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
DATE OF REPORT: July 30, 1999
CHILDREN'S BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 0-21534 41-1663712
--------- ------- ----------
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction
of incorporation)
5501 EXCELSIOR BOULEVARD, MINNEAPOLIS, MINNESOTA 55416
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(Address of principal executive offices)
(612) 925-8840
--------------
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
(a) Reference is made to the Press Release issued to the public by the
Registrant on August 4, 1999, and attached hereto as an exhibit, relating to the
purchase of 51% of Curious Pictures Corporation from the four principals of
Curious Pictures Corporation.
(b) Reference is made to the cautionary statements of the Registrant,
presented in the Registrant's Form 10-KSB, for the year ended December 31, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
99.1 Press Release dated August 4, 1999.
99.2 Purchase Agreement dated as of July 27, 1999 and effective as of
August 1, 1999, by and among Children's Broadcasting Corporation,
a Minnesota corporation; Harmony Holdings, Inc., a Delaware
corporation; Curious Pictures Corporation, a New York
corporation; and Susan Holden; Stephen Oakes; Richard Winkler;
and David Starr, as individuals.
99.3 Curious Stock Agreement dated as of July 27, 1999 and effective
as of August 1, 1999, by and among Children's Broadcasting
Corporation, a Minnesota corporation; Harmony Holdings, Inc., a
Delaware corporation; and Susan Holden; Stephen Oakes; Richard
Winkler; and David Starr, as individuals.
2
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SIGNATURE
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.
Dated: August 4, 1999 CHILDREN'S BROADCASTING CORPORATION
BY: /s/ James G. Gilbertson
-----------------------
James G. Gilbertson
ITS: Chief Operating Officer and
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
99.1 Press Release dated August 4, 1999.
99.2 Purchase Agreement dated as of July 27, 1999 and effective as of August 1,
1999, by and among Children's Broadcasting Corporation, a Minnesota
corporation; Harmony Holdings, Inc., a Delaware corporation; Curious
Pictures Corporation, a New York corporation; and Susan Holden; Stephen
Oakes; Richard Winkler; and David Starr, as individuals.
99.3 Curious Stock Agreement dated as of July 27, 1999 and effective as of
August 1, 1999, by and among Children's Broadcasting Corporation, a
Minnesota corporation; Harmony Holdings, Inc., a Delaware corporation; and
Susan Holden; Stephen Oakes; Richard Winkler; and David Starr, as
individuals.
EXHIBIT 99.1
CHILDREN'S BROADCASTING CORPORATION, DBA INTELEFILM(SM), PURCHASES 51%
OF BI-COASTAL COMMERCIAL PRODUCTION COMPANY, CURIOUS PICTURES
PRINCIPALS EXTEND EMPLOYMENT AGREEMENTS THROUGH 2004
MINNEAPOLIS -- AUGUST 4, 1999 -- Children's Broadcasting Corporation DBA
iNTELEFILM(SM) (Nasdaq: FILM) announced today that on July 27, 1999 it purchased
51 percent of Curious Pictures Corporation, a commercial production company from
a four person management team for $1.5 million in cash and $1.5 million pursuant
to a promissory note bearing 8 percent interest due May 31, 2000. Curious
Pictures was a subsidiary of Harmony Holdings Inc., of which iNTELEFILM is the
largest shareholder. The transaction results in Curious Pictures ownership
divided as 51 percent iNTELEFILM and 49 percent Harmony Holdings. In a related
transaction, the principals of Curious Pictures extended their employment
contracts with Harmony Holdings through December 31, 2004 and received certain
rights to shares of iNTELEFILM.
In addition, Curious Pictures principals received the right to acquire a
minority interest in Curious Pictures and have certain related agreements with
iNTELEFILM entitling them to put their Curious Pictures stock to iNTELEFILM upon
certain events.
"Curious Pictures has built a strong brand in the commercial production
industry and we look forward to assisting their exceptional management team in
implementing their exciting growth strategies," said iNTELEFILM Chief Executive
Officer Christopher T. Dahl.
Curious Pictures, a broadcast commercial production company and producer of
broadcast television programming, has studios in New York and San Francisco. The
company has received numerous industry awards and is currently producing 18
episodes of "A Little Curious," a half-hour daily television show for the HBO
Family Channel now in its second season.
Certain statements made in this press release constitute "forward looking
statements" within the meaning of the Private Securities litigation Reform Act
of 1985. Such forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
anticipated. Such factors include, but are not limited to, changes in economic
conditions and the risks and uncertainties described in the company's filings
with the Securities and Exchange Commission.
# # #
EXHIBIT 99.2
PURCHASE AGREEMENT
THIS AGREEMENT, dated as of July 27, 1999, effective as of August 1,
1999, is made by and among CHILDREN'S BROADCASTING CORPORATION, a Minnesota
corporation (referred to herein as "CBC"); HARMONY HOLDINGS, INC., a Delaware
corporation (referred to herein as "HHI"); CURIOUS PICTURES CORPORATION, a New
York corporation (referred to herein as "Curious"); and SUSAN HOLDEN; STEPHEN
OAKES; RICHARD WINKLER; AND DAVID STARR , as individuals (collectively referred
to herein as "CP Management").
