SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 4, 1996
Date of Report (Date of earliest event reported)
CHILDREN'S BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-21534 41-1663712
(State or other jurisdiction (Commission File No.) (IRS Employer ID No.)
of incorporation)
724 First Street North, Minneapolis, Minnesota 55401
(Address of principal executive offices)
(612) 338-3300
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 4, 1996, the Company acquired all of the issued and outstanding
stock of Radio Elizabeth, Inc. ("REI"), which holds a Federal Communications
Commission ("FCC") license for WJDM-AM Radio Station licensed to Elizabeth, New
Jersey on the 1530 kHz frequency. Under the terms of the Stock Purchase
Agreement entered into in January 1996, between the Company and John R. Quinn
("Seller"), the sole shareholder of REI, the aggregate consideration for the
acquisition was $11,500,000, $10,000,000 of which was to be paid in cash and the
remainder over ten years pursuant to the terms of a Non-Competition and
Consultancy Agreement. On June 1, 1996, pursuant to an agreement of the parties
to amend the purchase terms, the Company entered into a Securities Agreement
("Securities Agreement") with the Seller pursuant to which the Seller agreed to
accept 270,468 Shares of Company Common Stock in lieu of $2,500,000 of the cash
portion of the purchase price, and the Company issued such Shares in accordance
with that Agreement. The 270,468 shares were issued to Seller at the closing of
the transaction which was completed on June 4, 1996. In accordance with the
Securities Agreement, the Seller or subsequent holder were granted certain
rights exercisable prior to September 1, 1996 with respect to registration of
such Shares under the Securities Act of 1933, as amended. To secure the
obligation, the Company escrowed $2,500,000. The Seller has subsequently
requested registration of the Shares issued to him, and the Company intends to
proceed to file a Registration Statement under the Act with respect to the
Shares. If the Company fails to complete such registration by July 31, 1996, the
Seller will have the right to exchange such Shares for the $2,500,000 held in
escrow; which would materially and adversely impact the Company's working
capital.
The FCC granted its consent to the transfer of control of REI by action
taken on April 11, 1996. On May 16, 1996, a "Petition for Reconsideration or to
Set Aside Grant of Application Pending Action on Request for Declaratory Ruling"
was filed by Press Broadcasting Company, Inc. Because of this filing, the FCC
consent to the transfer of control is not a final action, and is thus subject to
possible rescission, review or further appeal. In recognition of this
possibility, the parties entered into an Unwind Agreement at closing which
provides that in the event of recision of the FCC grant of its consent, the
parties would "unwind" the transaction which would place the parties back in
their preclosing positions. The Unwind Agreement does not require the Seller to
escrow funds for, or to collateralize his obligations under, the Unwind
Agreement, and the Company would be at risk in the event the Seller failed, or
was unable, to rescind or unwind the transaction. In addition, if the transfer
of control of the FCC license were rescinded by the FCC, the Company would lose
market coverage in all or portions of the New York City AM radio market, which
is currently the largest in the United States. If the Company would be unable to
make an alternate acquisition in such market, the revenue generated from its
network would be materially and adversely affected.
REI, in addition to its license for operation on 1530 kHz, presently
has issued to it a special temporary authorization ("STA") for operation on 1660
kHz at 10kW power, which provides coverage of a significant portion of the New
York market. WJDM has been broadcasting the Company's Radio AAHS(R) programming
in the nation's largest radio market since February 1, 1996, over its 1660 kHz
frequency pursuant to a local programming and marketing agreement. The STA
frequency is located in a portion of the spectrum referred to as the expanded
band ("Expanded Band") recently allocated by the FCC and assigned to certain AM
broadcasters in order to implement Congressional policy. REI and other Expanded
Band licensees are expected to be allowed to operate on both their original
frequencies and the Expanded Band frequencies for a period of five years, after
which time the licensee must elect which frequency on which it will continue
broadcasting. There can be no assurance that REI will ever receive a permanent
license to an Expanded Band frequency, and failure to obtain such a license
would leave the Company broadcasting from only the existing licensed frequency,
which at 1 kw power does not cover the New York market, thereby resulting in a
substantial diminution of the value of the Company's investment in REI. Most
radio receivers produced prior to 1990 cannot receive Expanded Band frequencies.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
It is impractical for the Registrant to provide required
financial statements specified in Rule 3-05(b) for the
acquisition described in Item 2. The Registrant intends to
file such financial statements within 60 days.
(b) Pro forma financial information.
It is impractical for the Registrant to provide required pro
forma financial information. The Registrant intends to file
such financial statements within 60 days.
(c) Exhibits.
10.1 Stock Purchase Agreement dated January 19, 1996, as
amended, between the Company and John Quinn
(incorporated by reference to Exhibit 10.47 to
Registrant's Registration Statement on Form S-2, File
No. 33-80721).
10.2 Securities Agreement dated June 3, 1996 between the
Company and John Quinn.
10.3 Escrow Agreement dated June 1, 1996 between the
Company, John R. Quinn and Pepper & Corazzini, L.L.P.
10.4 Form of Stock Purchase Warrant dated June , 1996
granted by the Company to Brenner Securities
Corporation.
10.5 Unwind Agreement dated June 1, 1996 between the
Company and John R. Quinn.
10.6 Non-Competition and Consultancy Agreement dated June
1, 1996, between John R. Quinn and the Company.
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.
CHILDREN'S BROADCASTING CORPORATION
Dated: June 17, 1996. By: /s/ James G. Gilbertson
James G. Gilbertson
Executive Vice President and
Chief Financial Officer
SECURITIES AGREEMENT
By and Among
Children's Broadcasting Corporation
and
John M. Quinn
----------------------------------------------
Dated as of June 3, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
ARTICLE I PURCHASE AND SALE OF SHARES................................................. 1
Section 1.1 Purchase and Sale of the Shares..................................... 1
Section 1.2 Consideration....................................................... 1
Section 1.3 Determination of Number of Shares; Adjustments to
Consideration....................................................... 2
Section 1.4 Closing............................................................. 2
Section 1.5 Deliveries at Closing............................................... 2
Section 1.6 Actions Subsequent to Closing....................................... 2
ARTICLE II REPRESENTATION AND WARRANTIES OF THE
SELLER.............................................................. 3
Section 2.1 Making of Representations and Warranties............................ 3
Section 2.2 Investment Representations.......................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
CHILDREN'S.................................................................. 4
Section 3.1 Making of Representations and Warranties............................ 4
Section 3.2 Organization and Corporate Power.................................... 4
Section 3.3 Authority........................................................... 4
Section 3.4 Investment Banking, Brokerage....................................... 5
Section 3.5 Children's Common Stock............................................. 5
ARTICLE IV CONDITIONS.................................................................. 5
Section 4.1 Conditions to the Obligations of Children's......................... 5
Section 4.2 Conditions to the Obligations of the Seller......................... 7
ARTICLE V TERMINATION OF AGREEMENT............................................................. 8
Section 5.1 Termination......................................................... 8
Section 5.2 Termination of Purchase Agreement................................... 8
Section 5.3 Effect of Termination............................................... 8
Section 5.4 Right to Proceed.................................................... 8
ARTICLE VI SURVIVAL.................................................................... 9
Section 6.1 Survival of Representations, Warranties, Etc........................ 9
ARTICLE VII ESCROW...................................................................... 9
Section 7.1 Escrow.............................................................. 9
ARTICLE VIII REGISTRATION RIGHTS......................................................... 10
Section 8.1 Definitions......................................................... 10
Section 8.2 Resale Registration................................................. 11
Section 8.3 Registration Procedures............................................. 12
Section 8.4 Registration Expenses............................................... 14
Section 8.5 Indemnification and Contribution.................................... 14
Section 8.6 Transfer of Registration Rights..................................... 16
Section 8.7 Limitations on Monthly Sales........................................ 16
ARTICLE IX MISCELLANEOUS............................................................... 16
Section 9.1 Incorporation By Reference.......................................... 16
</TABLE>
SECURITIES AGREEMENT
This Securities Agreement ("Agreement") is made as of this 3rd
day of June, 1996, by and among Children's Broadcasting Corporation, a Minnesota
corporation ("Children's"), and John M. Quinn ("Seller").
