SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
COMMISSION FILE NO. 0-21534
CHILDREN'S BROADCASTING CORPORATION
(Name of Registrant as Specified In Its Charter)
AVRON L. GORDON, ESQ.
BRIGGS AND MORGAN, P.A.
2400 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(612) 334-8455
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) an identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125
2) Form, Schedule or Registration Statement No.: Preliminary
Schedule 14A
3) Filing Party: Children's Broadcasting Corporation
4) Date Filed: June 28, 1996
CHILDREN'S BROADCASTING CORPORATION
724 FIRST STREET NORTH
MINNEAPOLIS, MN 55401
August 26, 1996
Dear Shareholder:
I am pleased to invite you to attend the Annual Meeting of Shareholders
of Children's Broadcasting Corporation, to be held at the Hilton-Minneapolis,
1001 Marquette Avenue South, Minneapolis, Minnesota, on September 30, 1996, at
3:30 p.m. Minneapolis time.
At the Annual Meeting you will be asked to vote for the election of
directors, to approve an Amendment to the Company's Articles of Incorporation,
to approve the Company's 1996 Stock Purchase Plan, to approve an Amendment to
the Company's 1994 Stock Option Plan, and to ratify the appointment by the Board
of Directors of BDO Seidman, LLP as the Company's independent accountants for
the fiscal year ending December 31, 1996. The accompanying material contains the
Notice of Annual Meeting, a Proxy Statement which includes information about the
matters to be acted upon at the Annual Meeting, and a related form of proxy.
I sincerely hope you will be able to attend the Company's Annual
Meeting. Whether or not you are able to attend the Annual Meeting in person, I
urge you to sign and date the enclosed form of proxy and return it promptly in
the enclosed envelope. If you do attend the meeting in person, you may withdraw
your proxy and vote personally on any matters brought properly before the
meeting.
Very truly yours,
CHILDREN'S BROADCASTING CORPORATION
/s/ Christopher T. Dahl
Christopher T. Dahl
Chairman, President and Chief Executive Officer
CHILDREN'S BROADCASTING CORPORATION
724 FIRST STREET NORTH
MINNEAPOLIS, MN 55401
--------------------
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1996
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Children's Broadcasting Corporation (the "Company") will be held at the
Hilton-Minneapolis, 1001 Marquette Avenue South, Minneapolis, Minnesota, on
September 30, 1996, at 3:30 p.m. Minneapolis time, for the following purposes,
as more fully described in the accompanying Proxy Statement:
1. To elect five directors for the ensuing year and until their
successors shall be elected and duly qualified;
2. To consider and vote upon an amendment to the Articles of
Incorporation of the Company to increase the Company's
authorized shares from 12,500,000 to 50,000,000 shares;
3. To consider and vote upon the adoption of the Company's 1996
Stock Purchase Plan;
4. To consider and vote upon an amendment to the Company's 1994
Stock Option Plan which increases the number of shares
reserved thereunder for issuance of stock options from 250,000
to 1,000,000 shares;
5. To ratify and approve the appointment of BDO Seidman, LLP as
the Company's independent accountants for the fiscal year
ending December 31, 1996; and
6. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on August 21, 1996
are entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please
complete, date and sign the enclosed proxy exactly as your name appears thereon
and promptly return it in the envelope provided, which requires no postage if
mailed in the United States. Proxies may be revoked at any time before they are
exercised and, if you attend the meeting in person, you may withdraw your proxy
and vote personally on any matter brought properly before the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lance W. Riley
Lance W. Riley
Secretary and General Counsel
Minneapolis, Minnesota
August 26, 1996
CHILDREN'S BROADCASTING CORPORATION
724 FIRST STREET NORTH
MINNEAPOLIS, MN 55401
--------------------
PROXY STATEMENT FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1996
--------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Children's Broadcasting Corporation (the
"Company") for use at the Annual Meeting of Shareholders to be held at the
Hilton-Minneapolis, 1001 Marquette Avenue South, Minneapolis, Minnesota, on
September 30, 1996 at 3:30 p.m. Minneapolis time, and at any adjournment
thereof.
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of the Company (hereinafter sometimes
referred to as the "Board"). All shares of Common Stock represented by properly
executed proxies, unless such proxies have previously been revoked, will be
voted at the meeting and, where the manner of voting is specified on the proxy,
will be voted in accordance with such specifications. Shares represented by
properly executed proxies on which no specification has been made will be voted
FOR the election of the nominees for director named herein, FOR the proposal to
approve the Amendment to the Company's Articles of Incorporation, FOR the
proposal to approve the Company's 1996 Stock Purchase Plan, FOR the proposal to
approve the Amendment to the 1994 Stock Option Plan, and FOR ratification and
approval of the appointment of the independent accountants for the fiscal year
ending December 31, 1996. If any other matters are properly presented at the
meeting for action, including a question of adjourning the meeting from time to
time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. If a
properly executed proxy is returned and the shareholder has abstained from
voting on any matter, the shares represented by the proxy will be considered
present at the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but will not be considered to have been voted in favor of
such matter.
When stock is held in the name of more than one person, each such
person should sign the proxy. If the shareholder is a corporation, the proxy
should be signed in the name of such corporation by an executive or other
authorized officer. If signed as attorney, executor administrator, trustee,
guardian or in any other representative capacity, the signer's full title should
be given and, if not previously furnished, a certificate or other evidence of
appointment should be furnished. If an executed proxy is returned by a broker
holding shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
Any shareholder who executes and returns a proxy may revoke it at any
time before it is voted. Any shareholder who wishes to revoke a proxy can do so
by executing a later-dated proxy relating to the same shares and delivering it
to Lance W. Riley, Children's Broadcasting Corporation, 724 First Street North,
Minneapolis, Minnesota 55401, prior to the vote at the Annual Meeting, by
written notice of revocation received by Lance W. Riley, prior to the vote at
the Annual Meeting, or by appearing in person at the Annual Meeting, filing a
written notice of revocation and voting in person the shares to which the proxy
relates.
The Board has fixed the close of business on August 21, 1996 as the
Record Date for determining the holders of outstanding shares of Common Stock
entitled to notice of, and to vote at, the Annual Meeting. On the August 15,
1996, there were 5,642,358 shares of Common Stock issued, outstanding and
entitled to vote. Each holder of Common Stock is entitled to one vote,
exercisable in person or by proxy, for each share of Common Stock held of record
on the Record Date. The Notice of Annual Meeting, this Proxy Statement and the
enclosed form of proxy are first being mailed to shareholders of the Company on
or about August 26, 1996.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table contains certain information as of August 15, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director, nominee for director and executive officer of
the Company and (iii) the executive officers of the Company and directors as a
group, and as to the percentage of the outstanding shares held by them on such
date. Any shares which are subject to an option or a warrant exercisable within
60 days are reflected in the following table and are deemed to be outstanding
for the purpose of computing the percentage of Common Stock owned by the option
or warrant holder but are not deemed to be outstanding for the purpose of
computing the percentage of Common Stock owned by any other person. Unless
otherwise noted, each person identified below possesses sole voting and
investment power with respect to such shares. The business address of Messrs.
Dahl, Gilbertson, Riley, Landis, Paradis and Ms. McMahon is 724 First Street
North, Minneapolis, Minnesota 55401.