W I T N E S S E T H:
THAT, WHEREAS, Curious has currently issued and outstanding 100 shares
of its Common Stock, which shares represent all of the issued and outstanding
Common Stock of Curious;
WHEREAS, pursuant to an Option and Share Transfer Agreement dated as
of December 15, 1996 among CP Management, Curious and HHI ("Option Agreement"),
a copy of which is attached hereto as Exhibit A, HHI is the holder of 99 shares
(or 99%) of Curious and CP Management is the holder of 1 share or 1% of Curious
(the 1 share owned by CP Management shall be referred to herein as the "Curious
Share");
WHEREAS, under the Option Agreement, CP Management has the right,
based upon Curious reaching certain net income levels, to receive shares of
Curious up to an amount not to exceed 50% of the Common Stock of Curious;
WHEREAS, contemporaneously herewith and incorporated herein, CP
Management, Curious and HHI have entered into an agreement whereby the parties
agree that Curious has reached such net income levels; that CP Management
currently has the right to receive 50 shares (or 50%) of the issued and
outstanding common stock of Curious; and that such shares are to be transferred
from HHI to CP Management (the "Curious Agreement");
WHEREAS, contemporaneously herewith and incorporated herein, each
member of CP Management has entered into five (5) year employment agreeements
with Curious; and
WHEREAS, CP Management desires to sell, transfer and assign the
Curious Share and the
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Option Agreement to CBC, and CBC desires to purchase such Curious Share and the
Option Agreement, and HHI consents to such sale, transfer and assignment on the
terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and the covenants,
representations and warranties hereinafter in this Agreement set forth, the
parties hereto hereby agree as follows:
1. OWNERSHIP, TRANSFER, SALE AND ASSIGNMENT OF CURIOUS SHARE AND OPTION
AGREEMENT.
(a) CP Management represents that collectively they are the
owner of the Curious Share and none of them owns any other
shares of Curious Common Stock other than the right(s) to
receive shares under the Option Agreement. CP Management and
HHI represent that under the Option Agreement, CP Management
has earned the right to receive 50 shares or 50% of the
issued and outstanding Common Stock of Curious from HHI, and
that CP Management has the right to sell, transfer and
assign their interest in the Option Agreement and the
Curious Share to CBC.
(b) Subject to the terms and conditions hereinafter in this
Agreement, CP Management agrees to sell, transfer and
deliver the Curious Share and their entire interest in the
Option Agreement to CBC on the Closing Date (as that term is
hereinafter defined), free and clear of all security
interests, liens and encumbrances, except for any
subordination obligations to Fremont Financial Services,
Inc.
2. PURCHASE AND CONSIDERATION.
(a) On the basis of the representations and warranties, and
subject to the terms and conditions set forth in this
Agreement, CBC hereby agrees to purchase and CP Management
agrees to sell, the Curious Share and CP Management's
interest in the Option Agreement on the Closing Date. The
total purchase price for the purchase of the Curious Share
and assignment of the Option Agreement (the "Purchase
Price"), will be the sum of Three Million and no/100 Dollars
($3,000,000.00) consisting of Two Million Seven Hundred
Thousand and no/100 Dollars ($2,700,000.00) for the Option
Agreement and Three Hundred Thousand and no/100 Dollars
($300,000.00) for the Curious Share and payable as follows:
1. The sum of $1,500,000 in cash at Closing (as
defined below) to CPManagement ($375,00 to each
member); and
2. The execution of a promissory note at Closing in
the amount equal to $1,500,000 ($375,000 to each
member) payable on May 31, 2000 at an interest
rate equal to eight percent (8%) per annum. The
interest payments shall be paid to CP Management
in quarterly payments. In the event any member(s)
of CP Management's employment with Curious is
terminated
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pursuant to 5(b) of his/her employment agreement
or any member(s) of CP Management terminates
his/her employment agreement prior to the payment
of the promissory note, the principal amount of
this promissory note shall be reduced by the sum
of $375,000 for such member(s). Any cancellation
or reduction of the promissory note pursuant to
this section shall be in addition to any other
remedies CBC may have against the members of CP
Management and shall not be deemed to be
liquidated damages.
(b) HHI and Curious consent to the sale and purchase of the
Curious Share and Option Agreement as provided in Section
2(a), and the assignment of all of CP Management's rights
therein.
(c) As additional consideration and as an inducement for each
member of CP Management to enter into employment agreements
with Curious, CBC agrees to grant each member of CP
Management a warrant for the purchase of 75,000 shares of
CBC's common stock at a price equal to the ten (10) day
average closing price for the ten (10) trading days
preceding the date of Closing. The warrant shall be in the
form attached hereto as Exhibit B incorporated herein by
reference as if set forth in full.
3. CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") unless otherwise agreed to by the parties, shall take place
at the offices of Curious, 440 Lafayette Street, New York, New York
10003 at 9:00 a.m. on July 30, 1999 (such date of Closing is
hereinafter sometimes referred to as the Closing Date). The Closing
shall be subject to the satisfaction of all of the conditions to CBC's
obligations set forth in Section 8 of this Agreement.
At the Closing:
(i) CP Management shall deliver, assign and transfer
(or request that HHI deliver, assign and transfer)
to CBC certificate(s) representing the Curious
Share, appropriately endorsed or accompanied by a
separate instrument or instruments of assignment
in writing, in proper form for registration of
transfer;
(ii) CP Management shall deliver, assign and transfer
the Option Agreement to CBC;
(iii) CBC shall deliver to each member of CP Management
a warrant agreement for the purchase of 75,000
shares, a form of which is attached hereto as
Exhibit B;
(iv) CP Management shall deliver the resignations
referred to in Section 8.4 of this Agreement;
<PAGE>
(v) Each member of CP Management shall execute and
deliver the employment agreements in the forms
attached hereto as Exhibits C to F incorporated
herein by reference as if set forth in full;
(vi) $1,500,000 in cash shall be sent by CBC by wire
transfer to such account or accounts in one or
more banks in the United States of America as CP
Management shall specify in writing delivered to
CBC not less than forty eight (48) hours prior to
the Closing Date, otherwise such purchase price
shall be payable by check or checks;
(vii) CBC shall execute a promissory note in the form of
Exhibit G attached hereto and incorporated herein
by reference as if set forth in full in the amount
of $1,500,000 payable to CP Management at eight
percent (8%) interest secured by the Curious Share
and the Option Agreement, subject to subordination
obligations with Fremont Financial Services, Inc.;
(viii) CP Management, HHI and Curious shall deliver an
executed Curious Agreement stating and confirming
that CP Management has the right to receive 50%
which equals 50 shares of the issued and
outstanding common stock of Curious from HHI and
consenting to assignment and transfer of the
Option Agreement and the Curious Share to CBC, a
form of which is attached hereto as Exhibit H; and
(ix) Certified Resolutions of Curious, HHI and CBC
approving the terms of this transaction.
4. REPRESENTATIONS AND WARRANTIES BY HHI.
HHI represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing; that
HHI is a corporation organized and existing in good standing under the
laws of the State of Delaware with full power and authority to enter
into this Agreement to which it is a party and enter into and complete
the transactions contemplated herein and therein; all required
corporate action has been duly and validly taken by HHI to make and
carry out this Agreement and the transactions contemplated herein;
this Agreement constitutes the valid and binding obligation of HHI
enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which HHI is subject or the breach of any
contract, agreement or other commitment to which HHI is a party or by
which it or its properties is bound or conflict with or violate any
provision of HHI's Articles of Incorporation, By-Laws, or other
organizational documents; and no other consent of any kind is required
that has not been obtained to make or carry out the terms of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES BY CURIOUS.
<PAGE>
Curious represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing, that
Curious is a corporation organized and existing in good standing under
the laws of the State of New York with full power and authority to
enter into this Agreement to which it is a party and enter into and
complete the transactions contemplated herein and therein; all
required corporate action has been duly and validly taken by Curious
to make and carry out this Agreement and the transactions contemplated
herein; this Agreement constitutes the valid and binding obligation of
Curious enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which Curious is subject or the breach of any
contract, agreement or other commitment to which Curious is a party or
by which it or its properties is bound or conflict with or violate any
provision of Curious' Articles of Incorporation, By-Laws, or other
organizational documents; and no other consent of any kind is required
that has not been obtained to make or carry out the terms of this
Agreement; that there are only 100 issued and outstanding shares of
Curious and that Curious will not issue any additional shares of its
Common Stock without receiving the prior written consent of HHI and
CBC; and that the financial statements prepared by Curious are
substantially correct in all material respects and there has not been
any material adverse change in the financial condition of Curious
since the latest financial statements.
6. REPRESENTATION AND WARRANTIES BY CBC.
CBC represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing, that
CBC is a corporation organized and existing in good standing under the
laws of the State of Minnesota with full power and authority to enter
into this Agreement to which it is a party and enter into and complete
the transactions contemplated herein and therein; all required
corporate action has been duly and validly taken by CBC to make and
carry out this Agreement and the transactions contemplated herein;
this Agreement constitutes the valid and binding obligation of CBC
enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which CBC is subject or the breach of any
contract, agreement or other commitment to which CBC is a party or by
which it or its properties is bound or conflict with or violate any
provision of CBC's Articles of Incorporation, By-Laws, or other
organizational documents; that the Curious Share and Option Agreement
are being purchased for CBC's own account and not with a view to, or
for resale; and that the warrants issued to members of CP Management
are duly authorized and upon the exercise of the warrants will be
validly issued non-assessable shares of CBC.
