any state securities laws ("Blue Sky Laws");
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<PAGE>
(b) will be issued by Channel America in reliance upon exemptions from
registration under the 1933 Act and applicable Blue Sky Laws;
(c) may not be resold by the holder thereof unless such shares are
registered under the 1933 Act and any applicable Blue Sky Law unless exemptions
from such registration requirements are available; and
(d) will be represented by a certificate(s) which contains the
following or a similar legend:
The securities represented by this certificate may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Securities Act of 1933
(the "Act"), or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the
satisfaction of the Company.
5. CONVERSION OF PREFERRED SHARES. The Preferred Shares shall be
convertible at the holder's option into Common Shares of Channel America which
will have the registration rights provided for in Paragraph 6 below. The
Preferred Shares shall convert into Common Shares in accordance with the terms
of the "Amended Certificate of Designation, Preferences, Rights and Limitation
of Series C Convertible Preferred Stock, No Par Value of EVRO Corporation"
attached hereto as Exhibit B.
For example purposes, if the current market rate for common stock of
Channel America was $8.00 and 50,000 Preferred Shares were converted, the holder
would receive 125,000 Common Shares calculated as follows:
# of Preferred Shares being converted/Conversion
Price (which is one-half market value for common
stock) x 10 = # Common Shares
50,000/4.00 x 10 = 125,000 Common Shares
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<PAGE>
The holder shall not be required to convert the Preferred Shares.
6. REGISTRATION REQUIREMENTS.
(a) COMMITMENT TO REGISTER WITHIN ONE YEAR. Channel America will: (i)
upon North American's request, within one year from the date of this Agreement,
at its expense, prepare and file with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the 1933 Act relating to the resale to
the public of the Common Shares held by North American; (ii) use its best
efforts to have such Registration Statement become effective as promptly as
possible; and (iii) furnish North American with copies of such Registration
Statement and any prospectus forming a part thereof as may be necessary in
connection with the resale or offering to the public of the Common Shares
covered thereby.
(b) "PIGGYBACK" REGISTRATION RIGHTS. In addition to the registration
rights provided above, Channel America will advise North American, at least ten
days prior to the filing of any Registration Statement for shares of Channel
America of the same class as the Common Shares held by North American, and at
North American's request, will include at Channel America's expense in such
Registration Statement, North American's Common Shares; provided, however, in
the event that North American shall elect not to include its Common Shares in
such Registration Statement, Channel America will have no further obligation
with respect to the filing of a Registration Statement with respect to the
resale and offering to the public of the Common Shares held by North American
either pursuant to subparagraph (a) above or otherwise.
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<PAGE>
7. DELIVERY OF ARTWORK. Channel America will take constructive delivery of
the Artwork by accepting delivery of the keys to the warehouse in Minnesota
where the Artwork is currently located.
8. REPRESENTATIONS AND WARRANTIES OF NORTH AMERICAN. North American
represents and warrants to Channel America with respect to the Artwork that:
(a) North American has good and marketable title to the Artwork being
conveyed hereunder, and has the right to and will convey the same to Channel
America free and clear of all liens and encumbrances.
(b) North American has entered into no other contract to sell, assign
or otherwise convey the Artwork or any portion thereof or interest therein.
(c) The execution and delivery of this Agreement and the conveyance
herein contemplated have been, or as of Closing shall have been, duly authorized
by the Board of Directors of North American.
(d) The execution and delivery of this Agreement and the conveyance
herein contemplated, do not require shareholder approval.
(e) The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated and the compliance and/or fulfillment of
the terms and provisions hereof, will not violate or conflict with any
provisions of North American's Certificate of Incorporation, its Bylaws or any
Resolution heretofore adopted and still effective, or result in breach of or
constitute a default under the terms, conditions, or provisions of any agreement
or instrument of which North American is a party.
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<PAGE>
(f) No representation or warranty made herein by North American nor any
statement or certificate given or to be given to Channel America pursuant hereto
or with respect to the transactions contemplated hereby, contains or will
contain any intentionally untrue statement of material fact or intentionally
omit or will intentionally omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(g) North American has no present intention to dispose of the Preferred
Shares being acquired hereunder.
(h) The foregoing representations and warranties are made by North
American with the knowledge and expectation that Channel America is placing
complete reliance thereon and all representations and warranties made by North
American shall survive Closing.
9. REPRESENTATIONS AND WARRANTY OF CHANNEL AMERICA. Channel America
represents and warrants to North American with respect to the Preferred Shares
of Channel America being issued that:
(a) The execution and delivery of this Agreement and the issuance of
the Preferred Shares herein contemplated have been, or as of Closing shall have
been, duly authorized by the Board of Directors of Channel America.
(b) The execution and delivery of this Agreement and the issuance of
the Preferred Shares herein contemplated do not require shareholder approval.
(c) The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated and the compliance and/or fulfillment of
the terms and provisions hereof, will not violate or conflict with any
provisions of Channel America's Certificate of Incorporation, its Bylaws or any
Resolution heretofore adopted and still effective,
-6-
<PAGE>
or result in breach of or constitute a default under the terms, conditions, or
provisions of any agreement or instrument of which Channel America is a party.
(d) No representation or warranty made herein by Channel America nor
any statement or certificate given or to be given to North American pursuant
hereto or with respect to the transactions contemplated hereby, contains or will
contain any intentionally untrue statement of material fact or intentionally
omit or will intentionally omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
10. RELATIONSHIP WITH AFFILIATED PERSONS. Both parties to this transaction
acknowledge that Max P. Cawal is an officer and director of both Channel America
and North American.