W I T N E S S E T H
WHEREAS, Children's and Seller have entered into a Stock Purchase
Agreement dated January 19, 1996 (the "Purchase Agreement"), as amended, which
provides for the sale by Quinn to Children's for a dollar amount all of the
outstanding common stock of Radio Elizabeth, Inc.; and
WHEREAS, Children's and Quinn have amended the Purchase Agreement to
provide that Two Million Five Hundred Thousand Dollars ($2,500,000) of the total
purchase price shall be paid in cash in the form of unregistered common stock of
Children's (the "Shares" or "Children's Common Stock"); and
WHEREAS, the parties hereto desire to memorialize such amendment and to
provide for certain registration rights with respect to the Shares, as
hereinafter provided.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Purchase and Sale of the Shares. Subject to the terms and
conditions of this agreement, and in reliance on the representations, warranties
and covenants set forth herein, Children's hereby agrees to sell and deliver to
Seller, at the Closing (as hereinafter defined in Section 1.4 hereof), and
Seller agrees to purchase from Children's the Shares free and clear of any and
all liens, claims, options, charges, encumbrances or rights of any nature
("Claims").
Section 1.2 Consideration. Subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants set
forth herein, and in consideration of the sale and delivery by the Seller of the
outstanding shares of Radio Elizabeth, Inc., Children's hereby agrees to issue
and deliver to the Seller the Shares, subject to possible adjustment, as
provided in Section 1.3 hereof. No fractional shares will be issued by
Children's to the Seller. Instead, the total number of shares of Children's
Common Stock to be issued to Seller (regardless of whether such Shares are
represented by a single or multiple certificates) will be rounded up or down to
the nearest number of whole shares of Children's Common Stock (or in the case of
.5, to the next higher whole number). Reference is made to the representations
and warranties of the Seller set forth in Section 2.2 hereof, including, without
limitation, the acknowledgment and understanding that (a) the Children's Common
Stock to be issued to the Seller hereunder has not been registered under the Act
of 1933, as amended (the "Securities Act"), or any state securities laws, (b)
the Children's Common Stock to be issued to the Seller hereunder will be subject
to transfer restrictions under the Act and applicable state securities laws and
may not be transferred unless (x) it is subsequently registered under the Act
and applicable state securities laws or (y) there is delivered to Children's an
opinion of counsel satisfactory to Children's that such registration is not
required, and (c) Children's will place a restrictive legend to the foregoing
effect on the certificate(s) representing Children's Common Stock to be issued
to the Seller hereunder.
Section 1.3 Determination of Number of Shares; Adjustments to
Consideration. The number of shares of Children's Common Stock to be issued and
delivered pursuant hereto shall be the number obtained by dividing $2,600,000 by
the Closing Price of Children's Common Stock. For purposes of this agreement,
the term "Closing Price" shall mean the average per share closing sale price of
Children's Common Stock as reported on the Nasdaq National Market for the ten
(10) trading days immediately preceding the second trading day prior to the
Closing Date. Notwithstanding the foregoing, if between the date of this
Agreement and the Closing Date the outstanding shares of Children's Common Stock
or Radio Elizabeth, Inc. Common Stock are changed into a different number of
shares or a different class or series, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the consideration described above shall be correspondingly and
proportionately adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
Section 1.4 Closing. The sale and delivery and the purchase and
acceptance of the Shares (the "Closing") shall take place at the offices of
Pepper & Corazzini, Washington, D.C., on the Closing Date provided in, or
determinable with reference to, the Purchase Agreement.
Section 1.5 Deliveries at Closing. At the Closing, Children's shall
deliver to Seller a certificate or certificates representing the number of
shares of Children's Common Stock determined in the manner provided in Section
1.3, bearing the legend provided in Section 2.2(d) hereof issued in the name of
Seller. All transfer, excise or similar taxes arising out of the sale or
delivery of the Shares to Children's shall be paid by the Seller.
Section 1.6 Actions Subsequent to Closing. The Seller and Children's,
after the Closing and without further consideration, shall from time to time
execute and deliver or cause to be executed and delivered such further
instruments of transfer, assignments, consents or documents as may be reasonably
necessary or appropriate to carry out the intent and purposes hereof.
ARTICLE II
REPRESENTATION AND WARRANTIES OF THE SELLER
Section 2.1 Making of Representations and Warranties. As a material
inducement to Children's to enter into this agreement and to consummate the
transactions contemplated hereby, Seller makes to Children's the following
representations and warranties:
Section 2.2 Investment Representations.
(a) Seller is acquiring the shares of Children's Common Stock
to be issued to such Seller hereunder for Seller's own account for
investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, in violation of
the Securities Act or any rule or regulation thereunder, as amended
from time to time.
(b) Seller is not directly or indirectly controlled by, or
acting on behalf of any person which is, an "investment company" within
the meaning of the Investment Company Act of 1940 (the "1940 Act"), as
amended, required to register as such under the 1940 Act.
(c) Seller (i) has carefully reviewed the disclosure
information provided by Children's; (ii) has requested and received
such other information, as he has deemed relevant, regarding Children's
for purposes of evaluating his acquisition of Children's Common Stock
to be issued hereunder; (iii) is aware of the risks associated with an
investment in Children's Common Stock; and (iv) has not received any
form of general solicitation or advertising in connection with his
decision to acquire Children's Common Stock hereunder. Seller has not
relied in any way on any information with respect to the Children's
Common Stock or Children's generally other than the representations of
Children's contained herein or materials furnished by Children's in
writing in connection herewith.
(d) Seller acknowledges and understands that (i) the
Children's Common Stock to be issued to Seller hereunder has not been
registered under the Securities Act or any state securities laws; (ii)
the Children's Common Stock to be issued to Seller hereunder will be
subject to transfer restrictions under the Securities Act and
applicable state securities laws and may not be transferred unless (x)
subsequently registered under the Securities Act and applicable state
securities laws or (y) there is delivered to Children's an opinion of
counsel satisfactory to Children's that such registration is not
required; and (iii) Children's will place a restrictive legend on the
certificate(s) representing the Children's Common Stock to be issued to
Seller hereunder, containing the following language:
The shares represented by this Certificate were issued without
registration under the Securities Act of 1933, as amended (the
"Act") and without registration under applicable state
securities laws, in reliance upon exemptions contained in the
Act and such laws. No transfer of these shares or any interest
therein may be made except pursuant to effective registration
statements under said laws unless this Corporation has
received an opinion of counsel satisfactory to it that such
transfer or disposition does not require registration under
said laws and, for any sales under Rule 144 of the Act, such
evidence as it shall request for compliance with that rule.
(e) Seller (i) is able to bear the economic risks of the
acquisition of shares of Children's Common Stock hereunder and has
adequate means of providing for current needs and possible
contingencies; (ii) either alone or with his advisors has had the
opportunity to ask questions and receive answers concerning Children's
and the terms and conditions of the acquisition of Children's Common
Stock, as well as the opportunity to obtain any additional information
necessary to verify the accuracy of information furnished in connection
therewith which Children's possesses or can acquire without
unreasonable effort or expense; and (iii) together with his advisors,
if any, has such knowledge and experience in financial and business
matters that Seller is capable of evaluating the merits and risks of
this acquisition of Children's Common Stock in exchange for the Shares,
and of making an informed investment decision, and has relied solely
upon the advice of his own counsel, accountant and other advisors, with
regard to the legal, investment, tax and other considerations regarding
such acquisition.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHILDREN'S
Section 3.1 Making of Representations and Warranties. As a material
inducement to the Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Children's hereby makes the following
representations and warranties:
Section 3.2 Organization and Corporate Power. Children's is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted and to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by it pursuant to or as contemplated by this Agreement
and to carry out the transactions contemplated hereby and thereby.
Section 3.3 Authority. The execution, delivery and performance of this
Agreement and each agreement, document and instrument to be executed and
delivered by Children's pursuant to this Agreement have been duly authorized by
all necessary corporate action of Children's, and no other corporate action on
the part of Children's is required in connection therewith. This Agreement and
each such agreement, document and instrument constitutes, or when executed and
delivered by Children's will constitute, valid and binding obligations of
Children's enforceable in accordance with their respective terms. The execution,
delivery and performance by Children's of this Agreement and each such
agreement, document and instrument:
(a) do not and will not violate any provisions of the
certificate of incorporation or by-laws of Children's;
(b) do not and will not result in any violation by Children's
of any laws, rules or regulations of the United States or any state or
other jurisdiction applicable to Children's or any of its affiliates,
or require Children's or any of its affiliates to obtain any approval,
consent or waiver of, or to make any filing of any notice with, any
person (governmental or otherwise) that has not been obtained or made;
and
(c) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right
of termination of any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, order, writ,
judgment, injunction, decree, determination or arbitration award to
which Children's is a party or by which the property of Children's is
bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or
encumbrance on any property or asset owned by Children's except for
such occurrence that would not have a material adverse effect on the
properties, business, condition (financial or otherwise), or prospects
of Children's.
Section 3.4 Investment Banking, Brokerage. There are no claims for
investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees of lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Seller or Children's, except an
obligation to Brenner Securities Corporation which Children's agrees to assume
and discharge.