7. REPRESENTATION AND WARRANTIES BY CP MANAGEMENT.
Each member of CP Management represents and warrants, which
representations and warranties shall be deemed to have been made again
at Closing that each member has the full right, power, authority and
capacity, and is free, without restriction, to enter into and perform
this Agreement; each member of CP Management represents and warrants
that the Curious Share is owned by CP Management that upon the
transfer of the Curious Share to CBC on
<PAGE>
the Closing Date, CBC will obtain absolute title to the Curious Share,
free and clear of all liens, pledges, security interests, claims,
charges, options, encumbrances or other adverse claims of any kind
whatsoever other than any security interest which has been granted to
Fremont Financial; that CP Management makes the same warranties and
representations with respect to the Option Agreement, except that the
Option Agreement may be subject to subordination obligations with
Fremont Financial Services, Inc.; that each member is an accredited
investor within the meaning of Regulation D, Rule 501(a) under the
Securities Act 1933, as amended.
8. CONDITION OF CBC'S OBLIGATIONS.
The obligations of CBC to consummate the transactions contemplated by
this Agreement is subject to the fulfillment prior to or on the
Closing Date of the following conditions, any of which may be waived
in whole or in part in writing by CBC:
8.1 The representations and warranties of CP Management, Curious
and HHI shall be true in all material respects as of the
Closing Date with the same effect as though made on and as
of the Closing Date.
8.2 CP Management and HHI shall have performed and complied with
all agreements, covenants or conditions required by this
Agreement to be performed and complied with by them prior to
or as of the Closing Date.
8.3 ACTION BY HHI AND CURIOUS BOARD OF DIRECTORS.
(a) HHI's Board of Directors, prior to the Closing
Date, shall have met and duly adopted resolutions,
subject to the consummation of the transactions
contemplated by this Agreement: (i) to approve the
terms of this transaction; (ii) to amend the
Option Agreement to allow CP Management to freely
assign and transfer CP Management's interest; and
(iii) to approve the terms of the employment
agreements.
(b) Curious' Board of Directors, prior to the Closing
Date, shall have met and duly adopted resolutions,
subject to the consummation of the transactions
contemplated by this Agreement: (i) to approve the
terms of this transaction; and (ii) to approve the
terms of the employment agreements.
8.4. RESIGNATIONS OF CP MANAGEMENT FROM CURIOUS BOARD. The
members of Curious' Board of Directors and all of Curious'
subsidiaries (other than Mr. Dahl and Mr. Cameron) shall
have tendered their resignations as directors
contemporaneously upon the Closing.
9. LEGAL FEES.
Provided this transaction is consummated, Curious agrees to pay for
any reasonable legal fees and expenses incurred by CP Management from
the law firm of Wollmuth, Maher & Deutsch, LLP in connection with this
transaction through April 28, 1999, provided that it receives
<PAGE>
copies of all such legal bills along with any other reasonably
requested backup documentation. Beginning April 29, 1999, Curious
agrees to pay for any reasonable legal fees and expenses incurred by
CP Management in connection with assignment of the Option Agreement
and purchase of the Curious Share by CBC. Notwithstanding the
foregoing, CP Management shall pay for any legal fees and expenses
incurred in connection with their employment agreements and any and
all future issuances of shares, exercise of put rights and similar
matters that are to the benefit of CP Management. Other than as
provided for herein, each party shall be responsible for its or
his/her own legal fees and expenses.
10. INDEMNIFICATION.
10.1 MUTUAL INDEMNIFICATION. Each party hereby indemnifies and
agrees to hold harmless the other parties from and against
all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any
legal, accounting or other expenses of investigating or
defending any actions or threatened actions) (hereinafter
sometimes collectively referred to as Losses) in connection
with each of the following:
(a) Any misrepresentation or breach of any
representation or warranty made by such party in
this Agreement; and
(b) any breach of any covenant, agreement or
obligation of such party contained in this
Agreement, provided, however, that such party
shall not have any obligation under this Section
unless the aggregate Losses amount to more than
$25,000 (if the Losses exceed $25,000, the
indemnification obligations set forth in this
Section shall include all such Losses and not only
those in excess of $25,000).
10.2 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this section, the indemnified
party (hereinafter sometimes referred to as the Indemnified
Party) shall promptly notify the party against whom
indemnification is sought (hereinafter sometimes referred to
as the Indemnifying Party) of the claim and, when known, the
facts constituting the basis for such claim. In the event of
any such claim for indemnification under this Agreement
resulting from or in connection with any claim or legal
proceedings by a third party, the notice shall specify, if
known, the amount or an estimate of the amount of liability
arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party in respect of which it
is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed;
provided, however, that if action or suit shall have been
instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such
action or suit as provided in this Section after
notification thereof, the Indemnified Party shall have the
right to settle or compromise such claim after giving notice
to the Indemnifying Party as provided in this Section.