11. CONDITIONS PRECEDENT TO CHANNEL AMERICA'S CLOSING HEREUNDER. All
obligations of Channel America under this Agreement are subject to fulfillment
prior to or as of Closing of each of the following conditions:
(a) North American shall have performed and complied with all
agreements and conditions required by this Agreement to be performed and
complied with by it prior to Closing.
(b) North American will have delivered to Channel America an appraisal
or valuation of the Artwork prepared by an independent appraiser approved by
Channel America and in form and content satisfactory to Channel America which
sets forth and certifies to the value of the Artwork.
(c) Notwithstanding anything herein to the contrary, the contingency
set forth in (a) and (b) above must be waived by Channel America or satisfied
within three (3) days of
-7-
<PAGE>
the signing of this Agreement, otherwise Channel America shall have the right to
terminate this Agreement upon written notice to North American.
12. CONDITIONS PRECEDENT TO NORTH AMERICA'S CLOSING HEREUNDER. All
obligations of North American under this Agreement are subject to Channel
America having performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by it prior to
Closing.
13. CLOSING DATE. For all purposes of this Agreement, the "Closing Date"
shall be on or before the 29th day of October, 1996 at the offices of Channel
America or at such other place as the parties hereto shall mutually agree. At
Closing, the conveyance, transfer, assignment and delivery of the Artwork shall
be effected by exchange of the Preferred Shares for a Bill of Sale, the keys
referenced in Paragraph 7 above, and related documentation conveying ownership
of the Artwork.
14. NOTICES. All notices, demands and requests required or permitted to be
given hereunder shall be deemed duly given if mailed by certified or registered
mail, postage prepaid, and pending designation of another address, addressed as
follows:
North American Resorts, Inc.
315 E.Robinson Street #190
Orlando, Florida 32801
Channel America Broadcasting, Inc.
1509 S. Florida Avenue, Suite 3
Lakeland, Florida 33803-2293
With a copy to:
Stephen H. Cohen, Esq.
Scolaro, Shulman, Cohen,
Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202
-8-
<PAGE>
15. ADDITIONAL DOCUMENTS. The parties hereto agree that they will at any
time, and from time to time, after the Closing and upon the request of the
other, execute, acknowledge, and deliver or cause to be executed, acknowledged
and delivered further assignments, transfers, conveyances, powers of attorney,
acts, and assurances as may be reasonably required in accordance with this
Agreement to more fully effect the transactions contemplated by this Agreement.
16. SURVIVAL OF WARRANTIES. Each of the covenants, representations and
warranties of each of the parties to this Agreement, as contained herein, shall
be true and correct as of the Closing Date as though such covenants,
representations and warranties were made at and as of such time, except for
changes occurring in the ordinary course of business. Each of the parties shall
on or before the Closing Date perform all of their undertakings herein in
accordance with the terms hereof.
17. ENTIRE AGREEMENT AND COUNTERPARTS. This Agreement contains the entire
Agreement between the parties, superseding in all respects any and all prior
oral or written agreements or understandings, and shall be amended or modified
only by written instruments signed by both parties hereto. This Agreement may be
executed in counterparts and by facsimile signature, each of which shall be
deemed an original and all of which, taken together, shall constitute one
Agreement.
18. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
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<PAGE>
19. GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the internal laws of the State of Florida without
regard to the principals of conflicts of law.
IN WITNESS WHEREOF, the parties have hereto set their hands and seals the
day and date first above written.
NORTH AMERICAN RESORTS, INC.
By:/s/ DONALD MASTROPIETRO
------------------------------
Donald Mastropietro, President
CHANNEL AMERICA BROADCASTING, INC.
By:/s/ THOMAS L. JENSEN
---------------------------
Thomas L. Jensen, Chief Executive Officer
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<PAGE>
EXHIBIT A
LIST OF ARTWORK
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<PAGE>
EXHIBIT B
AMENDED CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES C CONVERTIBLE PREFERRED STOCK,
NO PAR VALUE OF EVRO CORPORATION
-12-
EXHIBIT 3
AMENDED
CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND
LIMITATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
NO PAR VALUE,
OF EVRO CORPORATION
EVRO Corporation (the "Corporation"), organized and existing under Florida
law, hereby certifies that, pursuant to authority conferred upon the Board of
Directors by the Articles of Incorporation of the Corporation and Section
607.0602 of the Florida Business Corporation Act, the Board of Directors on
September 27, 1996, adopted a Resolution providing for the creation and issuance
of a series of its authorized preferred stock, designated Series A Convertible
Preferred Stock, no par value, which Resolution is hereafter set forth in its
entirety.
RESOLVED, THAT THE SECURITIES AUTHORIZED HEREIN HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATIONS OF THE
1933 ACT) EXCEPT PURSUANT TO REGISTRATION REQUIREMENTS OF THE 1933 ACT, OR
REGULATION "S" OR ANOTHER EXEMPTION THEREFROM.
RESOLVED, THAT PURSUANT TO THE AUTHORITY EXPRESSLY GRANTED AND VESTED IN
THE BOARD OF DIRECTORS OF THIS CORPORATION IN ACCORDANCE WITH THE PROVISIONS OF
ITS ARTICLES OF INCORPORATION, A SERIES OF THE CORPORATION'S AUTHORIZED CLASS OF
PREFERRED STOCK, NO PAR VALUE, IS HEREBY ESTABLISHED AS "SERIES A CONVERTIBLE
PREFERRED STOCK" (HEREINAFTER REFERRED TO AS THE SERIES A PREFERRED STOCK),
WHICH SERIES CONSISTS OF 100 AUTHORIZED SHARES. THE ISSUED AND OUTSTANDING
SHARES OF THE SERIES A PREFERRED STOCK, AS THEY MAY EXIST FROM TIME TO TIME, ARE
SOMETIMES REFERRED TO BELOW AS THE "SHARE(S)". THE PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF, AND THE QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS IMPOSED UPON THE SERIES A PREFERRED STOCK SHALL BE
AS FOLLOWS:
1. NO VOTING RIGHTS. Except as required by Florida Business Corporation
Act, the Holders of the Shares will have no voting rights.
