-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E4CgQe4WxTADs2u7GsjDPOMC4dI6nPeM3ULr/HhnxBg0kApZIU4JDvrjNMcNGlMB qmvNxwhMuGPlMfU5xrFntg== 0000897101-96-000415.txt : 19960620 0000897101-96-000415.hdr.sgml : 19960620 ACCESSION NUMBER: 0000897101-96-000415 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960604 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960619 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHILDRENS BROADCASTING CORP CENTRAL INDEX KEY: 0000882160 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 411663712 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21534 FILM NUMBER: 96582899 BUSINESS ADDRESS: STREET 1: 724 1ST ST N STREET 2: 4TH FLOOR CITY: MINNEAPOLIS STATE: MN ZIP: 55401 BUSINESS PHONE: 6123383300 MAIL ADDRESS: STREET 1: 724 FIRST STREET NORTH STREET 2: FOURTH FLOOR CITY: MINNEAPOLIS STATE: MN ZIP: 55401 8-K 1 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 EX-10.2 2 SECURITIES AGREEMENT By and Among Children's Broadcasting Corporation and John M. Quinn ---------------------------------------------- Dated as of June 3, 1996
TABLE OF CONTENTS Page ---- 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
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 EX-10.3 3 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 EX-10.4 4 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: ______________________________ EX-10.5 5 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 EX-10.6 6 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 -----END PRIVACY-ENHANCED MESSAGE-----