Section 3.5 Children's Common Stock. The Children's Common Stock to be
issued hereunder in exchange for the Shares shall, when issued in accordance
with this Agreement, be validly issued, fully paid and non-assessable.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions to the Obligations of Children's. The obligation
of Children's to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or at the Closing, of the following
additional conditions precedent:
(a) Representations, Warranties, Covenants. Each of the
representations and warranties of Seller made pursuant to this
Agreement and the Purchase Agreement shall be true and correct in all
material respects on and as of the Closing Date, with the same effect
as though made on and as of the Closing Date; Seller shall, on or
before the Closing Date, have performed and satisfied all of his
covenants and agreements set forth herein and in the Purchase
Agreement, which by the terms hereof, are to be performed and satisfied
on or before the Closing Date; and Seller shall have delivered to
Children's certificates executed as of the Closing Date certifying to
the foregoing effect.
(b) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have
been instituted or threatened by or on behalf of Seller or which seeks
to enjoin, restrain or prohibit, or might result in money damages to
any party hereto in respect of, this Agreement or the complete
consummation of the transactions contemplated by this Agreement, or
which otherwise would in the reasonable judgment of Children's make it
inadvisable to consummate such transactions. No law or regulation shall
be in effect and no court order shall have been entered in any action
or proceeding instituted by any party which enjoins, restrains or
prohibits this Agreement or the complete consummation of the
transactions contemplated by this Agreement.
(c) Children's Approvals and Consents. Children's shall have
made all filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by it in
connection with the execution and delivery of this Agreement and the
performance by it of the transactions contemplated hereby; Children's
shall have received all required authorizations, waivers, consents and
permits to permit the consummation of the transactions contemplated by
this agreement, in form and substance reasonably satisfactory to
Children's, from all third parties.
(d) Deliveries. The Seller shall have delivered or entered
into the documents and instruments contemplated by this Agreement, in
each case, in form and substance satisfactory to Children's and its
counsel.
(e) Closing of Purchase Agreement. All transactions
contemplated by the Purchase Agreement shall have been completed in
accordance with the terms of the Purchase Agreement.
(f) Proceedings Satisfactory to Children's. All proceedings to
be taken by the Seller in connection with the connection of the Closing
and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transaction contemplated hereby reasonably requested by Children's will
be reasonably satisfactory in the form and substance to Children's and
its counsel.
Section 4.2 Conditions to the Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement are subject to the fulfillment of, prior to or at the Closing, the
following additional conditions precedent:
(a) Representations, Warranties, Covenants. Each of the
representations and warranties of Children's contained in this
Agreement and the Purchase Agreement shall be true and correct in all
material respects on and as of the Closing Date, with the same effect
as though made on and as of the Closing Date; Children's shall, on or
before the Closing Date, have performed and satisfied all of its
covenants and agreements set forth herein and in the Purchase
Agreement, which by the terms hereof are to be performed and satisfied
by Children's on or before the Closing Date; and Children's shall have
delivered to Seller a certificate as of the Closing Date certifying to
the foregoing effect.
(b) Opinion of Counsel and Other Documents. On the Closing
Date the Seller shall have received an opinion of counsel for
Children's, dated as of the Closing Date and addressed to the Seller,
substantially in the form attached as Exhibit 4.2 hereto.
(c) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have
been instituted or threatened which seeks to enjoin, restrain or
prohibit, or might result in damages in respect of, this Agreement or
the complete consummation of the transactions as contemplated by this
Agreement. No law or regulation shall be in effect and no court order
shall have been entered in any action or proceeding instituted by any
party which enjoins, restrains or prohibits this Agreement or the
complete consummation of the transactions as contemplated by this
Agreement.
(d) Deliveries. Children's shall have delivered or entered
into the documents and instruments contemplated by this Agreement, in
each case, in form and substance satisfactory to the Seller and its
counsel.
(e) Closing of Purchase Agreement. All transactions
contemplated by the Purchase Agreement shall have been completed in
accordance with the terms of the Purchase Agreement.
(f) Proceedings Satisfactory to Seller. All proceedings to be
taken by Children's in connection with the connection of the Closing
and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transaction contemplated hereby reasonably requested by the Seller will
be reasonably satisfactory in the form and substance to the Seller and
its counsel.
ARTICLE V
TERMINATION OF AGREEMENT
Section 5.1 Termination. This Agreement may be terminated any time
prior to the Closing Date as follows:
(a) With the mutual consent of Children's and Seller.
(b) By Children's, if there has been a material
misrepresentation or breach of warranty on the part of Seller in the
representations and warranties contained herein or a material breach of
covenants on the part of Seller and the same has not been cured within
10 days after notice thereof. In the event of any termination pursuant
to this Section 5.1(b), written notice setting forth the reasons
therefor shall forthwith be given by Children's to Seller.
(c) By Seller if there has been a material misrepresentation
or breach of warranty on the part of Children's in the representations
and warranties contained herein or a material breach of covenants on
the part of Children's and the same has not been cured within 10 days
after notice thereof. In the event of any termination pursuant to this
Section 5.1(c), written notice setting forth the reasons therefor shall
forthwith be given by the Seller to Children's.
Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under Section 5.1 shall not be available to any party
to the extent the failure of such party, respectively, to fulfill any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date (as a result, for
example, of an action or failure to act causing a failure of a condition
precedent).
Section 5.2 Termination of Purchase Agreement. This Agreement shall
automatically terminate upon any termination of the Purchase Agreement.
Section 5.3 Effect of Termination. All obligations of the parties
hereunder shall cease upon any termination pursuant to Section 5.1; provided,
however, that (i) the provisions of this Article V shall survive any termination
of this Agreement; (ii) nothing herein shall relieve any party from any
liability for a material error or omission in any of its representations or
warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein; and (iii) any party may
proceed as further set forth in Section 6.3 below.
Section 5.4 Right to Proceed. Anything in this Agreement to the
contrary notwithstanding, if any of the conditions specified in Section 4.1
hereof have not been satisfied, Children's shall have the right to proceed with
the transactions contemplated hereby without waiving any of its rights
hereunder, and if any of the conditions specified in Section 4.2 hereof have not
been satisfied, the Seller shall have the right to proceed with the transactions
contemplated hereby without waiving any of his rights hereunder.
ARTICLE VI
SURVIVAL
Section 6.1 Survival of Representations, Warranties, Etc. All
representations, warranties, agreements, covenants and obligations herein or in
any schedule or certificate delivered by any party incident to the transactions
contemplated hereby are material and may be relied upon by the party receiving
the same and shall survive the Closing regardless of any investigation by or
knowledge of such party and shall not merge into the performance of any
obligation by any party hereto.
ARTICLE VII
ESCROW
Section 7.1 Escrow. Children's has established an account with Strong
Capital Management and deposited therein the sum of $2,500,000 (the "Escrowed
Funds"). The Escrowed Funds shall include earnings thereon, if any. Such funds
shall remain and constitute the property of Children's, subject to the
conditions of Section 7.2. The law firm of Pepper & Corazzini, L.L.P., 1776 K
Street, N.W. Washington, D.C. is hereby designated agent (the "Agent") of the
parties for purposes of disposition of the Escrowed Funds pursuant to Section
7.3.
Section 7.2 Conditions of Escrow. In the event the Shares are not
subject to an effective registration statement under the Securities Act of 1933,
as amended (the "Act") within sixty (60) days after Children's has received the
notice of Seller's demand for such registration (the "Registration Period")
pursuant to Section 8.2(a), Seller, at his option, shall have the right, at any
time after the termination of the Registration Period, but prior to the time
that the Registration Statement relating to the Shares is declared effective
under the Act, upon at least two (2) business days prior written notice to
Children's and the Agent, to tender the Shares to the Agent, against receipt of
the Escrowed Funds; provided, however, that Seller shall not have the right to
tender such Shares pursuant to this Section 7.2, if at the time of receipt by
Children's of Seller's notice pursuant hereto: (a) the Shares are subject to an
effective registration statement under the Act; or (b) Seller has not demanded
such registration by September 1, 1996. In addition to the tender of the Shares
to the Agent, and as a condition to obtaining the Escrowed Funds, Seller shall
deliver to the Agent in favor of Children's: (i) a statement signed by Seller
and duly acknowledged, to the effect that the Shares are owned by Seller and are
delivered for repurchase by Children's, free and clear of all liens, security
interests, encumbrances or restrictions (other than restrictions applicable to
the Shares under federal and state securities laws) and (ii) an assignment
separate from certificate with Seller's signature duly guaranteed by a national
bank or a Medallion Guaranty. The Closing on the exchange of the Shares for the
Escrowed Funds shall take place at the time, place and manner prescribed by the
escrow agreement (the "Escrow Agreement") attached hereto as Exhibit 7.2, which
the parties hereto agree to execute and deliver concurrent with the execution of
this Agreement. Notwithstanding the terms and conditions of this Article VII,
the terms and conditions of the Escrow Agreement shall govern the deposit,
retention and disposition of the Escrowed Funds.