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------------------
PERCENT
VOTING NON-VOTING OF
NAME AND ADDRESS COMMON CONVERTIBLE COMMON CLASS
- ------------------------------------------- --------------- -------------------- ----------
<S> <C> <C> <C>
Christopher T. Dahl............................ 531,585(1) 9.2%
James G. Gilbertson............................ 49,625(2) *
Lance W. Riley................................. 27,917(2) *
Gary W. Landis................................. 28,124(2) *
Barbara A. McMahon............................. 7,500(2) *
Melvin E. Paradis.............................. 2,500 *
The Walt Disney Company
Capital Cities/ABC, Inc.
ABC Holding Company, Inc.
ABC Radio Network, Inc.................... 1,088,684(3) 16.2%
Richard W. Perkins............................. 471,459(4) 8.0%
730 East Lake Street
Wayzata, Minnesota 55391
Perkins Capital Management, Inc................ 706,638(5) 12.3%
730 East Lake Street
Wayzata, Minnesota 55391
Russell Cowles II.............................. 270,039(6) 4.7%
c/o Sherburne and Coughlin, Ltd.
708 South 3rd Street, Suite 510
Minneapolis, Minnesota 55415
John Cowles Family Trust....................... 216,685(7) 3.8%
Sherburne and Coughlin, Ltd.
708 South 3rd Street, Suite 510
Minneapolis, Minnesota 55415
Rodney P. Burwell.............................. 68,750(8) 1.2%
7901 Xerxes Avenue South, Suite 201
Minneapolis, Minnesota 55431
Mark A. Cohn................................... 27,500(9) *
7101 Winnetka Avenue North
Minneapolis, Minnesota 55428
All Officers, Directors and Nominees
as a Group (10 persons)................... 2,191,637(10) 34.5%
</TABLE>
- ---------------
* Less than 1%
(1) Includes: (i) 410,486 shares owned directly and (ii) 121,099 shares
purchasable upon exercise of options and warrants.
(2) Includes options for the purchase of 45,125 shares, 27,917 shares,
28,124 shares and 7,500 shares for Messrs. Gilbertson, Riley, Landis
and Ms. McMahon, respectively.
(3) As set forth in Schedule 13D filed with the Securities and Exchange
Commission on February 22, 1996. This amount includes 1,088,684 shares
issuable upon exercise of the ABC Warrant and the potential conversion
of non-voting Common shares, when issued, into voting Common shares
within 60 days. The address of the Walt Disney Company is 500 South
Buena Vista Street, Burbank, California 91521. The address of Capital
Cities/ABC, Inc., ABC Holding Company, Inc. and ABC Radio Network, Inc.
is 77 West 66th Street, New York, New York 10023.
(4) Includes: (i) 189,691 shares owned directly by Mr. Perkins, (ii) 6,769
shares beneficially owned by Mr. Perkins through Perkins Capital
Management, Inc. Profit Sharing Plan and Trust and Perkins Foundation,
(iii) 269,374 shares purchasable upon exercise of options and warrants
by Mr. Perkins and (iv) 5,625 shares purchasable upon exercise of
warrants by Perkins Capital Management, Inc. Profit Sharing Plan and
Trust and Perkins Foundation. Mr. Perkins beneficial ownership excludes
shares held for the accounts of clients of Perkins Capital Management,
Inc. ("PCM").
(5) Based upon statements filed with the Securities and Exchange
Commission, PCM is a registered investment adviser of which Mr. Richard
W. Perkins, a director of the Company, is President, Chief Executive
Officer, a director and the controlling shareholder. PCM has the right
to sell the shares but does not have voting power over the shares. Mr.
Perkins and PCM disclaim any beneficial interest in such shares.
Excludes shares beneficially owned by Mr. Perkins.
(6) Includes: (i) 40,854 shares owned directly and (ii) 12,500 shares
purchasable upon exercise of warrants. Mr. Cowles beneficially owns:
(i) 191,685 shares owned by the John Cowles Family Trust and (ii)
25,000 shares purchasable by the John Cowles Trust upon exercise of
warrants.
(7) The shares owned by the John Cowles Family Trust are non-voting shares.
(8) Includes: (i) 25,000 shares owned directly by Mr. Burwell and (ii)
43,750 shares purchasable upon exercise of options and warrants.
(9) Includes: (i) 12,500 shares owned directly by Mr. Cohn and (ii) 15,000
shares purchasable upon exercise of options and warrants.
(10) Includes: (i) 1,481,247 shares and owned directly by all officers,
directors and director nominees and (ii) 710,390 shares purchasable
upon exercise of options and warrants.
1. ELECTION OF DIRECTORS
Five persons have been nominated for election as directors at the
Annual Meeting, four of whom currently serve as directors of the Company.
Directors of the Company are elected annually to serve until the next Annual
Meeting of Shareholders or until their successors are duly elected and
qualified. There are no family relationships between any director or officer.
The Board of Directors unanimously recommends a vote for each of the
nominees. It is intended that votes will be cast pursuant to the enclosed form
of proxy for the election of the nominees listed in the table below, except for
those proxies which withhold such authority. Shareholders do not have cumulative
voting rights with respect to the election of directors, and proxies cannot be
voted for a greater number of directors than the number of nominees named below.
In the event that any of the nominees shall be unable or unwilling to serve as a
director, it is intended that the proxy will be voted for the election of such
other person or persons as the management may recommend in the place of such
nominee. The management has no reason to believe that any of the nominees will
not be candidates or will be unable to serve.
The following information has been furnished to the Company by the
respective nominees for the Board of Directors.
PRINCIPAL DIRECTOR
NAME AGE OCCUPATION SINCE
Christopher T. Dahl 52 Chairman of the Board, President, 1990
and Chief Executive Officer of
the Company
Richard W. Perkins 65 President, Chief Executive Officer 1990
and Director of Perkins Capital
Management, Inc.
Rodney P. Burwell 57 Chairman of Xerxes Corporation 1992
Mark A. Cohn 39 Chairman and Chief Executive Officer 1994
of Damark International, Inc.
Russell Cowles II 59 Trustee of the Cowles Family Voting 1994*
Trust
* The election of Mr. Cowles as a director, as more fully described below,
remains contingent upon either obtaining a waiver from the FCC of the
application of its cross-ownership rules or the amendment of such rules to
remove existing restrictions.
BUSINESS EXPERIENCE
CHRISTOPHER T. DAHL, age 52, has been President and a director of the
Company since its inception in February 1990. Mr. Dahl is Chairman and Chief
Executive Officer of Community Airwaves Corporation ("CAC"), a company that owns
and operates radio stations in the Midwest and Hawaii. Prior to founding CAC in
1986, Mr. Dahl managed his private investments. From 1969 to 1979, he was the
founder and President of a group of companies involved in photofinishing, retail
photo sales, home sewing notions, toy distribution and retail craft stores. He
was employed by Campbell-Mithun and Knox Reeves Advertising from 1965 through
1969.
RICHARD W. PERKINS, age 65, has been a director of the Company since
its inception. For more than five years, Mr. Perkins has been President and
Chief Executive Officer of Perkins Capital Management, Inc., a registered
investment advisor. Mr. Perkins is also a director of CAC as well as the
following publicly held companies: Bio-Vascular, Inc., a medical products
manufacturer; CNS, Inc., a consumer products manufacturer; Peerless Industrial
Group, Inc., a manufacturer of metal products; Garment Graphics, Inc., a
manufacturer of printed sportswear; LifeCore Biomedical, Inc., a medical device
manufacturer; Nortech Systems, Inc., an electronic sub-systems manufacturer;
Eagle Pacific Industries, Inc., a manufacturer of plastic pipe; and Quantech
LTD., a developer of immunological tests.