10.3 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim
that may give rise to
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a right of indemnification under this Section resulting from
or arising out of any claim or legal proceeding by a person
other than the Indemnified Party, the Indemnifying Party, at
its or his/her sole cost and expense, may, upon written
notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if the Indemnifying Party
acknowledges to the Indemnified Party in writing the
obligation to indemnify the Indemnified Party with respect
to all elements of such claim or legal proceeding. If the
Indemnifying Party shall assume the defense of any such
claim or legal proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to the Indemnified
Party to conduct the defense of such claim or legal
proceeding at the sole cost and expense of the Indemnifying
Party, who shall take all steps necessary in the defense or
settlement thereof. An Indemnified Party shall be entitled
to participate in (but not control) the defense of any such
claim or legal proceeding with its own counsel and at its
own expense. If the Indemnifying Party shall not assume the
defense of such claim or legal proceeding within 15 days
after notice thereof shall have been given to in accordance
with this Section: (a) the Indemnified Party may defend such
claim or legal proceeding in such manner as it may deem
appropriate, including, but not limited to, the settlement
of such claim or legal proceeding, after giving notice of
the same to Indemnifying Party, on terms as the Indemnified
Party may deem appropriate and (b) Indemnifying Party shall
be entitled to participate in (but not control) the defense
of such claim or legal proceeding with their own counsel at
their own expense.
11. MISCELLANEOUS PROVISIONS.
11.1 EXECUTION OF DOCUMENTS. The parties agree to execute all
applications, documents and instruments which may be
reasonably necessary for the consummation of the
transactions contemplated hereunder, or which might be from
time to time reasonably requested by any party hereto in
connection therewith, whether before or after the date of
Closing.
11.2 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision thereof may be changed, amended, waived,
discharged or terminated orally, but only in writing signed
by the party against which enforcement of the change,
amendment, waiver, discharge or termination is sought.
11.3 NOTICES. All notices, requests, elections, demands and other
communications given pursuant to this Agreement shall be in
writing and shall be duly given when delivered personally or
by facsimile transmission (upon receipt of confirmation) or
when deposited in the mail, certified or registered mail,
postage prepaid, return receipt requested, and shall be
addressed as follows:
If to CBC:
Mr. Christopher T. Dahl
Children's Broadcasting Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
<PAGE>
Facsimile: (612) 926-7946
with copy to:
Jill Theis, Esq.
Children's Broadcasting Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 925-8845
If to HHI:
Mr. Christopher T. Dahl
Harmony Holdings, Inc,
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 926-7946
with copy to:
Jill Theis, Esq.
Harmony Holdings, Inc.
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 925-8845
If to Curious:
Mr. Christopher T. Dahl
Curious Pictures Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 926-7946
with copy to:
Jill Theis, Esq.
Curious Pictures Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 925-8845
If to CP Management:
Susan Holden, Stephen Oakes, Richard Winkler, David Starr
c/o Curious Pictures Corporation
<PAGE>
440 Lafayette Street
New York, New York 10003
Facsimile: (212) 674-0081
With copy to:
David Wollmuth, Esq.
WOLLMUTH, MAHER & DEUTSCH, LLP
516 Fifth Avenue, 12th Floor
New York, New York 10036
Facsimile: (212) 382-0050
11.4. EXHIBITS. All Exhibits referred to herein are incorporated
into this Agreement by reference for all purposes and shall
be deemed part of this Agreement.
11.5. ASSIGNABILITY. None of the parties may assign their rights
or obligations under this Agreement without the prior
written consent of the other parties which shall not be
unreasonably withheld or delayed, except that CBC, HHI and
Curious may make an assignment to a parent, subsidiary,
affiliate or successor of such party and each member of CP
Management may make an assignment to an entity that is
controlled by and 100% owned by such member.
11.6. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the representatives, heirs, estates,
successors, and assigns of the parties hereto.
11.7. HEADING. The headings contained in this Agreement are for
reference only and shall not effect in any way the meaning
or interpretation of this Agreement.
11.8. COUNTERPARTS. This Agreement and any other instrument to be
signed by the parties hereto may be executed by the parties,
together or separately, in two or more identical
counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same
instrument.
11.9. CLAUSES SEVERABLE. The provisions of this Agreement are
severable. If any provision of this Agreement or the
application thereof to any person or circumstance is held
invalid, the provision or its application shall be modified
to the extent possible to reflect the expressed intent of
the parties but in any event, invalidity shall not affect
other provisions or applications of this Agreement which can
be given effect without the invalid provision or
application.
IN WITNESS WHEREOF, the parties hereto, by their properly authorized
representatives, have caused this Agreement to be executed as of the day and
date first above written.