ARTICLE VIII
REGISTRATION RIGHTS
Section 8.1 Definitions.
As used in this Article VIII, the following terms shall have the
following meanings:
"Advice" has the meaning set forth in Section 8.3.
"Affiliate" means, with respect to any specified person, any other
person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified person.
"Commission" means the Securities and Exchange Commission.
"Controlling Persons" has the meaning set forth in Section 8.5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"Holder" means (i) Seller and (ii) each person (other than Children's
and its Affiliates) to whom Seller transfers the Shares as provided in Section
8.6 hereof, if the person to whom the Shares are transferred acquires the Shares
as Registrable Securities.
"Lock-up Period" has the meaning set forth in Section 8.6.
"Lock-up Request" has the meaning set forth in Section 8.6.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a Prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any Prospectus supplement, and by all other
amendments and supplements to the Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means the Shares; provided, however, that any
Shares shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, or (ii) such Registrable Securities become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act, or (iii) such Securities cease to be outstanding.
"Registration Statement" means any registration statement of Children's
that covers any of the Registrable Securities pursuant to the provisions of this
agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Shares" means the shares of Children's Common Stock issued to the
Seller pursuant to this agreement so long as they are owned beneficially and of
record by a Holder.
"Suspension Notice" has the meaning set forth in Section 8.3.
Section 8.2 Resale Registration.
(a) Filing, Effectiveness. If any Holder shall make a demand
of Children's in writing at any time after the Closing Date of the
transactions contemplated by this Agreement that it desires Children's
to register all or any portion of his Registrable Securities,
Children's shall use reasonable efforts to prepare and file one
registration statement on Form S-3 (the "Registration Statement") under
the Act covering the resale by such Holder of its Registrable
Securities pursuant to Rule 415 under the Securities Act from time to
time in transactions not involving any underwritten public offering and
use reasonable efforts (i) to cause such Registration Statement to be
declared effective by the Commission for such Registrable Securities as
soon as practicable thereafter and (ii) to keep the Resale Registration
Statement continuously effective until the earliest of (x) the date on
which such Holder no longer holds any Registrable Securities registered
under the Resale Registration Statement or (y) the third anniversary of
the Closing Date, or such lesser time as may be permitted under Rule
144(k) under the Act (or any successor rule thereto) to enable Holder
to sell the Registrable Securities without restriction under the Act.
Children's shall not be required to cause a Registration Statement
requested pursuant to this Section 8.2 to become effective prior to 90
days following the effective date of a registration statement for a
publicly underwritten offering of Children's Common Stock initiated by
Children's if any managing underwriter named in such registration
statement for the publicly underwritten offering has advised Children's
in writing that the registration or sale of additional securities by
stockholders of Children's within such 90-day period would have a
material adverse effect on the likelihood of success of such
underwritten offering; provided, however, that Children's shall use its
best efforts to achieve such effectiveness promptly following such
90-day period if the request pursuant to this Section 8.2 has been made
prior to the expiration of such 90-day period. Children's may postpone
the filing of any Registration Statement required hereunder for a
reasonable period of time, not to exceed 60 days, if Children's has
been advised by outside legal counsel that such filing would require
the disclosure of a material transaction or other matter and Children's
determines reasonably and in good faith that such disclosure would have
a material adverse effect on Children's; provided, however, that
Children's shall (A) use reasonable efforts to disclose such material
transaction or other matter as soon as in its good faith judgment it is
prudent to do so and (B) may so postpone such filing only if all other
persons who are named as selling securityholders under then effective
registration statements filed by Children's with the Commission and all
directors of Children's are advised of the fact that a material
transaction or other matter is not being disclosed during the length of
such postponement and of the consequences of such nondisclosure under
the Act and the Exchange Act. The disclosure to any Holder of any
material transaction, or of the existence thereof, pursuant to the
preceding sentence shall be held in confidence by Seller or Holder
until Children's or a third party not under the control of Seller or
Holder has made a public disclosure thereof. The exercise by Children's
of any rights in this Section 8.2(a) to postpone the filing or to delay
the effectiveness of any Registration Statement shall not otherwise
affect the rights of Seller to tender his Shares and demand payment of
the Escrowed Funds pursuant to Section 7.2 hereof.
(b) Effective Registration. A registration will not be deemed
to have been effected unless the Registration Statement has been
declared effective by the Commission; provided, however, that if after
it has been declared effective, the offering of Registrable Securities
pursuant to a Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the Commission or
any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to
such Registration Statement may legally resume.
Section 8.3 Registration Procedures. In connection with the obligations
of Children's to effect or cause the registration of any Registrable Securities
pursuant to the terms and conditions of this Agreement, Children's shall use
reasonable efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
in connection therewith:
(a) Children's shall prepare and file with the Commission a
Registration Statement on Form S-3 or other similar form under the
Securities Act which permits secondary sales of securities in a "shelf
registration," and use reasonable efforts to cause such Registration
Statement to become effective and remain effective in accordance with
the provisions of this Agreement;
(b) Children's shall promptly prepare and file with the
Commission such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration
Statement effective and shall timely file with the Commission all
required filings under the Exchange Act as are necessary to keep the
Registration Statement effective for as long as such registration is
required to remain effective pursuant to the terms hereof; shall cause
the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424
under the Securities Act; and shall comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement during
the applicable period in accordance with the intended methods of
disposition by Holder set forth in such Registration Statement or
supplement to the Prospectus;
(c) Children's shall promptly furnish to Holder such number of
copies of the Prospectus (including each preliminary Prospectus) and
any amendments or supplements thereto, as Holder may reasonably request
in order to facilitate the public sale or other disposition of the
Registrable Securities being sold by Holder;
(d) Children's shall promptly notify Holder, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of
any request by the Commission or any state securities authority for
amendments and supplements to a Registration Statement and Prospectus
or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement, (iv) of
the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state
securities or "blue sky" laws, and (v) of the happening of any event
which makes any statement made in a Registration Statement or related
Prospectus untrue or which requires the making of any changes in such
Registration Statement or Prospectus so that they will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As soon as practicable following expiration of the
Suspension Period (as defined below), Children's shall prepare and file
with the Commission and furnish a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Upon receipt of any notice (a "Suspension Notice") by Holder from
Children's of the happening of any event of the kind described in Section
8.3(d)(v), Holder shall forthwith discontinue disposition of the Registrable
Securities pursuant to the Resale Registration Statement covering such
Registrable Securities until such Seller's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 8.3(d) or until
Holder is advised in writing (the "Advice") by Children's that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by Children's, will, or will request any broker-dealer acting as
Holder's agent to, deliver to Children's (at Children's expense) all copies,
other than permanent file copies then in Seller's or broker-dealer's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that in no event shall the period
from the date on which Seller receives a Suspension Notice to the date on which
Seller receives either the Advice or copies of the supplemented or amended
Prospectus contemplated by Section 8.3(d) (the "Suspension Period") exceed 60
days.
Section 8.4 Registration Expenses. Children's shall bear all expenses
incurred in connection with the registration of the Registrable Shares pursuant
to Section 8.2 of this agreement. Such expenses shall include, without
limitation, all printing, legal and accounting expenses incurred by Children's
and all registration and filing fees imposed by the Commission, any state
securities commission or the NASDAQ Stock Market. Each Holder shall be
responsible for any brokerage fees or commissions and taxes of any kind
(including, without limitation, transfer taxes) with respect to any disposition,
sale or transfer of Registrable Securities and for any legal, accounting and
other expenses incurred by such Holder.
Section 8.5 Indemnification and Contribution.
(a) Indemnification by Children's. Children's agrees to
indemnity and hold harmless, to the full extent permitted by law, each
Holder from and against all losses, claims, damages, liabilities and
expenses (including without limitation reasonable legal fees and
expenses incurred by Holder (collectively, the "Damages") to which
Holder may become subject under the Securities Act or otherwise,
insofar as such Damages (or proceedings in respect thereat) arise out
of or are based upon any untrue or alleged untrue statement of material
fact contained in any Registration Statement (or any amendment thereto)
pursuant to which Registrable Securities were registered under the
Securities Act, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented
if Children's shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
except insofar as such Damages arise out of or are based upon any such
untrue statement or omission based upon information relating to Seller
furnished in writing to Children's by Seller specifically for use
therein; provided, however, that Children's shall not be liable to
Holder under this Section 8.5(a) to the extent that any such Damages
were caused by the fact that Holder sold Securities to a person as to
whom it shall be established that there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the
Prospectus as then amended or supplemented if, but only if, (i)
Children's has previously furnished copies of such amended or
supplemented Prospectus to Holder and (ii) such Damages were caused by
any untrue statement or omission or alleged untrue statement or
omission contained in the Prospectus so delivered which was corrected
in such amended or supplemented Prospectus.