RODNEY P. BURWELL, age 57, has been a director of the Company since
June 1992. Since 1979, Mr. Burwell has served as Chairman of Xerxes Corporation,
a manufacturer of fiberglass tanks. Mr. Burwell also owns and operates hotels in
Wisconsin and Colorado. Mr. Burwell is also a director of the Vaughn Company.
MARK A. COHN, age 39, joined the Company's Board of Directors in July
1994. Mr. Cohn is Chief Executive Officer of Damark International, Inc., a
direct marketer of brand name and general merchandise products, since Damark's
inception in 1986. From 1981 to 1984, Mr. Cohn held various marketing and
operations positions, including Director of Marketing Operations, with C.O.M.B.,
Co., a retailer of discount, discontinued and close-out merchandise through
stores and direct mail catalogs.
RUSSELL COWLES II, age 59, was elected in 1994 as a director of the
Company subject to either the obtaining of a waiver from the Federal
Communications Commission (the "FCC") of the application of its cross-ownership
rules or the amendment of such rules to remove existing restrictions. Mr. Cowles
has thus not yet assumed his role as a director. Mr. Cowles has served as a
Trustee of the Cowles Family Voting Trust since 1984. The Voting Trust holds a
majority share of the voting stock of Cowles Media Corporation, a newspaper,
magazine and book publisher and information services provider. Mr. Cowles was
previously employed in the production, distribution, financial and planning
departments of the Minneapolis Star Tribune and worked in the engineering and
production departments of radio and television broadcasting stations. Mr.
Cowles is also a director of CAC.
The Company and Mr. Cowles have agreed that Mr. Cowles, if elected,
will not assume his duties as a director until the Company receives a favorable
ruling from the FCC waiving its cross ownership rules between the Company and
Cowles Media Corporation. The waiver is necessary because Cowles Media
Corporation's ownership of newspaper media is attributed to Mr. Cowles under the
FCC's attribution rules, and will be attributed to the Company as well through
Mr. Cowles as a director. The FCC's cross ownership rules would, without the
waiver, prevent the Company from having interests in two different forms of
media (radio and newspaper) and would thus prevent Mr. Cowles from serving as a
director. The Company anticipates that the FCC will grant the waiver.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during the fiscal year ended
December 31, 1995. Each of the incumbent directors attended at least 75% of the
meetings of the Board held while he was a member during the last fiscal year.
The Compensation Committee of the Board of Directors consists of Messrs. Perkins
and Rodney P. Burwell. The Compensation Committee met five times during the last
fiscal year. The Company has not formalized an Executive or Audit Committee.
DIRECTORS' COMPENSATION
The Company has not paid any cash compensation to a director in his
capacity as a director but may pay directors' fees in the future. Certain
non-qualified stock options have been granted to directors, and the Company's
1994 Director Stock Option Plan provides stock options to its outside directors.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid to
or accrued by each of the Company's executive officers receiving in excess of
$100,000, and for all executive officers as a group, for services rendered to
the Company during the fiscal years ended December 31, 1995, 1994 and 1993. The
Company has no formalized employment agreements with its executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------------- -----------
SECURITIES
UNDERLYING LTIP
NAME AND OPTIONS/SARS PAYOUTS
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($)
- --------------------- -------- --------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Christopher T. Dahl 1995 210,000 12,500 41,250(1) -
President 1994 177,500 - 50,000(2) -
1993 116,960 25,000 - -
R. David Ridgeway(3) 1995 125,000 - 25,000(4) 18,141(5)
Executive Vice 1994 107,531 - - 16,453(6)
President 1993 - - - -
James G. Gilbertson 1995 97,500(7) 17,500 25,000(2)(4)
Executive Vice 1994 73,125(7) - - -
President 1993 58,125(7) 40,388(8) - -
Gary W. Landis 1995 125,000 - 45,000(9) -
Executive Vice 1994 90,417 - - -
President of 1993 81,279 - - -
Programming
</TABLE>
- ---------------
(1) Non-qualified grants of options for 41,250 shares at $7.70 Per share.
(2) Option grant pursuant to the Company's 1994 Stock Option Plan.
(3) Mr. Ridgeway's employment with the Company ceased on March 31, 1996.
(4) Option grant pursuant to the Company's 1991 Stock Option Plan.
(5) Represents vesting of 3,375 shares of formerly restricted stock on
February 14, 1995.
(6) Represents vesting of 3,375 shares of formerly restricted stock on
February 14, 1994.
(7) Mr. Gilbertson's salary is paid by Radio Management Corporation.
(8) Of this amount, $34,525 represents compensation received through the
exercise of options.
(9) Option to purchase 17,500 shares pursuant to the Company's 1994 Stock
Option Plan and non-qualified grants of options for 27,500 shares at
$9.50 per share.
The following table sets forth the number of securities underlying
options granted in fiscal year 1995, the percent the grant represents of the
total options granted to employees during such fiscal year, the per share
exercise price of the options granted, and the expiration date of the options
for the executive officers named above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN FISCAL EXERCISE OR BASE
NAME GRANTED (#) YEAR PRICE ($/SHARE) EXPIRATION DATE
- ----------------- -------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Christopher T. Dahl 41,250 20.4% 7.70 1-5-2000
R. David Ridgeway(1) 25,000 12.3% 7.25 (2)
James G. Gilbertson 25,000 12.3% 7.25 1-5-2005
Gary W. Landis 17,500 8.6% 7.25 1-5-2005
27,500 13.6% 9.50 9-1-2005
</TABLE>
(1) Mr. Ridgeway's employment with the Company ceased on March 31, 1996.
(2) Mr. Ridgeway's options expired upon termination of his employment with
the Company.
The following table sets forth the number and value of unexercised
in-the-money options at December 31, 1995 for the executive officers named
above. There were no options exercised in fiscal year 1995 by the named
individuals.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
SHARES OPTIONS/SARS VALUE OF UNEXERCISED
ACQUIRED ON AT FY-END (#) IN-THE-MONEY OPTIONS/SARS
EXERCISE VALUE EXERCISABLE/ AT FY-END ($)
NAME (#) REALIZED ($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- -------------- ------------ ------------- -------------------------
<S> <C> <C> <C> <C>
Christopher T. Dahl - - 96,099/57,917 421,667/445,958
R. David Ridgeway(1) - - 16,667/33,333 133,333/247,917
James G. Gilbertson - - 35,750/37,500 221,500/281,250
Gary W. Landis - - 15,833/49,167 66,667/421,458
</TABLE>
(1) Mr. Ridgeway's employment with the Company ceased on March 31, 1996.
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE
ARTICLES OF INCORPORATION AS AMENDED TO INCREASE
THE COMPANY'S AUTHORIZED CAPITAL STOCK
The Board has adopted a resolution proposing an Amendment to the
Company's current Articles of Incorporation which would amend the current
Article IV. The amended Article IV, as set forth in Exhibit A to this Proxy
Statement with the amended language underlined for ease of reference, would
increase the authorized capital stock of the Company to 50,000,000 shares, $.02
par value, from the 12,500,000 shares currently authorized. Under the Articles,
the Company's Board of Directors is authorized to issue from time to time, in
one or more designated series, shares having such redemption, exchange,
conversion, dividend, interest and voting rights as specified in the particular
series. The Articles provide the Board with the maximum authority permitted by
Minnesota law to fix and determine the relative rights and preferences of each
series of shares.
