-----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, OlhxIVvWHeKQS4JZyc8rRjtt6lTsPGjGESCkX5tJ1pwdH7uFP0trkef5YnXay45O 4qIMbB0UDKmeT+D51fw99Q== 0000912057-97-019306.txt : 19970604 0000912057-97-019306.hdr.sgml : 19970604 ACCESSION NUMBER: 0000912057-97-019306 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19970603 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: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-28315 FILM NUMBER: 97618270 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 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on June 2, 1997 Registration No. 333-______ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CHILDREN'S BROADCASTING CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 5961 41-1663712 (State or other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Classification Identification Incorporation or Organization) Code Number) Number) 724 FIRST STREET NORTH MINNEAPOLIS, MINNESOTA 55401 (612) 338-3300 (Address and telephone number, including area code, of registrant's principal executive offices) JAMES G. GILBERTSON, CHIEF OPERATING OFFICER AND TREASURER CHILDREN'S BROADCASTING CORPORATION 724 FIRST STREET NORTH MINNEAPOLIS, MINNESOTA 55401 (612) 338-3300 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: AVRON L. GORDON, ESQ. LANCE W. RILEY, ESQ. BRETT D. ANDERSON, ESQ. CHILDREN'S BROADCASTING CORPORATION BRIGGS AND MORGAN, P.A. 724 FIRST STREET NORTH 2400 IDS CENTER MINNEAPOLIS, MINNESOTA 55401 MINNEAPOLIS, MINNESOTA 55402 (612) 330-9521 (612) 334-8400 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE. --------------- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: /X/ If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box: / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If this form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK ($.02 PAR VALUE)................. 318,607 $3.625 $1,154,951 $350 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) and based upon the last reported sale price for such stock on May 28, 1997, as reported by the Nasdaq National Market System. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a) MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED JUNE 2, 1997 PROSPECTUS - -------------------------------------------------------------------------------- 318,607 SHARES CHILDREN'S BROADCASTING CORPORATION COMMON STOCK - -------------------------------------------------------------------------------- This Prospectus relates to 318,607 shares of Common Stock (the "Shares"), par value $.02 per share (the "Common Stock"), of Children's Broadcasting Corporation (the "Company") that may be offered for sale for the account of certain shareholders of the Company as stated herein under the heading "Selling Shareholders." Certain of the Shares are issuable upon the exercise of warrants held by the Selling Shareholders. No period of time has been fixed within which the Shares may be offered or sold. The Company's Common Stock is traded on the Nasdaq National Market under the symbol "AAHS." On May 28, 1997, the average of the high and low prices of the Common Stock on the Nasdaq National Market was $3.75 per share. Current market quotations are listed in THE WALL STREET JOURNAL and many other newspapers of general circulation. The Selling Shareholders have advised the Company that sales of the Shares by them, or by their pledgees, donees, transferees or other successors in interest, may be made from time to time in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices. The Shares may be sold by one or more of the following methods: (a) a block trade in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; and (c) ordinary brokerage transactions and transactions in which the broker solicits purchasers. Sales may be made pursuant to this Prospectus to or through broker-dealers who may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or the purchasers of Common Stock for whom such broker-dealer may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). One or more supplemental prospectuses will be filed pursuant to Rule 424 under the Securities Act of 1933, as amended (the "Securities Act") to describe any material arrangements for the sales of the Shares when such arrangements are entered into by any of the Selling Shareholders and any other broker-dealers that participate in the sale of the Shares. The Selling Shareholders and any broker-dealers or other persons acting on their behalf in connection with the sale of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions received by them and any profit realized by them on the resale of the Shares as principals may be deemed to be underwriting commissions under the Securities Act. As of the date hereof, there are no special selling arrangements between any broker-dealer or other person and any Selling Shareholder. The Company will not receive any part of the proceeds of any sales of Shares pursuant to this Prospectus. Pursuant to the terms of registration rights granted to the Selling Shareholders, the Company will pay all the expenses of registering the Shares, except for selling expenses incurred by the Selling Shareholders in connection with this offering, including any fees and commissions payable to broker-dealers or other persons, which will be borne by the Selling Shareholders. In addition, such registration rights provide for certain other usual and customary terms, including indemnification by the Company of the Selling Shareholders against certain liabilities arising under the Securities Act. THE SHARES INVOLVE CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- THE DATE OF THIS PROSPECTUS IS __________, 1997. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there by any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company pursuant to the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission at http://www.sec.gov. In addition, the Company's Common Stock is quoted on the NASDAQ National Market System. Reports, proxy statements and other information concerning the Company can be inspected and copied at the Public Reference Room of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act. This Prospectus does not contain all of the information, exhibits and undertakings set forth in the Registration Statement, certain parts of which are omitted as permitted by the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement which may be inspected and copied in the manner and at the sources described above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed by the Company (File No. 0-21534) with the Commission pursuant to the Exchange Act are incorporated into this Prospectus by reference: (a) The Company's Annual Report on Form 10-KSB for the year ended December 31, 1996, filed on March 31, 1997. (b) The Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997, filed on May 14, 1997. (c) The Company's Current Report on Form 8-K/A filed on January 31, 1997, relating to acquisition of the assets of Radio Station WCAR-AM. (d) The Company's Current Report on Form 8-K/A filed on January 31, 1997, relating to acquisition of Radio Elizabeth, Inc. (e) The Company's Current Report on Form 8-K filed on February 3, 1997, relating to the Company acquiring an AM radio broadcast license and certain other broadcasting equipment in the Chicago metropolitan area. (f) The Company's Definitive Schedule 14A (Proxy Statement) filed on April 30, 1997, relating to the Company's Annual Meeting of Shareholders scheduled for July 16, 1997. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering hereunder shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document all or any portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed 2 to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge, to each person to whom this Prospectus is delivered, upon written or oral request of any such person, a copy of any or all of the foregoing documents (other than exhibits to such documents which are not specifically incorporated by reference in such documents). Written requests for such copies should be directed to the Company at 724 First Street North, Minneapolis, Minnesota 55401, Attention: Chief Financial Officer. Telephone requests may be directed to the office of the Chief Financial Officer of the Company at (612) 338-3300. 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS," AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "LITIGATION REFORM ACT"), THAT INVOLVE RISKS AND UNCERTAINTIES. PURCHASERS OF THE COMPANY'S COMMON STOCK ARE CAUTIONED THAT THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE FACTORS DISCUSSED HEREIN UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Children's Broadcasting Corporation is a full-time national broadcaster of children's radio programming in the United States. The Company develops, produces and distributes programming that is entertaining and informative, and directed to the interests and radio listening patterns of pre-teenage children and their families. The Company's Aahs World Radio-SM-* format provides 24-hour programming featuring music, stories, call-in segments, quizzes and current events features. The programming varies by time of day in order to attract that component of its prospective audience most likely to be listening. The programming originates at the Company's flagship station, WWTC-AM in Minneapolis, Minnesota, and is distributed via satellite to a network of radio stations around the country. Since the inception of the Company, the primary sources of the Company's revenue have been from the sale of local advertising and air time and network revenue. A substantial portion of the Company's local advertising revenue is derived from Company-owned stations not broadcasting the Aahs World Radio-SM- format. These stations, which broadcast primarily family-oriented programming in the Houston, Kansas City, Milwaukee and Minneapolis markets, were acquired by the Company in 1994. See "Risk Factors -- Development of National Radio Network." The Company's growth strategy includes the acquisition of AM radio broadcast licenses ("RBLs") in the top 15 markets, thereby securing the network's presence and continuity in those key markets. Pursuant to that strategy, the Company has acquired RBLs which serve the New York City, Los Angeles, Chicago, Philadelphia, Detroit and Dallas/Fort Worth markets. During the year ended December 31, 1996, the Company acquired RBLs covering the New York City, Philadelphia and Detroit markets. With the January 1997 acquisition of the RBL and certain other assets of radio station WAUR-AM in the Chicago market, the Company distributes its programming to markets representing approximately 40% of the U.S. population and has a presence in the top four markets and seven of the top ten markets in the U.S. The Company has engaged investment bankers to explore strategic alternatives to enhance shareholder value. Such investment bankers have had and continue to hold discussions with various potential strategic partners with a view toward entering into a joint venture, sale or merger. There can be no assurance that the Company will be successful in completing any transaction with a prospective strategic partner. The Company was incorporated under the Minnesota Business Corporation Act on February 7, 1990. All references to the Company herein include its subsidiaries, unless otherwise noted. The Company's executive office is located at 724 First Street North, Minneapolis, Minnesota 55401, and its telephone number is (612) 338-3300. Its World Wide Web site is www.netradioaahs.net. - -------------------- * Children's Broadcasting Corporation has applied for a service mark for Aahs World Radio-SM-. 4 BROADCAST STRATEGY The Company seeks to attract listeners and advertisers to the Aahs World Radio-SM- programming format by continually refining its content and expanding the distribution network. Elements of this strategy include (i) attracting a loyal listenership by maintaining high quality, distinctive programming directed to its target audience, (ii) reinforcing this loyalty by creating a brand identity through the creation of characters which are integrated into its programming, (iii) delivering this listenership base to national advertisers by expanding its radio network to obtain U.S. population coverage, and (iv) making opportunistic acquisitions of RBLs in key markets. The Company derives its revenue primarily from the sale of local and network time to advertisers. The Company believes that as its coverage of the U.S. continues to expand, it will be able to sell national advertising time in greater quantities and at significantly higher rates with no significant additional operating