2. PRIORITY IN THE EVENT OF LIQUIDATION OR DISSOLUTION. In the event of
any liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or otherwise, after payment or provision for payment of the
debts and other liabilities of the Corporation and before any distribution shall
be made to the Holder of any class of the common
Page 1 of 10
<PAGE>
stock of the Corporation, each Holder of Series A Preferred Stock shall be
entitled to receive, out of the net assets of the Corporation, the sum of
$50,000.00 in cash for each Share of Series A Preferred Stock so held subject to
the first priorities of all Holders of the Corporation's Series B Preferred
Stock, if any, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series I Preferred Stock, Series H
Preferred Stock, Series L Preferred Stock and Series M Preferred Stock, as set
forth in the respective certificates of designation, preferences, rights and
limitations of such series of preferred stock of the Corporation. After payment
shall have been made in full to the Holder of Series A Preferred Stock, or funds
necessary for such payment shall have been set aside in trust for the exclusive
benefit of such Holders, the Holders of the Series A Preferred Stock shall be
entitled to no further participation in any distribution of the assets of the
Corporation.
3. CONVERSION OF PREFERRED STOCK INTO COMMON STOCK.
(a) IN GENERAL. Subject to the provisions of this Section 4, each
Holder of record shall be entitled, at its option, at any time commencing
forty (40) days after issuance hereof to convert any or all of the
original amount of the Series A Preferred Stock into shares of common
stock, $0.01 par value per share, of the Corporation (the "Common Stock"),
at a conversion price for each share of Common Stock equal to the lesser
of 50% of the Market Price (as defined below) of the Corporation's Common
Stock, or $.75 per common share. For purposes of this Section 4(a), the
"Market Price" shall be the lower of (i) the average closing bid price of
the Common Stock for the five (5) business days immediately preceding the
conversion date; or (ii) the average closing bid price of the Common Stock
for the five (5) business days prior to subscription by the Holder as
reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"). Such conversions shall be effectuated by
surrendering the Series A Preferred Stock to be converted (with a copy, by
facsimile or courier) to the Corporation with the form of conversion
notice, executed by the Holder of a Series A Preferred Stock evidencing
such Holder's intention to convert the Series A Preferred Stock or
specified portion (as above provided) hereof, and accompanied, if required
by the Corporation, by proper assignment hereof in blank. Accrued but
unpaid interest shall be subject to conversion as well. The number of
shares issuable shall be rounded to the nearest whole share, with the
fraction paid in cash in the discretion of the Corporation. The date on
which notice of conversion is given shall be deemed to be the date
executed, to the Corporation or, if earlier, the date set forth in such
notice of conversion if the Debenture is received by the Corporation
within five (5) business days thereafter.
(b) PROCEDURE. Any Holder of Shares of Series A Preferred Stock
desiring to convert any such Shares into Common Stock shall surrender each
certificate representing one or more Shares of such Stock to be converted,
duly endorsed to the Corporation or in blank, at the principal business
office of the Corporation (or such other place as may be designated by the
Corporation), and shall give written notice to the Corporation at that
office of the election to convert the same, setting forth therein the name
or names (with the address or addresses) in which the shares of Common
Stock are to be issued. If the
Page 2 of 10
<PAGE>
last day for any exercise of the conversion right shall be a legal holiday
or a day on which federally chartered banking institutions are authorized
by law to close, then such conversion right may be exercised on the next
succeeding day not a legal holiday or a day on which such banking
institutions are authorized by law to close.
(c) NO REDEMPTION RIGHT BY CORPORATION. Corporation shall not have the
right to redeem or call the Shares, without the prior written consent by
Holder.
(d) ELECTION TO CONVERT BY HOLDER. Subject to the provision of this
Section 4 and provided the Shares were purchased by the Holder pursuant to
Regulation "S", the Holder shall have the right, forty (40) days after
purchasing the Shares, to receive upon conversion free trading shares of
the Corporation's Common Stock which may be sold in the United States
without any restrictions.
(e) PENALTY IF LATE DELIVERY. Corporation shall pay to Holder a monthly
penalty of a three percent (3%) discount of the stated value of the Shares
of Series A Preferred Stock, if for any reason Corporation is unable to
deliver Common Stock to Holder within forty (40) days from the closing
hereof. Such penalty shall be calculated upon conversion by Holder to
equate to a further discount of three percent (3%) per month after the
forty (40) day period.
(f) ADDITIONAL PROVISIONS. Conversion of Series A Preferred Stock shall
be subject to the following additional terms and provisions:
(1) REPLACEMENT CERTIFICATES. As promptly as practicable after the
surrender for conversion of any Series A Preferred Stock, the
Corporation shall deliver or cause to be delivered at the principal
office of the Corporation (or such other place as may be designated by
the Corporation), to or upon the written order of the Holder of such
Series A Preferred Stock, one or more certificates representing the
shares of Common Stock issuable upon such conversion, issued in such
name or names as such Holder may reasonably direct. Shares of the
Series A Preferred Stock shall be deemed to have been converted as of
the close of business on the date of the surrender of the Series A
Preferred Stock for conversion, as provided above, and the rights of
the Holders of such Series A Preferred Stock shall cease at such time,
and each person in whose name a certificate for such shares is to be
issued shall be treated for all purposes as having become the record
Holder of such Common Stock at such time; provided, however, that any
such surrender on any date when the stock transfer books of the
Corporation shall be closed shall constitute the person in whose name
each certificate for such shares is to be issued as the record Holder
thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open.