As of August 15, 1996, 5,642,358 shares of Common Stock were issued and
outstanding, and 2,726,686 shares of Common Stock were reserved for issuance
upon exercise of stock options, warrants and the conversion of convertible debt,
leaving 4,130,956 shares available for future issuance. Although the Company has
no intention or commitment to issue any additional shares as of the date of this
Proxy Statement, the Board believes that it is desirable to have the additional
shares available for possible future financing or acquisition transactions and
other general corporate purposes. The Board believes that the availability of
such shares for issuance in the future will give the Company greater flexibility
and permit such shares to be issued without the expense and delay of holding a
shareholders meeting. The shares would be available for issuance by the Board
without further shareholder authorization, except as may be required by law or
by the rules of the Nasdaq Stock Market or any other quotation system or stock
exchange on which the Common Shares may then be listed. The shareholders of the
Company do not have any preemptive right to purchase or subscribe for any part
of any new or additional issuance of the Company's securities. There are at
present no specific understandings, arrangements or agreements with respect to
any transactions that would require the Company to issue any new shares of its
Common Stock, other than proposed stock option grants to employees and
directors. See "Proposal to Approve the Amendment to the 1994 Stock Option
Plan."
It is possible that material dividend requirements and sinking fund,
conversion or redemption provisions, if any, which may be fixed by the Board on
any series of shares at the time of issuance may have an adverse effect on the
availability of earnings for distribution to holders of outstanding Common
Shares or on other rights of the outstanding Common Shares.
Although not intended as an anti-takeover device, issuing additional
shares could impede a non-negotiated acquisition of the Company by diluting the
ownership interests of a substantial shareholder, increasing the total amount of
consideration necessary for a person to obtain control of the Company or
increasing the voting power of friendly third parties. The Board could authorize
voting rights per share that are the same as or different than the voting rights
of the outstanding Common Shares.
Approval of the Amendment to the Articles of Incorporation requires the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting. THE BOARD OF DIRECTORS CONSIDERS THIS
AMENDMENT TO BE ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THIS
AMENDMENT. Unless otherwise instructed, proxies will be voted FOR approval of
this Amendment.
3. PROPOSAL TO APPROVE THE
1996 STOCK PURCHASE PLAN
PROPOSED PLAN
The Board of Directors has approved and adopted, subject to shareholder
approval, the 1996 Employee Stock Purchase Plan (the "Purchase Plan"), which
provides employees of the Company and any future designated subsidiaries, with
the opportunity to purchase Common Stock of the Company through payroll
deductions. A total of 400,000 shares of Common Stock is reserved for issuance
under the Purchase Plan, a copy of which is attached to this Proxy Statement as
Exhibit B. No awards under the Purchase Plan have been made. It is the intention
of the Company to have the Purchase Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The provisions of the Purchase Plan shall, accordingly, be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code. The Board believes the Purchase Plan
will advance the interests of the Company and its shareholders by increasing the
proprietary interests of employees in the Company's long-term success and more
closely aligning the interests of employees with the Company's shareholders.
The Purchase Plan is administered by the Board of Directors of the
Company or a committee appointed by the Board. Offerings under the Purchase Plan
have a duration of one year and commence on January 1 of each year, unless
otherwise specified by the Board of Directors. The Board of Directors has the
power to alter the duration of an offering period with respect to future
offerings if announced at least fifteen (15) days prior to the scheduled
beginning of the first offering to be affected.
Any employee who is customarily employed for at least 20 hours per week
and more than 5 months per calendar year by the Company or any future designated
subsidiary is eligible to participate in offerings under the Purchase Plan.
Employees become participants under the Purchase Plan by delivering to the
Company a subscription agreement authorizing payroll deductions within the
specified period of time prior to the commencement of each offering period. No
employee is permitted to purchase shares under the Purchase Plan if such
employee owns 5% or more of the total combined voting power or value of all
classes of shares of stock of the Company or any of its future designated
subsidiaries (including shares which may be purchased under the Purchase Plan or
pursuant to any other options). In addition, no employee is entitled to purchase
more than $25,000 worth of shares (based on upon the fair market value of the
shares at the time the option is granted) in any calendar year.
The price at which shares are sold under the Purchase Plan is 85% of
the fair market value of a share of Common Stock on the Offering Date of each
offering period. The Purchase Price of the shares is accumulated by payroll
deductions over each offering period. The deductions may not be greater than 10%
of a participant's compensation, defined to include all taxable earnings. All
payroll deductions of a participant are credited to his account under the
Purchase Plan and such funds may be used for any corporate purpose.
By executing the subscription agreement to participate in the Purchase
Plan, the employee is permitted to have shares placed under option to him. At
the beginning of an offering period, each participant is granted an option to
purchase up to a number of shares of the Company's Common Stock determined by
dividing such employee's payroll deductions to be accumulated during such
offering period by eighty-five percent of the fair market value of a share of
the Company's Common Stock on the Offering Date. Unless the employee's
participation is discontinued, his option for the purchase of shares will be
exercised automatically at the end of the offering period at the applicable
price. To the extent an employee's payroll deductions exceed that amount
required to purchase the shares subject to option, such excess amount shall be
returned to said participant.
A participant may terminate his or her interest in a given offering by
withdrawing all, but not less than all, of the accumulated payroll deductions
credited to such participant's account at any time prior to the end of the
offering period by giving five days prior written notice to the Company. The
withdrawal of accumulated payroll deductions automatically terminates the
employee's interest in that offering. As soon as practicable after such
withdrawal the payroll deductions credited to a participant's account are
returned to the participant without interest. A participant's withdrawal from an
offering does not have any effect upon such participant's eligibility to
participate in subsequent offerings under the Purchase Plan.
Termination of a participant's employment for any reason, including
retirement or death or the failure to remain in the continuous employ of the
Company for at least 20 hours per week (except for certain leaves of absence),
cancels his or her participation in the Purchase Plan immediately. In such
event, the payroll deductions credited to the participant's account will be
returned to the participant, or in the case of death, to the person or persons
entitled thereto, without interest. No rights or accumulated payroll deductions
of an employee under the Purchase Plan may be pledged, assigned or transferred
for any reason and any such attempt may be treated by the Company as an election
to withdraw from the Purchase Plan.
The Board of Directors of the Company may at any time amend or
terminate the Purchase Plan, except that such termination cannot affect options
previously granted nor may any amendment make any change in an existing option
which adversely affects the rights of any participant. No amendment may be made
to the Purchase Plan without prior approval of the shareholders of the Company
if such amendment would increase the number of shares that may be issued under
the Purchase Plan, change the designation of the employees eligible for
participation in the Purchase Plan or materially increase the benefits which may
accrue to participants under the Purchase Plan.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. A participant may
become liable for tax upon disposition of the shares acquired, as summarized
below.
1. If the shares are sold or disposed of (including by way of gift) at
least two years after the date of the beginning of the offering period (herein
referred to as the "date of option grant") and at least one year after the date
of the end of the offering period (herein referred to as the "date of option
exercise"). In this event, the lesser of (a) the excess of the fair market value
of the shares at the time of such disposition over the purchase price of the
shares subject to the option (herein referred to as the "option price") or (b)
the excess of the fair market value of the shares at the time the option was
granted over an amount equal to what the option price would have been if it had
been computed as of the date of option grant, will be treated as ordinary income
to the participant. Any further gain upon such disposition will be treated as
long-term capital gain. If the shares are sold and the sales price is less than
the option price, there is no ordinary income and the participant has a capital
loss for the difference. Under current law, capital gain is fully included in
gross income and is taxed at the same rates as ordinary income. Under current
law, capital losses are allowed in full against capital gains plus $3,000 of
other income.