CHILDREN'S BROADCASTING HARMONY HOLDINGS, INC.,
CORPORATION, a Minnesota corporation a Delaware corporation
<PAGE>
By: /s/ Christopher T. Dahl By: /s/ James G. Gilbertson
----------------------- -----------------------
Its: Chief Executive Officer Its: Chief Operating Officer
----------------------- -----------------------
CURIOUS PICTURES CORPORATION
a New York corporation
By: /s/ James G. Gilbertson
-----------------------
Its: Chief Operating Officer
-----------------------
CP MANAGEMENT
/s/ Stephen Oakes /s/ Richard Winkler
- ----------------- -------------------
Stephen Oakes Richard Winkler
/s/ David Starr /s/ Susan Holden
- ----------------- -------------------
David Starr Susan Holden
EXHIBIT 99.3
CURIOUS STOCK AGREEMENT
THIS AGREEMENT, dated as of July 27, effective as of August 1, 1999,
is made by and among CHILDREN'S BROADCASTING CORPORATION, a Minnesota
corporation (referred to herein as "CBC"); HARMONY HOLDINGS, INC., a Delaware
corporation (referred to herein as "HHI"); and SUSAN HOLDEN; STEPHEN OAKES;
RICHARD WINKLER; AND DAVID STARR , as individuals (collectively referred to
herein as "CP Management").
W I T N E S S E T H:
THAT, WHEREAS, contemporaneously herewith and incorporated herein, CP
Management, HHI, Curious Pictures Corporation ("Curious") and CBC have entered
into an agreement whereby CP Management agreed to sell, transfer and assign
their one (1) share of Curious Common Stock ("Curious Share") and their interest
in the Option and Share Transfer Agreement dated as of December 15, 1996 among
CP Management, Curious and HHI ("Option Agreement") to CBC, and CBC agreed to
purchase such Curious Share and the Option Agreement, and HHI consented to such
sale, transfer and assignment (the "Purchase Agreement");
WHEREAS, contemporaneously herewith and incorporated herein, each
member of CP Management has entered into five (5) year employment agreements
with Curious;
WHEREAS, as consideration for entering into the Purchase Agreement and
employment agreements, HHI is desirous of transferring certain shares of
Curious' common stock owned by HHI to members of CP Management; members of CP
Management are desirous of having certain put rights to such shares to CBC; and
CBC is desirous of having certain call rights to such shares on the terms and
conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and the covenants,
representations and warranties hereinafter in this Agreement set forth, the
parties hereto hereby agree as follows:
1. CURIOUS SHARES.
1.1 RIGHT TO ACQUIRE. Subject to the provisions set forth
herein, the parties agree that on December 31, 1999 and each
year thereafter until December 31, 2003, each member
<PAGE>
of CP Management will each receive the option to acquire 1
share which represents 1% of the issued and outstanding
common stock of Curious from HHI up to an aggregate of 5
shares per member. Such member shall provide HHI with
written notice of his/her right to receive such share(s) in
the form attached hereto and incorporated herein as Exhibit
A.
1.2 PUT AGREEMENT.
1.2.1 CP MANAGEMENT'S EMPLOYMENT AGREEMENTS. On December 31,
2002, provided that his/her employment agreement has not
been terminated pursuant to Section 5(a) or (b) of his/her
employment agreement, each member of CP Management shall
have the right to put 2 shares of Curious Common Stock to
CBC. On December 31, 2003, provided that his/her employment
agreement has not been terminated pursuant to Section 5(a)
or (b) of his/her employment agreement, each member of CP
Management shall have the right to put an additional 2
shares of Curious Stock to CBC. Each member shall have the
right to put his/her remaining 1 share of Curious common
stock to CBC on December 31, 2004 only in the event that the
member entered into an extension of his/her employment
agreement for a term of at least one (1) additional year
through December 31, 2004 and such member's employment
agreement was not terminated pursuant to Section 5(a) or
5(b) of that employment agreement. Each member shall provide
CBC with written notice in the form attached hereto and
incorporated herein as Exhibit B of his/her intent to put
such share(s) to CBC.
1.2.2 CP MANAGEMENT'S EMPLOYMENT IS TERMINATED UNDER SECTION
5(a). In the event a member of CP Management's employment is
terminated due to death of member under Section 5(a), the
estate of such member shall be entitled to put all of
member's 4 shares of the Curious common stock to CBC
immediately upon such termination, even if such amount had
not yet been earned at the time of termination. In the event
a member of CP Management's employment is terminated due to
disability and such member is not re-employed under Section
5(a) of his/her employment agreement, such member shall be
entitled to put all of his/her 4 shares of Curious common
stock to CBC on the first day of the thirteenth month
following such termination for disability, even if such
amount had not yet been earned at the time of termination.
1.2.3 CP MANAGEMENT'S EMPLOYMENT IS TERMINATED UNDER SECTION
5(b). In the event a member of CP Management's employment is
terminated under Section 5(b) of that member's employment
agreement, any and all put rights which that member may have
or may have been entitled to receive shall terminate upon
such termination.