Page 3 of 10
<PAGE>
(2) SUBDIVISIONS OR COMBINATIONS. In the event that the Corporation
shall at any time prior to a particular conversion subdivide or combine
its outstanding shares of Common Stock into a greater or lesser number
of such shares, the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock shall be proportionately
increased in the case of a subdivision or decreased in the case of a
combination, effective in either case at the close of business on the
date which such subdivision or combination shall become effective.
(3) RECAPITALIZATIONS. In the event that the Corporation shall be
recapitalized, consolidated with or merged into any other corporation,
or shall sell or convey to any other corporation all or substantially
all of its property as an entity, provision shall be made as part of
the terms of such recapitalization, consolidation, merger, sale or
conveyance for each Holder of Series A Preferred Stock to thereafter
receive in lieu of the Common Stock otherwise issuable to him upon
conversion of his Preferred Stock, but at the conversion ratio stated
in this Section 4, the same kind and amount of securities or assets as
may be distributable upon such recapitalization, consolidation, merger,
sale or conveyance, with respect to the Common Stock of the
Corporation.
(4) SUCCESSIVE ADJUSTMENTS. The adjustments hereinabove referenced
shall be made successively if more than one event listed in the above
subdivisions of this subsection (c) of this Section 4 shall occur.
(5) NO FRACTIONAL SHARES. The Corporation shall not be required to
issue any fractions of shares of Common Stock upon conversions of
Series A Preferred Stock. If any interest in a fractional share of
Common Stock would otherwise be deliverable upon the conversion of any
Series A Preferred Stock, the Corporation shall make adjustment for
such fractional share interest by payment to the converting shareholder
of cash in an amount bearing the same ratio to the fair market value of
a whole share of Common Stock of the Corporation, as determined by the
Corporation's Board of Directors, as the fractional interest to which
the shareholder would otherwise be entitled bears to a whole share of
Common Stock.
(6) GRANTING OF PUT.
(A) On or after June 30, 1997, at the option of Holder, the
Corporation shall redeem and repurchase the Series A Preferred
Stock from the Holder thereof. The redemption price shall be Fifty
Thousand Dollars ($50,000.00) per share together with accrued
dividends and penalties thereon, if any, and shall be payable in
cash, wire transfer, or certified funds.
Page 4 of 10
<PAGE>
(B) No provision of this Certificate of Designation,
Preferences, Rights and Limitations shall alter or impair the
obligation of the Corporation, which is absolute and unconditional,
to redeem the Shares of the Series A Preferred Stock as provided
for herein.
(C) The Corporation hereby expressly waives demand and
presentment for payment, notice of non-payment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to
accelerate, bringing of suit and diligence in taking any action to
collect amounts called for pursuant to the Put hereunder and shall
be directly and primarily liable for all suits owing and to be
owing herein, regardless of and without any notice, diligence, act
or omission as or with respect to the collection of any amount
called for hereunder.
(D) The Corporation agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by the
Holder in collecting any amount due under the Put.
(7) EVENTS OF DEFAULT. If one or more of the following described
"Events of Default" shall occur:
(A) Any of the representations or warranties made by the
Corporation herein, in the Subscription Agreement, or in any
certificate or financial or other written statements heretofore or
hereafter furnished by or on behalf of the Corporation in
connection with the execution and delivery of the Shares of Series
A Preferred Stock or the Subscription Agreement shall be false or
misleading in any material respect at the time made; or
(B) The Corporation shall fail to perform or observe, in any
material respect, any other covenant, term, provision, condition,
agreement or obligation of the Corporation under this Certificate
of Designation, Preferences, Rights and Limitations and such
failure shall continue uncured for a period of seven (7) days after
notice from the Holder of such failure; or
(C) The Corporation shall (1) become solvent; (2) admit in
writing its inability to pay its debts generally as they mature;
(3) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
Page 5 of 10
<PAGE>
(D) A trustee, liquidator or receiver shall be appointed for
the Corporation or a substantial part of its property or business
without its consent and shall not be discharged within thirty (30)
days after such appointment; or
(E) Any governmental agency or any court of competent
jurisdiction at the insistence of any governmental agency shall
assume custody or control of the whole or any substantial portion
of the properties or assets of the Corporation and shall not be
dismissed within thirty (30) days thereafter, or
(F) Any money judgment, writ or warranty of attachment, or
similar process in excess of Five Hundred Thousand Dollars
($500,000.00) in the aggregate shall be entered or filed against
the Corporation or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of
fifteen (15) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder; or
(G) Bankruptcy, reorganization, insolvency, or liquidation
proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or
against the Corporation and, if instituted against the Corporation,
shall not be dismissed within thirty (30) days after such
instruction of the Corporation shall by any action or answer
approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a
petition filed in any such proceeding; or
(H) The Corporation shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may immediately exercise its right to Put
hereunder. The Holder may then immediately demand redemption of the
Series A Preferred Stock pursuant to the Put. The Holder may
immediately, and without expiration of any period of grace, enforce any
and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
(8) NO ADJUSTMENTS. No adjustment of the conversion ratio shall be made
by reason of:
Page 6 of 10
<PAGE>
(A) the payment of any cash dividend on the Common Stock or any
other class of the capital stock of the Corporation;
(B) the purchase, acquisition, redemption or retirement by the