2. If the shares are sold or disposed of (including by way of gift or
by exchange in connection with the exercise of an incentive stock option) before
the expiration of the holding periods described above. In this event, the excess
of the fair market value of the shares on the date of option exercise over the
option price will be treated as ordinary income to the participant. This excess
will constitute ordinary income in the year of sale or other disposition even if
no gain is realized on the sale or a gratuitous transfer of the shares is made.
The balance of any gain will be treated as capital gain and will be treated as
long-term capital gain if the shares have been held more than one year. Even if
the shares are sold for less than their fair market value on the date of option
exercise, the same amount of ordinary income is attributed to a participant and
a capital loss is recognized equal to the difference between the sales price and
the value of the shares on such date of option exercise.
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that ordinary income must be reported
upon disposition of shares by the participant before the expiration of the
holding periods described above. The foregoing summary of the effect of federal
income taxation upon the participant and the Company with respect to the shares
purchased under the Purchase Plan does not purport to be complete. Reference
should be made to the applicable provisions of the Code.
REQUIRED VOTE
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL OF
THE PURCHASE PLAN. Approval of the Purchase Plan requires the affirmative vote
of the holders of a majority of the shares of Common Stock represented at the
Annual Meeting.
4. PROPOSAL TO APPROVE THE AMENDMENT TO THE
1994 STOCK OPTION PLAN
BACKGROUND AND SUMMARY OF PLAN
On March 18, 1994, the Board of Directors and shareholders of the
Company adopted the 1994 Stock Option Plan (the "1994 Plan") which provides for
the granting of stock options to designated employees and non-employees,
including consultants to the Company, to purchase up to an aggregate of 250,000
shares of Common Stock. Options that qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and options that do not qualify as such "incentive stock options"
("nonstatutory stock options") may be granted under the 1994 Plan.
The 1994 Plan permits a committee composed of disinterested persons to
award stock options and permits the grant of stock options for up to an
aggregate of 250,000 shares of Common Stock. Options may be granted as incentive
or non-incentive stock options, except that incentive stock options may only be
granted to employees of the Company or any future designated subsidiary. The
terms of option grants are as approved by the Stock Option Committee, subject to
certain conditions. The exercise price per share may not be less than the fair
market value of a share of the underlying Common Stock on the date the option is
granted.
The 1994 Plan is administered by the Stock Option Committee, which has
the authority (i) to interpret the plan document, (ii) to establish rules for
the plan's administration, (iii) to determine all terms and conditions of awards
(other than automatic non-employee director options) to be made under the 1994
Plan, subject to the limitation expressed therein, and (iv) to amend or modify
the terms of outstanding awards, including accelerating the exercisability or
vesting of an award or extending the term of an award.
The Board of Directors may amend the 1994 Plan in such respects as is
deemed advisable. No such Amendment will be effective without the approval of
the Company's shareholders if shareholder approval of the Amendment is required
pursuant to Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of
the Code or the rules of the Nasdaq Stock Market or any other quotation system
or stock exchange on which the Common Shares may be listed.
If there is any material change in the corporate structure or shares of
Common Stock of the Company, such as in connection with a merger,
recapitalization, stock split, stock dividend or other extraordinary dividend
(including a spinoff), the Stock Option Committee (or the board of the surviving
corporation) shall make appropriate adjustments in the aggregate number and kind
of securities to award under the 1994 Plan and in the number of shares and
purchase price per share, if any, under any awards outstanding under the 1994
Plan. If all or any portion of an award terminates, expires or is canceled
unexercised or unvested, then the shares subject to such an award will
automatically become available for reissuance under the 1994 Plan.
Upon termination of employment, or in the case of a non-employee
director, termination of service as a director, an option terminates (i) three
months after such termination (other than by reason of disability or death) or
(ii) five years after the date of the option grant. In the event such
termination occurs by reason of disability or death, including death within a
period of three months after termination of a directorship or employment, an
option may be exercised until the earlier of (a) twelve months after such death
or disability or (b) the date on which the option expires by its terms. In each
of such cases, an option may be exercisable to the extent it was exercisable on
the date of termination of a directorship or employment, but had not previously
been exercised.
No option granted under the 1994 Plan may be transferred by a
participant for any reason or by any means, except by will or by the laws of
descent and distribution. Options may not be granted under the 1994 Plan after
January 31, 2004.
PROPOSED PLAN AMENDMENT
The Board has approved, subject to shareholder approval, an Amendment
to the 1994 Plan which would increase the aggregate number of shares of Common
Stock available under the plan to one million (1,000,000). A copy of the amended
section of the 1994 Plan is attached to this Proxy Statement as Exhibit C with
the amended language underlined for ease of reference. The Board believes that
the Amendment will advance the interests of the Company and its shareholders by
increasing the proprietary interests of employees and non-employee directors in
the Company's long-term success and more closely aligning the interests of
employees and such directors with the Company's shareholders.
On August 15, 1996, there were outstanding options under the 1994 Plan
to purchase 221,025 shares. No additional grants to officers and directors were
authorized in 1995 or 1996 under the 1994 Plan. The Company believes that it is
prudent and desirable to increase the number of shares available for grant under
the Plan by 750,000 shares to permit current and future grants and to further
the purposes of the 1994 Plan. At August 15, 1996, the market value of the
additional shares for which options may be granted pursuant to the 1994 Plan was
$4,673,850.
TAX INFORMATION
An optionee will not incur any federal income tax liability as a result
of the grant of an incentive stock option ("ISO") or a nonqualified stock
option. The same is true when any option becomes exercisable. Upon the exercise
of a nonqualified option, the optionee will generally recognize ordinary income
for federal income tax purposes in an amount equal to the difference between the
fair market value of the shares at the time of exercise and the exercise price.
The income recognized by the optionee will be subject to tax withholding by the
Company, and the Company will be entitled to a tax deduction in an amount equal
to the amount of ordinary income recognized by the optionee. Upon resale of such
shares by the optionee, any difference between the sale price and the fair
market value of the shares at the time the option was exercised will be treated
as capital gain or loss.
Generally, an optionee will not incur federal income tax liability as
the result of an exercise of an ISO. However, except in the case of death or
disability, if an ISO is exercised more than three months after an optionee's
termination of employment (a "disqualifying exercise"), the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise price. In
addition, for purposes of calculating an optionee's alternative minimum tax, if
any, the difference between the fair market value of the shares at the time the
ISO is exercised and the exercise price becomes an item of adjustment. When the
shares acquired upon exercise of an ISO are sold, the optionee will be taxed on
the difference between the sale price and the exercise price. If such a sale
does not occur within two years of the date the ISO was granted or within one
year of the date it was exercised, then the gain, if any, will be treated as
long-term capital gain. If such a sale occurs within either of the time periods
specified in the preceding sentence ( a "disqualifying disposition"), then the
portion of the optionee's gain equal to the difference between the fair market
value of the stock on the date of exercise (or, if less, the selling price) and
the exercise price will be treated as ordinary compensation income, while the
balance of any gain would be treated as capital gain. The Company is generally
not entitled to a deduction as the result of the grant or exercise of an ISO.
However, if the optionee recognizes ordinary income as the result of a
disqualifying exercise or disposition, the Company is entitled to a deduction in
an equivalent amount in the taxable year of the Company in which the
disqualifying event occurs.