(b) Indemnification by the Seller. Holder agrees to indemnify
and hold harmless Children's, its stockholders, directors, officers and
each person, if any, who controls Children's within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from Children's to
Holder, but only with reference to information relating to Holder
furnished in writing to Children's by Holder specifically for use in
any Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto); provided, however, that
Holder shall not be obligated to provide such indemnity to the extent
that such Damages result from the failure of Children's to promptly
amend or take action to correct or supplement any such Registration
Statement or Prospectus on the basis of corrected or supplemental
information provided by Seller to Children's expressly for such
purpose. In no event shall the liability of Holder hereunder be greater
in amount than the amount of the proceeds received by Holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 8.5 is unavailable
to an indemnified party or insufficient in respect of any Damages, then
each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid
or payable by such indemnified party as a result of such Damages in
such proportion as is appropriate to reflect the relative fault of
Children's on the one hand and Holder on the other hand in connection
with the statements or omissions that resulted in such Damages, as well
as any other relevant equitable considerations. The relative fault of
Children's on the one hand and of Holder on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
Children's or by Holder and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
If indemnification is available under paragraph (a) or (b) of this
Section 8.5, the indemnifying parties shall indemnity each indemnified party to
the full extent provided in such paragraphs without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 8.5(c). Children's and Holder agree
that it would not be just or equitable if contribution pursuant to this Section
8.5(c) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to herein.
Section 8.6 Transfer of Registration Rights. The registration rights of
Seller and any Holder under this Article VIII may be transferred to any
transferee of Registrable Securities that acquires at least 10,000 shares of
Registrable Securities (appropriately adjusted for stock splits, stock dividends
and the like).
Section 8.7 Limitations on Monthly Sales. Seller and each Holder
(collectively and not severally) agree that they will not sell, or offer for
sale, collectively, in any calendar month, without the prior written consent of
Children's, more than an aggregate twenty-five thousand (25,000) Shares.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Incorporation By Reference. The provisions of Sections 17,
18, 19, 22, 23, 24, 25, 26, 27 and 28 of the Purchase Agreement are incorporated
herein by reference and shall be operative as if fully set forth herein.
In Witness hereof, the parties have executed this agreement effective
the date first above written.
CHILDREN'S BROADCASTING
CORPORATION
By /s/ James G. Gilbertson
Seller
/s/ John R. Quinn
John M. Quinn
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of this 1st day of June, 1996 by and between
JOHN R. QUINN ("Quinn"); CHILDREN'S BROADCASTING CORPORATION ("Children's
Broadcasting Corporation"); and PEPPER & CORAZZINI, L.L.P. ("Escrow Agent").
W I T N E S S E T H
WHEREAS, pursuant to a Stock Purchase Agreement dated January 19, 1996,
as amended, between Seller and Buyer, Seller sold to Buyer, and Buyer purchased
from Seller the corporate stock of Radio Elizabeth, Inc., the licensee of radio
station WJDM(AM), Elizabeth, New Jersey;
WHEREAS, in the consummation of that certain January 19, 1996 Stock
Purchase Agreement, as amended, Quinn and Children's Broadcasting Corporation
desire that the Escrow Agent hold certain funds in escrow under the terms of a
Stock Purchase Agreement by and among Children's Broadcasting Corporation and
John R. Quinn, dated June 1, 1996 (the "June 1, 1996 Stock Purchase Agreement"),
upon the terms and conditions described herein pending the registration of
certain shares of Children's Broadcasting Corporation that are being
concurrently issued to Quinn ("Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, Quinn, Chil dren's Broadcasting
Corporation and the Escrow Agent covenant and
agree as follows:
1. Delivery and Investment of Escrow Deposit. Concurrent with the
execution and entering into of this Escrow Agreement, Children's Broadcasting
Corporation is delivering to the Escrow Agent the sum of TWO MILLION FIVE
HUNDRED THOUSAND DOLLARS ($2,500,000.00) (hereafter, including any interest
earned, the "Escrow Deposit"). The Escrow Agent will promptly invest the Escrow
Deposit sum in an interest bearing account or instrument, such account or
instrument to have a maturity date of no more than sixty (60) days from the date
of this Escrow Agreement, at NationsBank, Washington, D.C., in accord with the
rules of the District of Columbia Rules of Professional Conduct relating to the
holding of and investment of such funds, and the Escrow Agent will promptly
provide evidence to the Children's Broadcasting Corporation and Quinn of such
investment. In connection with making any distributions pursuant to this Escrow
Agreement, the Escrow Agent may sell, liquidate or dispose of such investments
as it deems necessary to make such distributions. The Escrow Agent shall have no
liability for any loss in respect of any investments, or any loss resulting from
the sale, liquidation or disposition of any such investments as long as such
investments are made in accordance with and are consistent with this Escrow
Agreement.
2. Release from Escrow. The Escrow Agent shall release and
distribute the Escrow Deposit as follows:
(a) the principal of the Escrow Deposit and all inter est
earned thereon to the Children's Broadcasting Corporation by wire transfer at or
about 1:00 p.m. Eastern Time on the third (3rd) business day after delivery of a
written opinion to Escrow Agent upon which the Escrow Agent may rely from the
law from of Briggs and Morgan, Minneapolis, Minnesota stating without material
qualification that "the Shares are subject to an effective registration
statement under the Securities Act of 1933, as amended, as contemplated by the
June 1, 1996 Stock Purchase Agreement," unless prior to 1:00 p.m. Eastern Time
on the third business day after delivery of the written opinion from Briggs and
Morgan, Escrow Agent receives a conflicting written opinion from the law firm of
Thompson Coburn, St. Louis, Missouri stating without material qualification that
"it has no knowledge or information that the Shares are subject to an effective
registration statement under the Securities Act of 1933, as amended, as
contemplated by the June 1, 1996 Stock Purchase Agreement" in which case the
Escrow Agent shall act in accord with Section 3 below; or
(b) the principal of the Escrow Deposit and all interest
earned thereon to Quinn by wire transfer at or about 1:00 p.m. Eastern Time on
the third (3rd) business day after: (1) the delivery of Quinn's written notice
to Escrow Agent that "the Shares are not subject to an effective registration
statement under the Securities Act of 1933, as amended, as contemplated by the
June 1, 1996 Stock Purchase Agreement"; and (2) the delivery to Escrow Agent of
a written opinion upon which the Escrow Agent may rely from the law firm of
Thompson Coburn, St. Louis, Missouri stating without material qualification that
"the Shares are not subject to an effective registration statement under the
Securities Act of 1933, as amended, as contemplated by the June 1, 1996 Stock
Purchase Agreement," provided that more than sixty (60) calendar days has
elapsed from the date of this Agreement, unless prior to 1:00 p.m. Eastern Time
on the third business day after delivery of the Quinn notice and the written
opinion from Thompson Coburn, Escrow Agent receives a conflicting written
opinion from the law firm of Briggs and Morgan, Minneapolis, Minnesota stating
without material qualification that "the Shares are subject to an effective
registration statement under the Securities Act of 1933, as amended, as
contemplated by the June 1, 1996 Stock Purchase Agreement," in which case the
Escrow Agent shall act in accord with Section 3 below;
(c) pursuant to the joint written verified instructions
of the parties hereto; or
(d) as directed by a decision of a court pursuant to
Section 3 hereof.
3. Litigation. In the event the parties fail to deliver to the Escrow
Agent the opinions described in Section 2(a) or Section 2(b), or the
instructions pursuant to Section 2(c), or in the event conflicting opinions are
delivered pursuant to Section 2(a) or 2(b), then the Escrow Agent shall retain
the Escrow Deposit until a determination settling the dispute between Children's
Broadcasting Corporation and Quinn shall have been finally determined by a court
of competent jurisdiction in New Jersey. If the Escrow Agent receives
conflicting letter opin ions, the Escrow Agent may hire independent counsel to
advise it. The legal fees and other expenses of such counsel shall be shared
equally by the parties. The parties shall also reimburse the Escrow Agent for
all expenses incurred as the result of any litigation or threat thereof to which
the Escrow Agent may be subject in connection with the duties set forth herein.