Corporation of any shares of the Common Stock or of any other class
of the capital stock of the Corporation, except as provided in
subdivision (3) of this subsection (f);
(C) the issuance, other than as provided in the subdivisions of
this subsection (f), of any shares of Common Stock of the
Corporation, or of any securities convertible into shares of Common
Stock or other securities of the Corporation, or of any rights,
warrants or options to subscribe for or purchase shares of the
Common Stock or other securities of the Corporation, or of any
other securities of the Corporation, provided that in the event the
Corporation offers any of its securities, or any rights, warrants
or options to subscribe for or purchase any of its securities, to
the Holders of its Common Stock pursuant to any preemptive or
preferential rights granted to Holders of Common Stock by the
Certificate of Incorporation of the Corporation, or pursuant to any
similar rights that may be granted to such Holders of Common Stock
by the Board of Directors of the Corporation, the Corporation shall
mail written notice of such offer to the Holders of the Series A
Preferred Stock then of record at least twenty (20) days prior to
the record date for the determination of Holders of the Common
Stock entitled to receive any such offer so as to provide such
Holders with a reasonable period of time within which to determine
whether to exercise their rights of conversion;
(D) any offer by the Corporation to redeem or acquire shares of
its Common Stock by paying or exchanging therefor stock of another
corporation or the carrying out by the Corporation of the
transactions contemplated by such offer, provided that at least 20
days prior to the expiration of any such offer the Corporation
shall mail written notice of such offer to the Holders of the
Series A Preferred Stock then of record; or
(E) the distribution to Holders of Common Stock of stock or
other securities of another issuer, if the issuers of such
securities shall be engaged at the time of such distribution in a
business (i) which shall have been previously operated on a
divisional or subsidiary basis by an entity acquired by the
Corporation and (ii) which shall be distinct from the principal
business of the entity to be acquired.
Page 7 of 10
<PAGE>
(9) The Corporation shall, after it has successfully increased its
authorized common stock from 2,500,000 shares to 100,000,000, at all
thereafter times reserve and keep available solely for the purpose of
issuance upon conversion of Series A Preferred Stock, as herein provided,
such number of shares of Common Stock as shall be issuable upon the
conversion of all outstanding Series A Preferred Stock. Seller will grant
to Buyer, for a period of sixty (60) days, a five (5) business day first
right of refusal on any new share sales by Seller, upon Seller receiving
written confirmation of a prospective buyer's intent to purchase shares.
If Buyer does not respond by the end of the fifth business day, Seller may
then sell the shares to the other buyer.
(10) All shares of Common Stock which may be issued upon conversion of
the shares of Series A Preferred Stock will upon issuance by the
Corporation be validly issued, fully paid and nonassessable and free from
all taxes, liens, and charges with respect to the issuance thereof.
(g) EXPENSES. The issuance of certificates representing shares of
Common Stock upon conversion of the Series A Preferred Stock shall be
without charge to each applicable shareholder. However, if any
certificate is to be issued in a name other than that of the Holder of
record of the Series A Preferred Stock so converted, the person or
persons requesting the issuance thereof shall pay to the Corporation
the amount of any expense which may be payable to the transfer agent in
respect of any transfer involved in such issuance, or shall establish
to the satisfaction of the Corporation that such expense has been paid
or is not due and payable.
(h) VERIFICATION. Upon the occurrence of each adjustment or
readjustment of the conversion ratio pursuant hereto, the Corporation
at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof, cause independent public
accountants selected by the Corporation to verify such computation and
prepare and furnish to each Holder of Series A Preferred Stock affected
thereby a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon the written request at any time
of any Holder of Series A Preferred Stock, furnish or cause to be
furnished to such Holder a like certificate setting forth (a) such
adjustment or readjustment, (b) the conversion ratio at the time in
effect, and (c) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of his Shares.
(i) STATUS OF CONVERTED STOCK. In case any Shares of Series A
Preferred Stock shall be converted, the Preferred Shares so converted
shall resume the status of authorized but unissued shares of preferred
stock. The converted common shares will be free trading after the forty
(40) day holding period.
4. LIMITATIONS ON CORPORATION; SHAREHOLDER CONSENT. So long as any Shares
of Series A Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote or the
Page 8 of 10
<PAGE>
written consent as provided by law of 80% of the Holders of the outstanding
Shares, voting as a class, change the preferences, rights or limitations with
respect to the Series A Preferred Stock in any material respect prejudicial to
the Holders thereof, or increase the authorized number of Shares of such Series,
but nothing herein contained shall required such a class vote or consent (a) in
connection with any increase in the total number of authorized shares of Common
Stock, or (b) in connection with the authorization, designation, increase or
issuance of any series of preferred stock holding liquidation preference equal
to or subordinate to the Series A Preferred Stock. Further, no such vote or
written consent of the Holders of the Series A Preferred Stock shall be required
if, at or prior to the time when such change is to take effect, provision is
made for the redemption of all Shares at the time outstanding; and the
provisions of this paragraph 4, shall not in any way limit the right and power
of the Corporation to issue any bonds, notes, mortgages, debentures and other
obligations, and to incur indebtedness to banks and to other lenders.
5. STATED CAPITAL. Of the consideration received by the Corporation in
exchange for the issuance of each share of the Series A Preferred Stock,
$50,000.00 shall constitute paid in capital.