The foregoing is only a summary of the general effect of U.S. federal
income taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1994 Plan and the subsequent sale of shares. This
summary does not discuss the income tax laws of any state or foreign country in
which an optionee may reside.
REQUIRED VOTE
Approval of the Amendment to the 1994 Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock represented at the
Annual Meeting. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE 1994 PLAN.
5. RATIFICATION AND APPROVAL OF THE
INDEPENDENT AUDITORS
On June 27, 1996, the Board of Directors engaged BDO Seidman, LLP
("BDO") as the Company's new independent accountant for the fiscal year ending
December 31, 1996. During the two most recent fiscal years and through June 27,
1996, the Company did not consult with BDO on items which (1) involved the
application of accounting principles to a specified transaction, either
completed or proposed, or involved the type of audit opinion that might be
rendered on the Company's financial statements, or (2) concerned the subject
matter of a disagreement or reportable event with the former auditor (as
described in Regulation S-K Item 304C(a)(2)). A proposal to ratify the
appointment of BDO will be presented at the Annual Meeting. Representatives of
BDO are expected to be present at the Annual Meeting, will have an opportunity
to make a statement if they desire to do so and will be available to answer
appropriate questions from shareholders.
On June 27, 1996, the Company dismissed Ernst & Young LLP ("E&Y") as
its independent accountant. Except for an explanatory paragraph with respect to
substantial doubt about the Company's ability to continue as a going concern and
management's plans described in Note 2 to the Company's consolidated financial
statements as of and for the years ended December 31, 1994 and 1995, the reports
of E&Y on the financial statements for the past two fiscal years contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. The Company's Audit
Committee and Board of Directors participated in and approved the decision to
change independent accountants. In connection with its audits for the two most
recent fiscal years and through June 27, 1996, there have been no disagreements
with E&Y on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of E&Y would have caused them to make reference
thereto in their report on the financial statements for such years. During the
two most recent fiscal years and through June 27, 1996, there have been no
reportable events (as defined in Regulation S-K Item 304(a)(1)(v)).
Representatives of E&Y are not expected to be present at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
THE RATIFICATION AND APPROVAL OF THE APPOINTMENT OF BDO AS INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
The Company leases the land, buildings and transmitter tower for
WWTC-AM and KYCR-AM, Minneapolis, Minnesota, from Mr. Dahl at an annual rent of
$79,405, payable at the monthly rate of $6,617 plus real estate taxes.
The Company leases approximately 12,000 square feet of office and
broadcast space located at 5501 Excelsior Boulevard, St. Louis Park, Minnesota,
from a partnership composed of Messrs. Dahl and Perkins. Pursuant to the terms
of the lease which expires in June 2001, the Company paid an annual rent of
$36,000 in the first year (July 1991 - June 1992), $45,000 in the second year
and $66,000 thereafter, plus real estate taxes.
In April 1993, the Company entered into a three-year lease with 724
Associates, a partnership consisting of Messrs. Dahl, Perkins and Stephen L.
Wallack, a shareholder of the Company, for 3,000 square feet of office space at
724 First Street North, Minneapolis, Minnesota. These facilities are leased at
annual rental of $15,000 and house the Company's executive offices. The
executive offices are adjacent to the offices of Community Airwaves Corporation
("CAC") and Radio Management Corporation ("RMC"). CAC is owned and controlled by
Messrs. Dahl, Perkins and Cowles, either directly or through trusts. RMC is
owned by Messrs. Dahl, Perkins and Cowles. Mr. Cowles is a beneficiary and
trustee of the Cowles Family Trust, and the Trust is a principal shareholder of
the Company. Under the terms of each of the leases, the Company is obligated to
pay its proportionate share of repairs and maintenance. These arrangements were
approved by the Related Party Transaction Committee of the Company's Board of
Directors, which is comprised of disinterested directors, and the Company
believes such arrangements were on terms at least as favorable as could have
been obtained from unaffiliated third parties.
MANAGEMENT SERVICES FROM AN AFFILIATE
Since July 1993, the Company has received administrative, legal and
accounting services from RMC. RMC is owned by Messrs. Dahl, Perkins and Cowles.
RMC provides corporate, legal, accounting and financial services to the Company
and CAC. CAC is a separate private company also owned by the individuals listed
above. The Company pays a set monthly fee of $50,000 for the services listed
above. All outside services directly attributable to the Company are billed
directly to the Company. The Company paid RMC an aggregate of $300,000 for such
services during the fiscal year ended December 31, 1993 and an aggregate of
$600,000 for such services during the fiscal years ended December 31, 1994 and
1995. The Company expects to pay an aggregate of $600,000 for such services
during 1996. The salaries of two officers of the Company, Lance W. Riley and
James G. Gilbertson, are paid by RMC. These arrangements were approved by the
Related Party Transaction Committee of the Company and Board of Directors, which
is comprised of disinterested directors, and the Company believes such
arrangements were on terms at least as favorable as could have been obtained
from unaffiliated third parties.
LOANS AND FINANCING TRANSACTIONS
Between April 1994 and November 1995, the Company borrowed from Messrs.
Dahl, Perkins, Cowles and Cohn in the form of bridge financings. The Company
borrowed $100,000 from Mr. Dahl at an interest rate of 10% per annum. The
Company subsequently repaid the loan balance in full. The Company also borrowed
a total of $1,950,000 from Mr. Perkins, at annual interest rates ranging from 8%
to 10%. The Company subsequently repaid the loan balance in full. In connection
with these borrowings, warrants were granted to Mr. Perkins to purchase 171,875
shares of Common Stock at prices ranging from $8.00 to $10.00 per share. Mr.
Cowles participated in the bridge financings as well by lending to the Company a
total of $200,000 at an annual interest rate of 10%. Mr. Cowles also received
warrants from the Company to purchase 27,500 shares of Common Stock at $8.00 per
share. Finally, the Company borrowed $100,000 from Mr. Cohn at an annual rate of
10%. Mr. Cohn received warrants from the Company to purchase 15,000 shares of
Common Stock at $8.00 per share.
The Company completed the conversion of an aggregate of $2,875,000 of
outstanding bridge financing Promissory Notes into Common Stock of the Company
effective September 30, 1995. $2,400,000 of the $2,875,000 of Promissory Notes
converted was from the Company's 1994 bridge financings. Holders of the
Promissory Notes from the Company's 1994 bridge financings agreed to surrender
the Notes in satisfaction of the exercise price of warrants which were issued as
part of such bridge financings. Most of the Note holders who chose to convert
also chose to convert interest accrued through September 30, 1995 at the same
$8.00 per share conversion price applicable to the exercised warrants. In
addition to receiving shares of Common Stock pursuant to the exercised warrants,
and as an incentive to convert their indebtedness into equity, the holders of
the surrendered 1994 bridge Promissory Notes also received new warrants to
purchase 1,250 shares of Common Stock for each $25,000 of debt converted, which
new warrants will be exercisable for five years at $10.00 per share. The
remaining $525,000 of indebtedness converted was from the Company's previous
1995 bridge financing. Messrs. Perkins, Cohn and Cowles participated in the
conversion with respect to $300,000, $100,000 and $200,000, respectively. As a
result of such conversions, they received shares of Common Stock and additional
warrants for the purchase of 15,000, 5,000 and 10,000 shares, respectively.