1.2.4 CP MANAGEMENT'S EMPLOYMENT IS TERMINATED UNDER SECTION
5(c). In the event Curious terminates a member's employment
pursuant to Section 5(c) of that member's employment
agreement, that member shall be entitled to put all of
his/her 4 shares of the Curious common stock to CBC
immediately upon such termination, even if such amount had
not yet been earned at the time of termination by Curious.
<PAGE>
1.2.5 PUT PRICE. The parties agree that the consideration
for each share put shall be $96,774 per share. Unless
otherwise terminated as set forth herein, CP Management
shall have until March 31, 2005 to exercise his/her put
rights.
1.3 CALL AGREEMENT. In the event a member of CP Management does
not put his/her shares to HHI by March 31, 2005, CBC shall
have the right to call such shares from CP Management at
anytime commencing after June 1, 2005. The parties agree
that the consideration for each share called shall be
$96,774 per share. CBC shall provide the members of CP
Management with written notice in the form attached hereto
and incorporated herein as Exhibit C of its intent to call
such share(s) from CP Management.
2. RESTRICTION ON TRANSFER. CBC and each member of CP Management hereby
agrees that for as long as this Agreement remains in effect, it/he/she
will not sell, transfer or otherwise dispose of (or enter into a
binding agreement to sell, transfer or otherwise dispose of) all or
any of its/his/her shares of or rights to acquire Curious common
stock, now owned or hereafter acquired (the "Shares") except in
compliance with this Agreement.
3. RIGHT OF CO-SALE. Except as hereinafter provided, each of the parties
hereto agrees that it/he/she will not sell, transfer or otherwise
dispose of any of the Shares or of any rights to acquire Shares unless
the other party hereto is given the right to participate as a seller
in such transaction on a pro rata basis as of the date of receipt of
written notice described in Section 8.3 of this Agreement. The
following sales, transfers or other disposals of Shares shall not be
covered by this right of co-sale:
(a) sales of Shares by any of the parties to this Agreement in a
bona fide underwritten public offering pursuant to a
registration statement filed by Curious under the Securities
Act of 1933;
(b) transfers or sales of a Share by a member of CP Management
pursuant to the exercise of such member of his/her right
require CBC to purchase such Share(s) pursuant to Section
1.2 of this Agreement, or transfers or sales of Shares to
CBC pursuant to CBC's exercise of its right to purchase any
Shares pursuant to Section 1.3 of this Agreement;
(c) sales or transfers by CBC to any parent or subsidiary of
CBC.
In the event of any distribution of the Shares to the public
shareholders of CBC, this Agreement shall cease to exist with respect to such
Shares after such distribution has been affected. The provisions of subsection
(a) above shall not apply to the members of CP Management during the period in
which CBC has the right to purchase the Shares from the members of CP Management
pursuant to Section 1.3 of this Agreement.
4. CO-SALE PROCEDURES. Each party to this Agreement to which the right of
co-sale provided in Section 3 of this Agreement applies shall give
prompt written notice to each other party to this Agreement in the
event it/he/she has a present intention to sell, transfer or otherwise
dispose
<PAGE>
of any Shares in a transaction subject to the right of co-sale, and
each other party receiving such notice shall notify the party giving
the notice within fifteen (15) calender days following receipt of such
notice as to whether it wishes to participate in such transaction and
bear a pro rata portion of the expenses incident thereto, with all
negotiations leading to the consummation of such transaction to be
conducted thereafter by the party contemplating such sale. Failure to
respond to such notice within such 15 day period shall be deemed a
declination of any right to participate in such transaction, provided
that (i) such transaction is fully closed and consummated within 180
days of the expiration of such 15 day notice period; (ii) the terms of
the actual transaction include no fewer or greater number of Shares
than those set forth in such notice; and (iii) no purchasers or
ultimate legal or beneficial holders of the Shares are involved in the
transaction other than those disclosed in such notice. Failure to meet
any of the foregoing conditions shall require that a new notification
and right of co-sale with regard to such transaction under this
section.
5. LEGENDS AND STOP TRANSFER ORDERS.
(a) Legend Covering This Agreement. CBC and each member of CP
Management shall promptly add the following legend to each
of the certificates representing Shares heretofore or
hereafter issued to it/him/her and standing in its/his/her
name on the books of Curious and, so long as this Agreement
shall remain in full force and effect, it/he/she shall add
(and hereby directs Curious, as well as any transfer agent
appointed by Curious, to add) such legend to any and all
Shares issued to it/him/her, such legend to be and remain
upon such certificates, as well as any re-issuance thereof
unless and untl removed pursuant to Section 5(c) below:
"The securities represented by this certificate
are subject to certain transfer restrictions and
co-sale rights set forth in an agreement, dated
July 30, 1999, between the registered owner of
such securities and certain other persons, and may
not be sold, transferred or otherwise disposed of
except in compliance with the terms of such
agreement, a copy of which is available for
inspection in the principal office of the issuer
of such securities."