6. NOTICES. All notices or other communications required or permitted to
be given pursuant to this resolution shall be in writing and shall be considered
as properly given or made if hand delivered, mailed by certified or registered
mail, return receipt requested, or sent by prepaid telegram, if to the
Corporation at its address indicated in its Annual Report as most recently filed
with the Florida Department of State, and if to a Holder of Series A Preferred
Stock at the address set forth in the shareholder records as maintained by the
Corporation, or to such other address as any such shareholder may have
designated by like notice forwarded to the Corporation. All notices, except
notices of change of address, shall be deemed given when mailed or hand
delivered and notices of change of address shall be deemed given when received.
IN WITNESS WHEREOF, EVRO Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be executed by its Chief Executive
Officer and its Assistant Secretary as of the 27th day of September, 1996.
/s/ THOMAS L. JENSEN
----------------------------------------------
Thomas L. Jensen, Chief Executive Officer
/s/ O. DON LAUHER
----------------------------------------------
O. Don Lauher, Assistant Secretary
Page 9 of 10
<PAGE>
STATE OF FLORIDA
COUNTY OF POLK
This instrument was acknowledged before me on September 27, 1996, on
behalf of EVRO Corporation by Thomas L. Jensen, its Chief Executive Officer.
/s/ DONALD R. MASTROPIETRO
----------------------------------------------
Notary Public
My Commission Expires: January 25, 2000
STATE OF FLORIDA
COUNTY OF POLK
This instrument was acknowledged before me on September 27, 1996, on
behalf of EVRO Corporation by O. Don Lauher, its Assistant Secretary.
/s/ DONALD R. MASTROPIETRO
----------------------------------------------
Notary Public
My Commission Expires: January 25, 2000
Page 10 of 10
EXHIBIT 4
CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND
LIMITATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
$10,000 STATED VALUE,
OF CHANNEL AMERICA BROADCASTING, INC.
Channel America Broadcasting, Inc. (the "Corporation"), organized and
existing under Florida law, hereby certifies that, pursuant to authority
conferred upon the Board of Directors by the Articles of Incorporation of the
Corporation and Section 607.0602 of the Florida Business Corporation Act, the
Board of Directors on October 21, 1996, adopted a Resolution providing for the
creation and issuance of a series of its authorized preferred stock, designated
Series B Convertible Preferred Stock, $10,000.00 stated value per share, which
Resolution is hereafter set forth in its entirety.
RESOLVED, that pursuant to the authority expressly granted and vested in
the Board of Directors of this Corporation in accordance with the provisions of
its Articles of Incorporation, a series of the Corporation's authorized class of
preferred stock, $.001 par value, is hereby established as "Series B Convertible
Preferred Stock" (hereinafter referred to as the Series B Preferred Stock),
which series consists of 1,000 authorized shares. The issued and outstanding
shares of the Series B Preferred Stock, as they may exist from time to time, are
sometimes referred to below as the "Share(s)". The preferences and relative,
participating, optional or other special rights of, and the qualifications,
limitations and restrictions imposed upon the Series B Preferred Stock shall be
as follows:
1. DIVIDENDS. The holders of the Shares of Series B Preferred Stock
(hereinafter referred to as "Holders" or "Holder") shall be entitled to receive
dividends at an annual rate to be determined by the Corporation's Board of
Directors at the time the Series B Preferred Stock is issued, which rate shall
not be less than 8.5% nor greater than 9.5% of the stated value of the shares.
The dividend rate shall be indicated on the face of the certificate. Dividends
shall begin accruing on the first business day to occur after the date of
issuance and shall continue until the Shares are converted into the
Corporation's common stock. Dividends shall be payable by the Corporation to the
Holders in cash or the Corporation's common stock (provided, however, if payment
is in common stock then such payment shall be based upon the formula provided
for in Section 4(a) below), at the end of each calendar year or, if earlier,
upon conversion of the Shares into common stock.
2. NO VOTING RIGHTS. Except as required by Florida Business Corporation
Act, the Holders of the Shares shall have no voting rights.
3. PRIORITY IN THE EVENT OF LIQUIDATION OR DISSOLUTION. In the event of any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or otherwise, after payment or provision for payment of the
debts and other liabilities of the
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Corporation and before any distribution shall be made to the Holder of any class
of the common stock of the Corporation, each Holder of Series B Preferred Stock
shall be entitled to receive, out of the net assets of the Corporation, the sum
of $10,000.00 in cash for each Share of Series B Preferred Stock so held subject
to the first priorities of all Holders of the Corporation's Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series I Preferred Stock, Series H Preferred Stock, Series L Preferred
Stock, Series M Preferred Stock and Series A Preferred Stock, as set forth in
the respective certificates of designation, preferences, rights and limitations
of such series of preferred stock of the Corporation. After payment shall have
been made in full to the Holders of Series B Preferred Stock, or funds necessary
for such payment shall have been set aside in trust for the exclusive benefit of
such Holders, the Holders of the Series B Preferred Stock shall be entitled to
no further participation in any distribution of the assets of the Corporation.
4. CONVERSION OF PREFERRED STOCK INTO COMMON STOCK.
(a) IN GENERAL. Subject to the provisions of this Section 4, each Holder
of record shall be entitled, at its option, at any time to convert any or all of
the stated value of the Series B Preferred Stock into shares of common stock,
$.001 par value per share, of the Corporation (the "Common Stock"), at a
conversion price for each share of Common Stock to be determined by the
Corporation's Board of Directors at the time the Series B Preferred Stock is
issued, which conversion price shall not be less than 50% nor greater than 70%
of the Market Price (as defined below) of the Corporation's Common Stock. The
conversion rate shall be indicated on the face of the certificate. For purposes
of this Section 4(a), the "Market Price" shall be the lower of (i) the average
closing bid price of the Common Stock for the five (5) business days immediately
preceding the conversion date; or (ii) the average closing bid price of the
Common Stock for the five (5) business days prior to the date the Holder
acquired the Corporation's Convertible Debentures (which the Holder has
delivered to the Corporation in exchange for the Corporation's Series B
Preferred Stock) as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). Such conversions shall be effectuated by
surrendering to the Corporation the Series B Preferred Stock to be converted,
endorsed by the Holder of the Series B Preferred Stock, evidencing such Holder's
intention to convert the Series B Preferred Stock or specified portion thereof.