In the event that any claim or action whatsoever is commenced to which Escrow
Agent is made a party, the Escrow Agent shall have the right to retain counsel
of its own choosing, and any and all legal fees and costs for such counsel shall
be the joint respon sibility of both the Quinn and Children's Broadcasting
Corpora tion, or the responsibility of the party so deemed to be respon sible by
the court in such a claim or action.
4. Duties of the Escrow Agent. The Escrow Agent shall perform only such
duties as are expressly set forth in this Escrow Agreement. The Escrow Agent may
resign and may be discharged from its duties or obligations hereunder by giving
notice of such resignation to Quinn and Children's Broadcasting Corporation
specifying a date when such resignation shall take effect, but no such
resignation shall be effective until ten (10) days following the date on which
the Escrow Agent shall have given notice thereof to Quinn and Children's
Broadcasting Corporation. In the event that Quinn and Children's Broadcasting
Corporation have not appointed a new escrow agent under this Escrow Agreement
and provision has not been made to transfer the Escrow Deposit to such new
escrow agent prior to the effective ness of the resignation of the Escrow Agent,
then the Escrow Agent may appoint a successor escrow agent which shall be a
commercial bank organized under the laws of the United States or any state
thereof and having a combined capital and surplus of at least $100,000,000.
5. Liability of Escrow Agent. The Escrow Agent will act hereunder as a
depository only and is not a party to or bound by any agreement, document or
understanding to which Children's Broadcasting Corporation and Quinn are parties
except for this Escrow Agreement, and is not responsible or liable in any manner
for the sufficiency, correctness, genuineness or validity of any of the
agreements or documents existing between the parties, and the Escrow Agent
undertakes no responsibility or liability for the form and execution of such
agreements and documents or the identity, authority, title or rights of any
person executing any such agreements and documents. Except for its own gross
negli gence or willful misconduct, the Escrow Agent shall not be liable for any
action which it may in good faith take or refrain from taking in connection
herewith, believed by it to be authorized or within the rights and powers
conferred upon it by this Escrow Agreement, and may consult with counsel of its
own choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel. The Escrow Agent is authorized to act upon any
document, request or notice which is believed by them in good faith to be
genuine and signed or presented by the proper party or parties, and shall be
protected in so acting.
6. Notices. Any notice, consent, waiver or other commu nication
hereunder shall be sent by identical nationally recog nized overnight air
courier service, so that delivery is made the next business day, to all parties
and counsel at the addresses specified below (or at such other address which
party shall specify to the other party in accordance herewith):
If to Quinn:
John R. Quinn
9 Caldwell Place
Elizabeth, NJ 07201
with a copy to:
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101-1693
If to Children's Broadcasting Corporation
Children's Broadcasting Corporation
724 First Street North
Fourth Floor
Minneapolis, Minnesota 55401
Attn: Christopher Dahl
with a copy to:
Lance Riley, Esquire
Radio Management Corporation
724 First Street North
Fourth Floor
Minneapolis, Minnesota 55401
and
Avron L. Gordon, Esq.
Briggs and Morgan
2400 IDS Center
Minneapolis, Minnesota 55402
If to Escrow Agent:
Pepper & Corazzini, L.L.P.
1776 K Street, N.W. Suite 200
Washington, D.C. 20006
Attn: John F. Garziglia, Esq.
Notice or other communication shall be deemed to have been given when delivered.
7. Construction. This Escrow Agreement shall be construed and enforced
in accordance with the substantive laws of the District of Columbia without
reference to principles of conflicts of law that may be in effect. If any
Section or provision of this Agreement is held to be invalid or unenforceable,
all other Sections and provisions shall nevertheless continue in full force and
effect.
8. Attorney's Fees and Costs. Should Children's Broad casting
Corporation and Quinn engage in litigation, the prevail ing party in such
litigation shall be entitled to reasonable attorneys' fees and costs as shall be
determined by the court and a reimbursement by the non-prevailing party of any
attorneys' fees and costs paid by the prevailing party to Escrow Agent.
9. Waiver. Any term or provision of this Escrow Agreement may be waived
at any time by the party which is entitled to the benefits thereof, and any term
or provision of this Escrow Agreement may be amended or supplemented at any time
by the mutual consent of the parties hereto, except that any waiver of any term
or condition, or any amendment or supplementation, of this Escrow Agreement
shall be effective only if in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Escrow Agreement shall not in any
way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Escrow
Agreement.
10. Multiple Counterparts. This Escrow Agreement may be signed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In addition, this
Escrow Agreement may contain more than one counterpart of the signature page and
this Agreement may be signed by the affixing of the signature of each party to
one of such counterpart signature pages; all of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement
to be effective on the date first above written.
JOHN R. QUINN
/s/ John R. Quinn
John R. Quinn
CHILDREN'S BROADCASTING CORPORATION:
By /s/ Lance W. Riley
Lance W. Riley
Secretary and General Counsel
ESCROW AGENT:
PEPPER & CORAZZINI, L.L.P.
By /s/ Peter Gutmann
Peter Gutmann
General Partner
WARRANT
TO PURCHASE 125,000 SHARES OF
COMMON STOCK OF
CHILDREN'S BROADCASTING CORPORATION
THIS CERTIFIES THAT, for good and valuable consideration, Brenner
Securities Corporation ("Brenner"), or its registered assigns, is entitled to
subscribe for and purchase from Children's Broadcasting Corporation, a Minnesota
corporation (the "Company"), at any time commencing one year after the closing
of the purchase by Children's Broadcasting Corporation of Radio Elizabeth, Inc.,
up to and including the date five years after such closing, One Hundred
Twenty-Five Thousand (125,000) fully paid and nonassessable shares of the Common
Stock of the Company at the price of $11.00 per share (the "Warrant Exercise
Price"), subject to the antidilution provisions and the provisions of Section 5
of this Warrant. Reference is made to this Warrant in the Letter Agreement dated
November 7, 1995, by and between the Company and Brenner. The shares which may
be acquired upon exercise of this Warrant are referred to herein as the "Warrant
Shares." As used herein, the term "Holder" means Brenner, any party who acquires
all or a part of this Warrant as a registered transferee of Brenner, or any
record holder or holders of the Warrant Shares issued upon exercise, whether in
whole or in part, of the Warrant; the term "Common Stock" means and includes the
Company's presently authorized Common Stock, and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the Holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) This Warrant may not be sold, transferred, assigned, hypothecated
or divided except as provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections 1 and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if Brenner shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as provided herein. Subject to the provisions of
the next section, certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the right to
purchase the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 45 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the purchase rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party, other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the
kind and amount of shares of stock and other securities and property which the
Holder would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Warrant
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Warrant.
The provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on the Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Act and applicable state securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company or the Holder for the transfer or
disposition of the Warrant or Warrant Shares.
(b) If in the opinion of counsel referred to in this Section 7, the
proposed transfer or disposition of this Warrant or such Warrant Shares
described in the written notice given pursuant to this Section 7 may not be
effected without registration or qualification of this Warrant or such Warrant
Shares, the Company shall promptly give written notice thereof to the Holder.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the last reported sale price or, if none, the average of the last reported
closing bid and asked prices on any national securities exchange, the Nasdaq
National Market or Nasdaq SmallCap Market, or if not listed on a national
securities exchange or quoted on Nasdaq, the average of the last reported
closing bid and asked prices as reported in the "pink sheets" or other standard
compilation of quotations by market makers in the over-the-counter market.
9. Registration Rights.
(a) If at any time after the closing of the purchase by Children's
Broadcasting Corporation of Radio Elizabeth, Inc., and through the date seven
years after such closing, the Company proposes to register under the Act (except
by a Form S-4 or Form S-8 Registration Statement or any successor forms thereto)
or qualify for a public distribution under Section 3(b) of the Act, any of its
equity securities or debt with equity features, it will give written notice to
all Holders of this Warrant, any Warrants issued pursuant to Section 2 or
Section 3(a) hereof, and any Warrant Shares of its intention to do so and, on
the written request of any such Holder given within twenty (20) days after
receipt of any such notice (which request shall specify the interest in this
Warrant or the Warrant Shares intended to be sold or disposed of by such Holder
and describe the nature of any proposed sale or other disposition thereof), the
Company will use its best efforts to cause all Warrant Shares, the Holders of
which shall have requested the registration or qualification thereof, to be
included in such Registration Statement proposed to be filed by the Company;
provided, however, that if a greater number of Warrant Shares is offered for
participation in the proposed offering than in the reasonable opinion of the
managing underwriter of the proposed offering can be accommodated without
adversely affecting the proposed offering, then the amount of Warrants and
Warrant Shares proposed to be offered by such Holders for registration, as well
as the number of securities of any other selling stockholders participating in
the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
(b) On a one-time basis, upon request made any time after the closing
of the purchase by Children's Broadcasting Corporation of the stock of Radio
Elizabeth, Inc., and through the date seven years after such closing, by a
majority in interest of Warrants, or by the Holders of a majority of the shares
of the common stock issued upon exercise thereof, the Company will, at its
expense, promptly take all necessary steps to register or qualify the Warrant
Shares under Section 3(b) or Section 5 of the Act and such state laws as such
Holders may reasonably request; provided that the Company shall be obligated to
so register the Warrant Shares only if the Company is then eligible to register
securities on Form S-3 or any successor form thereto. The Company shall keep
effective and maintain any registration, qualification, notification or approval
specified in this paragraph for such period as may be necessary for the Holders
of the Warrants and such common stock to dispose thereof and from time to time
shall amend or supplement, at the Company's expense, the prospectus used in
connection therewith to the extent necessary in order to comply with applicable
law, provided that the Company shall not be obligated to maintain any
registration for a period of more than six (6) months after effectiveness,
except that a Form S-3 Registration Statement or successor thereof shall be
maintained for up to twelve (12) months after effectiveness.