POTENTIAL CONFLICT OF INTEREST WITH COMMUNITY AIRWAVES CORPORATION
CAC may acquire additional radio stations in the future. Under current
FCC regulations, radio stations owned by CAC are attributed to the Company and
radio stations owned by the Company are attributed to CAC for the purpose of
determining whether a station may be acquired in a particular market under the
FCC's duopoly rules. The Company does not believe that any such purchases will
conflict with its present acquisition strategy, which is to have affiliates or
acquire properties in the top 100 U.S. metropolitan markets. CAC has advised the
Company that its strategy is to acquire and operate stations in smaller markets.
An acquisition by CAC in any market would, however, be attributed to the Company
and could further limit the stations which the Company can acquire in such
market under existing FCC regulations. The Company is a party to an Attribution
Agreement with CAC under which the Company is required to obtain the consent of
CAC for the acquisition of any FM radio station or any AM radio station located
outside the top 125 U.S. markets.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"Commission"). Such officers, directors and shareholders are required by the
Commission to furnish the Company with copies of all such reports.
To the Company's knowledge, based solely on a review of copies of
reports filed with the Commission during 1995, all applicable Section 16(a)
filing requirements were complied with.
MANAGEMENT OF THE COMPANY
The following table provides information with respect to the Company's
executive officers. Each executive officer has been appointed to serve until his
successor is duly appointed by the Board of Directors or his earlier removal or
resignation from office.
NAME AGE POSITION
Christopher T. Dahl 52 Chairman of the Board, President and Chief
Executive Officer
James G. Gilbertson 34 Chief Operating Officer,
Chief Financial Officer and Treasurer
Lance W. Riley 45 Secretary and General Counsel
Gary W. Landis 42 Executive Vice President of Programming
Melvin E. Paradis 57 Executive Vice President of Operations
Barbara A. McMahon 40 Executive Vice President of Affiliate Relations
CHRISTOPHER T. DAHL - See "Election of Directors."
JAMES G. GILBERTSON has served as the Company's Chief Financial Officer
since July 1992, became an Executive Vice President in March 1994, and was
recently promoted to Chief Operating Officer. From June 1988 to July 1992, he
was the Chief Financial Officer of Parker Communications, which operated a group
of radio stations. From 1985 to June 1988, he was Controller of the radio
division of Palmer Communications located in Des Moines, Iowa. Prior to joining
Palmer Communications, Mr. Gilbertson was a practicing certified public
accountant with the firm of Ernst & Young LLP.
LANCE W. RILEY became the General Counsel and Secretary of the Company
in March 1994. Mr. Riley has been practicing law since 1977. His primary area of
practice is radio broadcasting and he held the position of Chairman of the
Communications Law Section of the Minnesota Bar Association from 1990 to 1994.
Prior to joining the Company, Mr. Riley was a partner in the firm of Courey,
Albers, Gilbert and Riley, P.A.
GARY W. LANDIS served as the Company's Executive Vice President of
Programming since December 1992 and became an Executive Vice President in July
1994. From 1985 to 1992, Mr. Landis served as Vice President of Programming for
Westwood One, the second largest radio network company in the U.S. Between 1982
and 1985, Mr. Landis served as Director of Programming for RKO Radio Networks.
MELVIN E. PARADIS became the Company's Executive Vice President of
Operations in January 1996. He has been the President of Community Airwaves
Corporation since 1992 and the Chief Operating Officer of that company since
1987. Mr. Paradis has also owned and managed other radio stations for several
years.
BARBARA A. MCMAHON joined the Company in June 1993 to oversee the
growth of the network through affiliates and was promoted to Executive Vice
President of Affiliate Relations in June 1996. During the years 1980 through
1989, Ms. McMahon served as Director for NBC Radio Networks, Mutual Broadcasting
and RKO Radio Networks.
OTHER MATTERS
The management of the Company is unaware of any other matters that are
to be presented for action at the meeting. Should any other matter properly come
before the meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred by them in connection therewith. All expenses incurred in connection
with this solicitation will be borne by the Company.
SHAREHOLDER PROPOSALS
Proposals intended to be presented at the 1997 Annual Meeting of
Shareholders must be received by the Company by December 15, 1996 to be
considered for inclusion in the Company's proxy materials relating to that
meeting. Due to the complexity of the respective rights of the shareholders and
the Company in this area, any shareholder desiring to propose such an action is
advised to consult with his or her legal counsel with respect to such rights. It
is suggested that any such proposals be submitted by certified mail, return
receipt requested.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to shareholders for the fiscal
year ended December 31, 1995, accompanies this Notice of Annual Meeting, Proxy
Statement and related form of proxy. No part of the Annual Report is
incorporated herein and no part thereof is to be considered proxy soliciting
material.
FORM 10-KSB
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY
WILL FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING
THE FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF FEES BASED ON THE COMPANY'S
REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH
REPORT AND/OR EXHIBIT(S) SHOULD BE DIRECTED TO LANCE W. RILEY, SECRETARY, AT THE
COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christopher T. Dahl
Christopher T. Dahl
Chairman, President and Chief Executive Officer
Minneapolis, Minnesota
August 26, 1996
EXHIBIT A
ARTICLE IV
CAPITAL
The aggregate number of shares of stock which this corporation shall
have the authority to issue is fifty million (50,000,000) shares with a par
value of two cents ($.02) per share.
EXHIBIT B
CHILDREN'S BROADCASTING CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan of CHILDREN'S BROADCASTING CORPORATION (the "Company"), a Minnesota
corporation.
1. Purpose. The purpose of the Plan is to provide Employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock, $.02 par
value, of the Company.
(d) "Company" shall mean Children's Broadcasting Corporation,
a Minnesota corporation.
(e) "Compensation" shall mean all taxable earnings, including
payments for overtime, incentive compensation, incentive payments, bonuses,
commissions or other compensation.
(f) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered to be interrupted in the case of a leave
of absence agreed to in writing by the Company, provided that such leave is for
a period of not more than ninety (90) days or reemployment upon the expiration
of such leave is guaranteed by contract or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(h) "Employee" shall mean any person, including an officer,
who is customarily employed for at least twenty (20) hours per week and more
than five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(i) "Exercise Date" shall mean the last day of each offering
period of the Plan.
(j) "Offering Date" shall mean the first day of each offering
period of the Plan.
(k) "Plan" shall mean this Employee Stock Purchase Plan.
(l) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a
given offering period shall be eligible to participate in such offering period
under the Plan, subject to the requirements of paragraph 5(a) and the
limitations imposed by Section 423(b) of the Code. Anyone who meets the
eligibility criteria and becomes an Employee during the offering period but
after the Offering Date may begin participation at the beginning of the next
payroll period. All eligible Employees who elect to participate in this Plan
shall have the same rights and privileges except as provided in subparagraph (b)
below.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 425(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any Subsidiary of the Company, or (ii)
which permits his rights to purchase stock under all employee stock purchase
plans (described in Section 423 of the Code) of the Company and its Subsidiaries
to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by one offering
during each 12 month period of the Plan, commencing on or about January 1 and
continuing thereafter to a date no later than December 31 of the same twelve
consecutive month period or until terminated in accordance with paragraph 20
hereof. The Board of Directors of the Company shall have the power to change the
duration of offering periods with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first offering period to be affected.
The first offering period shall commence on a date determined by the Board of
Directors.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions on the
form provided by the Company and filing it with the Company's payroll office
prior to the applicable Offering Date, unless a later time for filing the
subscription agreement is set by the Board for all eligible Employees with
respect to a given offering.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Offering Date and shall end on the Exercise Date of
the offering to which such authorization is applicable, unless sooner terminated
by the participant as provided in paragraph 11. Payroll deductions must be whole
dollar amounts only and may not be less than $10.00 per pay period.