Accrued but unpaid dividends shall be subject to conversion as well. The number
of shares issuable shall be rounded to the nearest whole share, with the
fraction paid in cash in the discretion of the Corporation. The date on which
notice of conversion is given shall be deemed to be the date the certificate is
received by the Corporation or, if earlier, the date the certificate is endorsed
for conversion by the Holder if the certificate is received by the Corporation
within five (5) business days thereafter.
(b) PROCEDURE. Any Holder of Shares of Series B Preferred Stock desiring
to convert any such Shares into Common Stock shall surrender each certificate
representing one or more Shares of such Stock to be converted, duly endorsed to
the Corporation or in blank, at the principal business office of the Corporation
(or such other place as may be designated
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<PAGE>
by the Corporation), and shall give written notice to the Corporation at that
office of the election to convert the same, setting forth therein the name or
names (with the address or addresses) in which the shares of Common Stock are to
be issued. If the last day for any exercise of the conversion right shall be a
legal holiday or a day on which federally chartered banking institutions are
authorized by law to close, then such conversion right may be exercised on the
next succeeding day not a legal holiday or a day on which such banking
institutions are authorized by law to close.
(c) NO REDEMPTION RIGHT BY CORPORATION. The Corporation shall not have
the right to redeem or call the Shares, without the prior written consent of
each Holder.
(d) ADDITIONAL PROVISIONS. Conversion of Series B Preferred Stock shall
be subject to the following additional terms and provisions:
(1) REPLACEMENT CERTIFICATES. As promptly as practicable after the
surrender for conversion of any Series B Preferred Stock, the Corporation shall
deliver or cause to be delivered at the principal office of the Corporation (or
such other place as may be designated by the Corporation), to or upon the
written order of the Holder of such Series B Preferred Stock, one or more
certificates representing the shares of Common Stock issuable upon such
conversion, issued in such name or names as such Holder may reasonably direct.
Shares of the Series B Preferred Stock shall be deemed to have been converted as
of the close of business on the date of the surrender of the Series B Preferred
Stock for conversion, as provided above, and the rights of the Holders of such
Series B Preferred Stock shall cease at such time, and each person in whose name
a certificate for such shares is to be issued shall be treated for all purposes
as having become the record Holder of such Common Stock at such time.
(2) SUBDIVISIONS OR COMBINATIONS. In the event that the Corporation
shall at any time prior to a particular conversion subdivide or combine its
outstanding shares of Common Stock into a greater or lesser number of such
shares, the number of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock shall be proportionately increased in the case of a
subdivision or decreased in the case of a combination, effective in either case
at the close of business on the date which such subdivision or combination shall
become effective.
(3) RECAPITALIZATIONS. In the event that the Corporation shall be
recapitalized, consolidated with or merged into any other corporation, or shall
sell or convey to any other corporation all or substantially all of its
property, provision shall be made as part of the terms of such recapitalization,
consolidation, merger, sale or conveyance for each Holder of Series B Preferred
Stock to thereafter receive in lieu of the Common Stock otherwise issuable to
him upon conversion of its Preferred Stock, at the conversion ratio stated in
this Section 4, the same kind and amount of securities
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<PAGE>
or assets as may be distributable upon such recapitalization, consolidation,
merger, sale or conveyance, with respect to the Common Stock of the Corporation.
(4) SUCCESSIVE ADJUSTMENTS. The adjustments hereinabove referenced
shall be made successively if more than one event listed in the above
subdivisions of this subsection (d) of this Section 4 shall occur.
(5) NO FRACTIONAL SHARES. The Corporation shall not be required to
issue any fractions of shares of Common Stock upon conversions of Series B
Preferred Stock. If any interest in a fractional share of Common Stock would
otherwise be deliverable upon the conversion of any Series B Preferred Stock,
the Corporation shall make adjustment for such fractional share interest by
payment to the converting shareholder of cash in an amount bearing the same
ratio to the fair market value of a whole share of Common Stock of the
Corporation, as determined by the Corporation's Board of Directors, as the
fractional interest to which the shareholder would otherwise be entitled bears
to a whole share of Common Stock.