(b) Stop Transfer Order. A stop transfer order shall be placed
with Curious, as well as any transfer agent appointed by
Curious, preventing transfer of any of the securities
referred to in Section 5(a) pending compliance with the
conditions set forth in any such legend.
(c) Removal of Legends. Any legend endorsed on a certificate or
instrument evidencing a security subject to this Agreement
shall be removed, and Curious shall be authorized to issue a
certificate or instrument without such legend to the holder
of such security, if this Agreement has expired by its terms
or such security is being disposed of pursuant to the terms
of this Agreement in a transaction which upon completion
will leave the Shares free and clear of this Agreement, and,
in either event, the holder of such security provides
Curious and the other parties to this Agreement with an
opinion of counsel for such holder to such effect.
5. TERM OF AGREEEMENT. The co-sale rights of this Agreement shall
terminate and expire on
<PAGE>
seventh anniversary of the date of this Agreement.
6. INDEMNIFICATION. Each party hereby indemnifies and agrees to hold
harmless the other parties from and against all claims, damages,
losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other
expenses of investigating or defending any actions or threatened
actions) in connection with any breach of any representation,
warranty, covenant, agreement or obligation of such party contained in
this Agreement.
7. Each of the parties hereto expressly represents and warrants to each
other party that it/she/he has the full right, power, authority and
capacity, and is free, without restriction to enter into this
Agreement.
8. MISCELLANEOUS PROVISIONS.
8.1 EXECUTION OF DOCUMENTS. The parties agree to execute all
applications, documents and instruments which may be
reasonably necessary for the consummation of the
transactions contemplated hereunder, or which might be from
time to time reasonably requested by any party hereto in
connection therewith, whether before or after the date of
this Agreement.
8.2 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision thereof may be changed, amended, waived,
discharged or terminated orally, but only in writing signed
by all parties to this Agreement.
8.3 NOTICES. All notices, requests, elections, demands and other
communications given pursuant to this Agreement shall be in
writing and shall be duly given when delivered personally or
by facsimile transmission (upon receipt of confirmation) or
when deposited in the mail, certified or registered mail,
postage prepaid, return receipt requested, and shall be
addressed as follows:
If to CBC:
Mr. Christopher T. Dahl
Children's Broadcasting Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 926-7946
with copy to:
Jill Theis, Esq.
Children's Broadcasting Corporation
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 925-8845
<PAGE>
If to HHI:
Mr. Christopher T. Dahl
Harmony Holdings, Inc.
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 926-7946
with copy to:
Jill Theis, Esq.
Harmony Holdings, Inc.
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
Facsimile: (612) 925-8845
If to CP Management:
Susan Holden, Stephen Oakes, Richard Winkler, David Starr
c/o Curious Pictures Corporation
440 Lafayette Street
New York, New York 10003
Facsimile: (212) 674-0081
With copy to:
David Wollmuth, Esq.
WOLLMUTH, MAHER & DEUTSCH, LLP
516 Fifth Avenue, 12th Floor
New York, New York 10036
Facsimile: (212) 382-0050
8.4. EXHIBITS. All Exhibits referred to herein are incorporated
into this Agreement by reference for all purposes and shall
be deemed part of this Agreement.
8.5. ASSIGNABILITY. None of the parties may assign their rights
or obligations under this Agreement without the prior
written consent of the other parties which shall not be
unreasonably withheld or delayed, except that CBC, HHI and
Curious may make an assignment to a parent, subsidiary,
affiliate or successor of such party and each member of CP
Management may make an assignment to an entity that is
controlled by and 100% owned by such member.
8.6. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the representatives, heirs, estates,
successors, and assigns of the parties hereto.
<PAGE>
8.7. HEADING. The headings contained in this Agreement are for
reference only and shall not effect in any way the meaning
or interpretation of this Agreement.
8.8. COUNTERPARTS. This Agreement and any other instrument to be
signed by the parties hereto may be executed by the parties,
together or separately, in two or more identical
counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same
instrument.
8.9 CLAUSES SEVERABLE. The provisions of this Agreement are
severable. If any provision of this Agreement or the
application thereof to any person or circumstance is held
invalid, the provision or its application shall be modified
to the extent possible to reflect the expressed intent of
the parties but in any event, invalidity shall not affect
other provisions or applications of this Agreement which can
be given effect without the invalid provision or
application.
IN WITNESS WHEREOF, the parties hereto, by their properly authorized
representatives, have caused this Agreement to be executed as of the day and
date first above written.
CHILDREN'S BROADCASTING HARMONY HOLDINGS, INC.,
CORPORATION, a Minnesota corporation a Delaware corporation
By: /s/ Christopher T. Dahl By: /s/ James G. Gilbertson
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Its: Chief Executive Officer Its: Chief Operating Officer
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CP MANAGEMENT
/s/ Stephen Oakes /s/ Richard Winkler
- ----------------- -------------------
Stephen Oakes Richard Winkler
/s/ David Starr /s/ Susan Holden
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David Starr Susan Holden