6. Payroll Deductions.
(a) At the time a participant files his subscription
agreement, he shall elect to have payroll deductions made on each payday during
the offering period. The aggregate of such payroll deductions during the
offering period shall not exceed ten percent (10%) of his aggregate Compensation
during said offering period.
(b) All payroll deductions made by a participant shall be
credited to his account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his participation in the
Plan as provided in paragraph 11.
(d) A participant may increase or decrease the rate of his
payroll deductions during the offering period by completing or filing with the
Company a new authorization for payroll deduction. The change in rate shall be
effective fifteen (15) days following the Company's receipt of the new
authorization. Only one change in rate may be made in any offering period by any
participant.
7. Grant of Option.
(a) On the Offering Date of each offering period, each
eligible Employee participating in the Plan shall be granted an option to
purchase (at the per share option price) up to a number of shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
to be accumulated during such offering period (not to exceed an amount equal to
ten percent (10%) of his anticipated Compensation for the offering period, or
the remainder of the offering period if the election is made upon employment
after the Offering Date, to be determined as of the date of the commencement of
the applicable offering period) by eighty-five percent (85%) of the fair market
value of a share of the Company's Common Stock on the Offering Date, subject to
the limitations set forth in Section 3(b) and 13 hereof. Fair market value of a
share of the Company's Common Stock shall be determined as provided in Section
7(b) herein.
(b) The fair market value of the Company's Common Stock on a
given date shall be determined by the Board in its discretion; provided,
however, that where there is a public market for the Common Stock, the fair
market value per Share shall be the mean of the bid and asked prices of the
Common Stock for such date, as reported in the Wall Street Journal (or, if not
so reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation (NASDAQ) System) or, in the event the Common Stock
is listed on a stock exchange, the fair market value per Share shall be the
closing price on such exchange on such date, as reported in the Wall Street
Journal.
(c) Options to purchase granted on the Offering Date expire as
of the Exercise Date.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 11, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
9. Delivery. As promptly as practicable after the Exercise Date of each
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the number of whole shares purchased
upon exercise of his option. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him of full shares at the termination
of each offering period, or which is insufficient to purchase a full share of
Common Stock of the Company, shall be returned to said participant.
10. Expenses. All costs of maintaining records and executing transfers
will be borne by the Company. Brokerage expenses incurred in connection with the
purchase of shares shall be included as part of the costs of the shares to the
participating Employees.
11. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his account under the Plan at any time prior to
the Exercise Date of the offering period by giving five (5) days prior written
notice to the Company. All of the participant's payroll deductions credited to
his account will be paid to him promptly after receipt of his notice of
withdrawal and his option for the current period will be automatically
terminated, and no further payroll deductions for the purchase of shares will be
made during the offering period.
(b) Upon termination of the participant's Continuous Status as
an Employee prior to each Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his account
will be returned to him or, in the case of his death, to the person or persons
entitled thereto under paragraph 15, and his option will be automatically
terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the offering period in which the Employee is a participant, he will be
deemed to have elected to withdraw from the Plan and the payroll deductions
credited to his account will be returned to him and his option terminated.
(d) A Participant who withdraws from an offering may not
revoke that withdrawal and recommence payroll deductions during the same
offering period.
(e) A participant's withdrawal from an offering will not have
any effect upon his eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be four hundred
thousand (400,000) shares, subject to adjustment upon changes in capitalization
of the Company as provided in paragraph 19. If the total number of shares which
would otherwise be subject to options granted pursuant to Section 7(a) hereof on
the Offering Date of an offering period exceeds the number of shares then
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares subject to the option to each Employee affected thereby and
shall similarly reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his spouse.
14. Administration. The Plan shall be administered by the Board of the
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who are eligible to participate in
the Plan may not vote on any matter affecting the administration of the Plan or
the grant of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the Committee.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of the offering period but prior to delivery to him of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to the Exercise Date of
the offering period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with paragraph 11.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Exercise Date, which statements will set forth
the amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or Subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. Amendment or Termination. The Board of Directors of the Company may
at any time terminate or amend the Plan. Except as provided in paragraph 19, no
such termination can affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant, nor may an amendment be made without prior approval
of the shareholders of the Company (obtained in the manner described in
paragraph 22) if such amendment would:
(a) Increase the number of shares that may be issued under the
Plan;
(b) Permit payroll deductions at a rate in excess of ten
percent (10%) of the participant's Compensation;
(c) Change the designation of the employees (or class of
employees) eligible for participation in the Plan; or
(d) If the Company has a class of equity securities registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") at the time of such amendment, materially increase the benefits
which may accrue to participants under the Plan.
If any amendment requiring shareholder approval under this paragraph 20
of the Plan is made, such shareholder approval shall be solicited as described
in paragraph 22 of the Plan.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by
the shareholders of the Company by the affirmative vote of the holders of a
majority of the shares of Common Stock of the Company represented at a duly-held
Shareholders' meeting within twelve (12) months before or after the date the
Plan is adopted.
(b) If and in the event that the Company registers any class
of equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in paragraph 21(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to
vote for the Plan substantially the same information which would be required (if
proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the Securities
and Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
23. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
24. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in paragraph 21. It shall continue in
effect for a term of ten (10) years unless sooner terminated under paragraph 20.
EXHIBIT C
4. SHARES SUBJECT TO THE PLAN
4.1 Number. The total number of shares of Stock reserved for issuance upon
exercise of Options under the Plan is one million (1,000,000). Such shares shall
consist of authorized but unissued Stock. If any Option granted under the Plan
lapses or terminates for any reason before being completely exercised, the
shares covered by the unexercised portion of such Option may again be made
subject to Options under the Plan.
CHILDREN'S BROADCASTING CORPORATION
724 FIRST STREET NORTH
MINNEAPOLIS, MINNESOTA 55401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of 1996 Annual Meeting
of Shareholders and the Proxy Statement, dated August 26, 1996, hereby appoints
Christopher T. Dahl and Lance W. Riley as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all common shares of Children's
Broadcasting Corporation held of record by the undersigned on August 21, 1996,
at the 1996 Annual Meeting of Shareholders to be held on September 30, 1996 at
3:30 p.m. at the Hilton-Minneapolis, 1001 Marquette Avenue South, Minneapolis,
Minnesota, and at any adjournments thereof.
1. To elect directors for the ensuing year and until their successors
shall be elected and duly qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees listed below
CHRISTOPHER T. DAHL, RICHARD W. PERKINS, RODNEY P. BURWELL,
MARK A. COHN, RUSSELL COWLES II
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below.
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2. To approve an amendment to the Articles of Incorporation of the Company
to increase the Company's authorized shares from 12,500,000 to
50,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt the Company's 1996 Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve an amendment to the Company's 1994 Stock Option Plan which
increases the number of shares reserved thereunder for issuance of
stock options from 250,000 to 1,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To ratify and approve the appointment of BDO Seidman, LLP as
independent accountants for the fiscal year ending December 31, 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 THROUGH 6. ABSTENTIONS WILL BE COUNTED TOWARDS THE
EXISTENCE OF A QUORUM.
Please sign exactly as name appears on this proxy. When shares are held
by joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
____________________________________
(Date)
____________________________________
(Signature)
____________________________________
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