(6) NO ADJUSTMENTS. No adjustment of the conversion ratio shall be
made by reason of:
(A) the payment of any cash dividend on the Common Stock or any
other class of the capital stock of the Corporation;
(B) the purchase, acquisition, redemption or retirement by the
Corporation of any shares of the Common Stock or of any other class of the
capital stock of the Corporation, except as provided in subdivision (2) of this
subsection (d);
(C) the issuance, other than as provided in the subdivisions of
this subsection (d), of any shares of Common Stock of the Corporation, or of any
securities convertible into shares of Common Stock or other securities of the
Corporation, or of any rights, warrants or options to subscribe for or purchase
shares of the Common Stock or other securities of the Corporation, or of any
other securities of the Corporation, provided that in the event the Corporation
offers any of its securities, or any rights, warrants or options to subscribe
for or purchase any of its securities, to the Holders of its Common Stock
pursuant to any preemptive or preferential rights granted to Holders of Common
Stock by the Certificate of Incorporation of the Corporation, or pursuant to any
similar rights that may be granted to such Holders of Common Stock by the Board
of Directors of the Corporation, the Corporation shall mail written notice of
such offer to the Holders of the Series B Preferred Stock then of record at
least twenty (20)
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<PAGE>
days prior to the record date for the determination of Holders of the Common
Stock entitled to receive any such offer so as to provide such Holders with a
reasonable period of time within which to determine whether to exercise their
rights of conversion;
(D) any offer by the Corporation to redeem or acquire shares of
its Common Stock by paying or exchanging therefor stock of another corporation
or the carrying out by the Corporation of the transactions contemplated by such
offer, provided that at least 20 days prior to the expiration of any such offer
the Corporation shall mail written notice of such offer to the Holders of the
Series B Preferred Stock then of record; or
(E) the distribution to Holders of Common Stock of stock or
other securities of another issuer, if the issuer of such securities shall be
engaged at the time of such distribution in a business (i) which shall have been
previously operated on a divisional or subsidiary basis by an entity acquired by
the Corporation and (ii) which shall be distinct from the principal business of
the entity to be acquired.
(7) The Corporation shall at all times reserve and keep available
solely for the purpose of issuance upon conversion of Series B Preferred Stock,
as herein provided, such number of shares of Common Stock as shall be issuable
upon the conversion of all outstanding Series B Preferred Stock.
(8) All shares of Common Stock which may be issued upon conversion
of the shares of Series B Preferred Stock will upon issuance by the Corporation
be validly issued, fully paid and nonassessable and free from all taxes, liens,
and charges with respect to the issuance thereof.
(e) EXPENSES. The issuance of certificates representing shares
of Common Stock upon conversion of the Series B Preferred Stock shall be without
charge to each applicable shareholder. However, if any certificate is to be
issued in a name other than that of the Holder of record of the Series B
Preferred Stock so converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax which may be payable
in respect of any transfer involved in such issuance, or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not due and
payable.
(f) VERIFICATION. Upon the occurrence of each adjustment or
readjustment of the conversion ratio pursuant hereto, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof, cause independent public accountants selected by the
Corporation to verify such computation and prepare and furnish to each Holder of
Series B Preferred Stock affected thereby a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment
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<PAGE>
or readjustment is based. The Corporation shall, upon the written request at any
time of any Holder of Series B Preferred Stock, furnish or cause to be furnished
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the conversion ratio at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of its Shares.
(g) STATUS OF CONVERTED STOCK. In case any Shares of Series B
Preferred Stock shall be converted, the Shares so converted shall resume the
status of authorized but unissued shares of preferred stock.
5. LIMITATIONS ON CORPORATION; SHAREHOLDER CONSENT. So long as any Shares
of Series B Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote or the written consent as provided by law of 80% of the
Holders of the outstanding Shares, voting as a class, change the preferences,
rights or limitations with respect to the Series B Preferred Stock in any
material respect prejudicial to the Holders thereof, or increase the authorized
number of Shares of such Series, but nothing herein contained shall require such
a class vote or consent (a) in connection with any increase in the total number
of authorized shares of Common Stock, or (b) in connection with the
authorization, designation, increase or issuance of any series of preferred
stock having a liquidation preference equal to or subordinate to the Series B
Preferred Stock. Further, no such vote or written consent of the Holders of the
Series B Preferred Stock shall be required if, at or prior to the time when such
change is to take effect, provision is made for the redemption of all Shares at
the time outstanding; and the provisions of this paragraph 5, shall not in any
way limit the right and power of the Corporation to issue any bonds, notes,
mortgages, debentures and other obligations, and to incur indebtedness to banks
and to other lenders.
6. STATED CAPITAL. Of the consideration received by the Corporation in
exchange for the issuance of each share of the Series B Preferred Stock,
$10,000.00 shall constitute paid in capital.
7. NOTICES. All notices or other communications required or permitted to be
given pursuant to this resolution shall be in writing and shall be considered as
properly given or made if hand delivered, mailed by certified mail, return
receipt requested, or sent telecopier, if to the Corporation at its address
indicated in its Annual Report as most recently filed with the Florida
Department of State, and if to a Holder of Series B Preferred Stock at the
address set forth in the shareholder records as maintained by the Corporation,
or to such other address as any such shareholder may have designated by like
notice forwarded to the Corporation. All notices, except notices of change of
address, shall be deemed given when mailed, sent by telecopier or hand delivered
and notices of change of address shall be deemed given when received.
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<PAGE>
IN WITNESS WHEREOF, Channel America Broadcasting, Inc. has caused its
corporate seal to be hereunto affixed and this Certificate to be executed by its
Chief Executive Officer and its Assistant Secretary as of the 22th day of
October, 1996.
/s/ THOMAS L. JENSEN
-----------------------------------------
Thomas L. Jensen, Chief Executive Officer
/s/ O. DON LAUHER
-----------------------------------------
O. Don Lauher, Assistant Secretary
STATE OF FLORIDA
COUNTY OF POLK
This instrument was acknowledged before me on October , 1996, on behalf of
Channel America Broadcasting, Inc. by Thomas L. Jensen, its Chief Executive
Officer.
/s/ TEREASA B. FANNIN
-----------------------------------------
Notary Public
My Commission Expires: December 28, 1998
STATE OF FLORIDA
COUNTY OF POLK
This instrument was acknowledged before me on October , 1996, on behalf of
Channel America Broadcasting, Inc. by O. Don Lauher, its Assistant Secretary.
/s/ TEREASA B. FANNIN
-----------------------------------------
Notary Public
My Commission Expires: December 28, 1998
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