(c) With respect to each inclusion of securities in a Registration
Statement pursuant to Section 9(a), the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, Nasdaq fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or underwriters
of such securities (if the offering is underwritten and the Company is required
to bear such fees and disbursements), all internal expenses, the premiums and
other costs of policies of insurance against liability arising out of the public
offering, and legal fees and disbursements and other expenses of complying with
state securities laws of any jurisdictions in which the securities to be offered
are to be registered or qualified. Fees and disbursements of special counsel and
accountants for the selling Holders, underwriting discounts and commissions, and
transfer taxes for selling Holders and any other expenses relating to the sale
of securities by the selling Holders not expressly included above shall be borne
by the selling Holders.
(d) The Company hereby indemnifies each of the Holders of this Warrant
and of any Warrant Shares, and the officers and directors, if any, who control
such Holders, within the meaning of Section 15 of the Act, against all losses,
claims, damages, and liabilities caused by (1) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (and as amended or supplemented if the Company shall have furnished
any amendments thereof or supplements thereto), any Preliminary Prospectus or
any state securities law filings; (2) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Holder expressly for
use therein; and each such Holder by its acceptance hereof severally agrees that
it will indemnify and hold harmless the Company, each of its officers who signs
such Registration Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the Act, with respect to losses, claims,
damages, or liabilities which are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such Holder
expressly for use therein.
IN WITNESS WHEREOF, Children's Broadcasting Corporation has caused this
Warrant to be signed by its duly authorized officer this ______ day of June,
1996.
Children's Broadcasting Corporation
By
Christopher T. Dahl
Its President
CHILDREN'S BROADCASTING CORPORATION
WARRANT EXERCISE NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
The undersigned, the Holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ___________________________ shares of the
Common Stock of Children's Broadcasting Corporation to which such Warrant
relates and herewith makes payment of $____________ therefor in cash or by
certified or cashier's check and requests that the certificate for such shares
be issued in the name of, and be delivered to _________________________________,
whose address is set forth below the signature of the undersigned. If the number
of shares purchased is less than all of the shares purchasable under the
Warrant, a new Warrant will be issued in the name of the undersigned for the
remaining balance remaining of the shares purchasable thereunder.
Name of Warrant Holder:
_____________________________________
(Please print)
Address of Warrant Holder:
_____________________________________
_____________________________________
Tax Identification No. or
Social Security No. of Warrant Holder:
_____________________________________
Signature: __________________________
NOTE: THE ABOVE SIGNATURE SHOULD
CORRESPOND EXACTLY WITH THE NAME OF
THE WARRANT HOLDER AS IT APPEARS ON
THE FIRST PAGE OF THE WARRANT OR ON A
DULY EXECUTED WARRANT ASSIGNMENT.
Dated: ______________________________
CHILDREN'S BROADCASTING CORPORATION
WARRANT ASSIGNMENT
(TO BE SIGNED ONLY UPON TRANSFER OF WARRANT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________, the assignee,
whose address is
___________________________________________________________________, and whose
tax identification or social security number is _______________________, the
right represented by the foregoing Warrant to purchase ___________________
shares of the Common Stock of Children's Broadcasting Corporation to which the
foregoing Warrant relates and appoints ______________________________________
attorney to transfer said right on the books of Children's Broadcasting
Corporation, with full power of substitution in the premises. If the number of
shares assigned is less than all of the shares purchasable under the Warrant, a
new Warrant will be issued in the name of the undersigned for the remaining
balance of the shares purchasable thereunder.
Name of Warrant Holder/Assignor:
_____________________________________
(Please print)
Address of Warrant Holder/Assignor:
_____________________________________
_____________________________________
Tax Identification No. or
Social Security No. of Warrant
Holder/Assignor:
_____________________________________
Signature: __________________________
NOTE: THE ABOVE SIGNATURE SHOULD
CORRESPOND EXACTLY WITH THE NAME OF
THE WARRANT HOLDER AS IT APPEARS ON
THE FIRST PAGE OF THE WARRANT OR ON A
DULY EXECUTED WARRANT ASSIGNMENT.
Dated: ______________________________
UNWIND AGREEMENT
UNWIND AGREEMENT dated as of this 1st day of June, 1996 by
and between JOHN R. QUINN ("Seller") and CHILDREN'S BROADCASTING
CORPORATION ("Buyer").
W I T N E S S E T H
WHEREAS, pursuant to a Stock Purchase Agreement dated January 19, 1996,
as amended, between Seller and Buyer, Seller sold to Buyer, and Buyer purchased
from Seller the corporate stock of Radio Elizabeth, Inc., the licensee of radio
station WJDM(AM), Elizabeth, New Jersey;
WHEREAS, the Federal Communications Commission ("FCC") has issued its
consent to the transfer of control of Radio Elizabeth, Inc. which enabled the
parties to consummate the transaction, but that FCC consent has not yet become
final, as the time for further reconsideration, review or appeal has not yet
expired.
WHEREAS; the parties wish to provide for the unlikely circumstance in
which the FCC rescinds its consent to the transfer of control and orders the
unwinding of the transaction;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, Seller and Buyer covenant and agree
as follows:
1. Unwinding of Transaction. Should the FCC rescind its consent to the
transfer of control of Radio Elizabeth, Inc. and specifically order the
unwinding of the transaction, then and only then shall the Seller and the Buyer
endeavor to return each to the status of the parties existing prior to the date
of the consummation of the transaction.
2. Continued Prosecution of FCC Application. In the event that actions
described in Section are required to be taken by the parties, the parties will
continue to prosecute their FCC application before the FCC through all possible
appeals and diligently use all reasonable efforts to re-obtain FCC consent to
the transaction and consummate the transaction in accord with the Stock Purchase
Agreement.
3. Termination. This Unwind Agreement terminates immedi ately at the
time that FCC consent becomes final, no longer subject to reconsideration,
review or appeal, and the time for Commission action on its own motion has
expired.
4. Successors and Assigns. This Unwind Agreement shall be binding upon,
and inure to the benefit of, the heirs, personal representatives, successors and
assigns of the parties.
5. Construction. This Unwind Agreement shall be construed and enforced
in accordance with the substantive laws of the State of New Jersey without
reference to principles of conflicts of law in effect in such State.
6. Multiple Counterparts. This Unwind Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Unwind Agreement
to be effective on the date first above written.
SELLER:
JOHN R. QUINN
/s/ John R. Quinn
John R. Quinn
BUYER:
CHILDREN'S BROADCASTING CORPORATION
By /s/ James G. Gilbertson
James G. Gilbertson
COO
NON-COMPETITION
and
CONSULTANCY AGREEMENT
THIS NON-COMPETITION AND CONSULTANCY AGREEMENT is dated this 1st day of
June, 1996 ("Non-Competition and Consultancy Agreement") by and between JOHN R.
QUINN ("Consultant" or "Seller") and CHILDREN'S BROADCASTING CORPORATION
("Buyer").
W I T N E S S E T H :
WHEREAS, pursuant to a Stock Purchase Agreement dated January 19, 1996
(the "Agreement") between Consultant and Buyer, Consultant has agreed to sell to
Buyer, and Buyer has agreed to purchase from Seller the corporate stock of Radio
Elizabeth, Inc., the licensee of radio station WJDM(AM), Elizabeth, New Jersey
(the "Station");
WHEREAS, this Non-Competition and Consultancy Agreement is being
executed pursuant to Section 2.3 of the Agreement;
WHEREAS, the Consultant is an officer, director and the sole stockholder
of Radio Elizabeth, Inc., has been involved in and has knowledge of the
operation of the Station and the Station's market, and the Buyer is desirous of
obtaining the benefits of and the Consultant is willing to enter into and bind
himself under this Non-Competition and Consultancy Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, Consultant and Buyer covenant and
agree as follows:
1. NON-COMPETITION WITH BUYER. Consultant agrees that for a period of ten
(10) years from the date of this Non-Competition and Consultancy
Agreement, Consultant shall not, either on his own account or on behalf
of or in association with any other person or entity, directly or
indirectly, as an employee, owner, investor, stockholder, partner,
joint venturer, agent, consultant, or representative, establish, engage
in or become interested in any radio broadcast enterprise licensed by
the Federal Communications Commission to Elizabeth, New Jersey, other
than an enterprise owned by or controlled by the Buyer.
2. CONSULTANCY WITH BUYER. Consultant agrees that for a period of ten (10)
years from the date of this Consultancy Agreement to assist the Buyer
in the operation of the Station, upon reasonable notice to the
Consultant and consistent with Consultant's prior commitments, by
providing telephone and in person consultation regarding the operation
of Station or the market in which it is located up to an aggregate time
commitment of twenty-four (24) hours per year. Any unused time in any
year shall not be carried over to the following year. Buyer will
reimburse Consultant for any out-of-pocket expenses incurred at the
request of the Buyer in performing his duties under this Consultancy
Agreement.
3. PAYMENTS TO CONSULTANT. In consideration of the performance of the
duties and obligations of the Consultant to the Buyer, the Consultant
will be paid One Million Five Hundred Thousand Dollars ($1,500,000) in
forty (40) equal quarterly payments of Thirty-Seven Thousand Five
Hundred Dollars ($37,500.00), with the first such payment to be due on
the date three (3) months after the date of this Non-Competition and
Consultancy Agreement, and each such subsequent payment due and payable
on dates three (3) months subsequent to the due date of the prior
payment until forty (40) such payments have been made.
In the event that a payment is delivered to Consultant after the date
it is due, Buyer shall remit as a late fee for such payment the amount
of Seven Hundred Fifty Dollars ($750.00) for each day past the due date
that the payment is delivered. If Buyer shall fail to pay when due any
of the payments due under this Section 3, or any portion of such
payments, and a time period of ten (10) business days elapses after
notice to the Buyer of such failure, the Consultant under this
Non-Competition and Consultancy Agreement may declare a default, and
the total amount remaining to be paid shall be due and payable without
regard to the payment schedule described above, and Buyer shall pay
Consultant interest on the total unpaid amount under this
Non-Competition and Consultancy Agreement at the lessor rate of the
maximum rate permitted by law or the rate of eighteen percent (18%) per
annum, computed on a daily basis, until such time as the total
remaining amount, with all accrued interest, is paid. In the event that
Consultant does not declare a default as a result of a late payment
whether or not notice is delivered to Buyer, Buyer will nonetheless owe
to Consultant the late fee of $750 for each day that payment is late or
insufficient, with such amounts to accrue and be owed and payable with
interest should a default be subsequently declared by the Consultant.
4. ENFORCEMENT. This Non-Competition and Consultancy Agreement shall be
enforceable by either party by restraining order, injunction or
specific performance without being required to prove actual damages or
post a bond or furnish other security and such enforcement shall be
cumulative and in addition to any other remedy available. Buyer's
obligation to make the payments set forth in Section 3 above is
absolute and not subject to any set off or counterclaim by Buyer. In
the event of a declaration of default by Seller under Section 3 hereof,
Seller need only prove the existence of such default to obtain a
judgment against Buyer. Any claims or counterclaims by Buyer shall not
be considered in any such action, and, in the event that any such claim
is asserted by Buyer, such claim shall not be either the basis of any
set-off in an action by Seller to enforce its remedies hereunder or a
defense or basis for Buyer with respect to its obligation to make
payments hereunder, but must be separately asserted and proved by Buyer
in an independent proceeding.
5. ATTORNEY'S FEES AND COSTS. Should either party default in the
performance of any of the terms or conditions of this Non-Competition
and Consultancy Agreement, which default results in the filing of a
lawsuit or any other action, the prevailing party in such lawsuit shall
be entitled to reasonable attorneys' fees and costs as shall be
determined by the court.
6. SUCCESSORS AND ASSIGNS. This Non-Competition and Consultancy Agreement
shall be binding upon, and inure to the benefit of, the heirs, personal
representatives, successors and assigns of the parties, even in the
event of the death, disability or demise of Consultant in which such
event the obligations placed upon the Consultant shall be relieved, but
the Buyer's obligation to remit payments shall continue.
7. NOTICES. Any payment, notice, consent, waiver or other communication
hereunder shall be sent by certified, express or registered mail,
return receipt requested, postage prepaid, overnight air courier
service or same day delivery service to the address specified below (or
at such other address which party shall specify to the other party in
accordance herewith):
If to Consultant:
John R. Quinn
Radio Elizabeth, Inc.
9 Caldwell Street
Elizabeth, New Jersey 07201
with a copy to:
John F. Garziglia, Esq.
Pepper & Corazzini, L.L.P.
1776 K Street, N.W., Suite 200
Washington, D.C. 20006
If to Buyer:
Children's Broadcasting Corporation
724 First Street North, Fourth Floor
Minneapolis, Minnesota 55401
with a copy to:
Lance W. Riley, Esq.
Radio Management Corporation
724 First Street North, Fourth Floor
Minneapolis, Minnesota 55401
Notice or other communication shall be deemed to have been given,
delivered or received as the case may be, three business days after
mailing if sent by registered or certified mail or on the next business
day if sent by express mail, overnight air courier or same day delivery
service.
8. CONSTRUCTION. This Non-Competition and Consultancy Agreement shall be
construed and enforced in accordance with the substantive laws of the
State of New Jersey without reference to principles of conflicts of law
in effect in such State. If any Section or provision of this
Non-Competition and Consultancy Agreement is held to be invalid or
unenforceable, all other Sections and provisions shall nevertheless
continue in full force and effect.
9. WAIVER. Any term or provision of this Non-Competition and Consultancy
Agreement may be waived at any time by the party which is entitled to
the benefits thereof, and any term or provision of this Non-Competition
and Consultancy Agreement may be amended or supplemented at any time by
the mutual consent of the parties hereto, except that any waiver of any
term or condition, or any amendment or supplementation, of this
Non-Competition and Consultancy Agreement shall be effective only if in
writing. A waiver of any breach or failure to enforce any of the terms
or conditions of this Non-Competition and Consultancy Agreement shall
not in any way affect, limit or waive a party's rights hereunder at any
time to enforce strict compliance thereafter with every term or
condition of this Non-Competition and Consultancy Agreement.
10. MULTIPLE COUNTERPARTS. This Non-Competition and Consultancy Agreement
may be signed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument. In addition, this Non-Competition and Consultancy
Agreement may contain more than one counterpart of the signature page
and this Non-Competition and Consultancy Agreement may be signed by the
affixing of the signature of each party to one of such counterpart
signature pages; all of such counterpart signature pages shall be read
as though one, and they shall have the same force and effect as though
all of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned have executed this Non-Competition
and Consultancy Agreement to be effective on the date first above written.
CONSULTANT:
JOHN R. QUINN
/s/ John R. Quinn
John R. Quinn
BUYER:
CHILDREN'S BROADCASTING CORPORATION
By: /s/ James G. Gilbertson
Its: CEO
STATE OF NEW JERSEY
County of Atlantic, ss.
Be it remembered that on this 3rd day of June, 1996, in the
County and State aforesaid, before me, the subscriber, a Notary Public
authorized to take acknowledgments and proofs in said County and State,
personally appeared John Quinn, who, I am satisfied is the grantor named in and
who executed the foregoing instrument, and he did acknowledge that he signed,
sealed and delivered the same as his act and deed for the uses and purposes
therein expressed.
/s/ Janet E. Goldsmith
Notary Public
[AFFIX SEAL] My commission expires: March 4, 2001
STATE OF MINNESOTA
COUNTY OF HENNEPIN, SS.
Be it remembered that on this 1st day of June, 1996, in the County and
State aforesaid, before me, the subscriber, a Notary Public authorized to take
acknowledgments and proofs in said County and State, I certify that James G.
Gilbertson personally came before me and this person acknowledged under oath, to
my satisfaction, that:
(a) this person signed, sealed and delivered the attached document as
Chief Operating Officer of the corporation named in this document;
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as its voluntary
act and deed by virtue of authority from its Board of Directors.
/s/ Christine A. Hein
Notary Public
[AFFIX SEAL] My commission expires: January 1, 2000