costs. To a large extent, the Company is already incurring the production, operating and administrative costs necessary to broadcast the network to the entire U.S. Incremental costs as the network continues to expand are expected to be minimal, excluding the costs of any station acquisitions or local marketing agreements ("LMAs") which the Company may complete or into which the Company might enter. Aahs World Radio-SM- is a music-driven format which was developed and is produced for pre-teens. In addition to this primary target market, the format has also been strategically designed to appeal to parents and care givers. This is accomplished through a blend of music, stories, call-in segments, interactive quiz features, interviews and current events. Approximately two-thirds of Aahs World Radio-SM- programming consists of pop-oriented music which is selected for children on the basis of lyric content, entertainment and/or educational value. Each selection is classified in one of several music categories and entered into the Company's program management system to ensure that it airs under designated conditions and only at designated times. Research conducted by the Company, including focus groups and analysis of listener feedback, has shown that having music as the core element of its programming is the best way to attract and retain its target audience. The Company develops and continually conducts focus groups and written and telephonic surveys in order to enhance its understanding of its target audience and ensure that its programming is meeting the demands of both kids and their parents. Management believes that non-musical programming is appealing as well and contributes to the "personality" of the format and to its differentiation from competing formats. Prior to the Company's development of the Aahs World Radio-SM- format, there were not any full-time radio formats which targeted the pre-teen market. It is estimated that over $1.0 billion in advertising dollars is directed toward children annually, yet only a small percentage of these advertising dollars are currently spent on radio. The Company believes that advertisers trying to reach children have not utilized radio due to the lack of children's programming on the radio. By providing quality programming which is appealing to both pre-teens and their parents and by pursuing vigorous sales and marketing efforts, the Company believes it will be able to attract an increasing portion of the annual advertising dollars aimed at this previously underserved market segment. The Company believes that developing a well-recognized brand identity will enhance its network's visibility and create opportunities for the Company to expand beyond the scope of its broadcast operations. The Company has created characters within its programming, including AAHSIE-TM-, the Company's animated mascot, which it has integrated into is merchandising and Internet enterprise. The Company has developed and intends to continue to develop strategic relationships to assist it in its brand development efforts, and to allow the Company to exploit business opportunities without detracting from management's focus upon the Company's core business. Pursuant to this strategy, the Company has entered into agreements with NetRadio Network, Inc. ("NetRadio") and Precision Tapes, Inc. which expand the Company's interactive Internet presence and give Aahs World Radio-SM- programming Internet distribution worldwide. The Company distributes the full 24-hour Aahs World Radio-SM- format over the Internet pursuant to an agreement with NetRadio. 5 In November 1995, the Company entered into a joint operations agreement (the "Operations Agreement") with ABC Radio Networks, Inc. ("ABC") pursuant to which ABC's affiliate development and national advertising sales staffs would augment the Company's efforts to market its children's radio format to broadcasters and advertisers. On July 25, 1996, ABC notified the Company that ABC would terminate such agreement effective October 24, 1996. Following the termination by ABC of the Operations Agreement, the Company filed a lawsuit in the United States District Court for the District of Minnesota against The Walt Disney Company ("Disney") and ABC for injunctive relief and to recover damages for their alleged attempts to misappropriate the Company's confidential information and trade secrets acquired through their strategic relationship with the Company in order to unfairly compete with the Company in the children's radio market. On November 18, 1996, ABC and Disney commenced broadcast of "Radio Disney," a competing format directed toward children age 12 and under in four markets across the country. See "Risk Factors -- ABC/Disney Litigation" and " -- Competition." FOOTHILL FINANCING The Company entered into an agreement (the "Credit Agreement") with Foothill Capital Corporation ("Foothill") to address the Company's working capital requirements through the creation of three credit facilities (the "Facilities") on November 25, 1996. The Credit Agreement provides the Company with working capital through (a) a $11,500,000 senior secured term loan (the "Term Loan") collateralized by the assets of the Company, payable over four years, (b) a $1,000,000 senior secured reducing/revolving line of credit (the "Revolving Loan") secured by the Company's accounts receivable, and (c) a $4,000,000 acquisition facility (the "Acquisition Loan") secured by future assets acquired by the Company. The Facilities mature on November 26, 2000. The Company's indebtedness under the Facilities is secured by a first priority lien on substantially all the assets of the Company and its subsidiaries, by a pledge of its subsidiaries' stock and by a guaranty of its subsidiaries. Additionally, the Company granted Foothill a warrant to purchase 50,000 shares of the Company's Common Stock. The Company was required to pay various service and commitment fees as are standard within the industry. Funds available from the Term Loan have been and may in the future be used for working capital needs and acquisitions, including the purchase of the RBL and certain other assets of WAUR-AM in the Chicago market. The Revolving Loan may be used for working capital needs and for acquisitions. Advances are not to exceed 80% of eligible accounts receivable less certain reserves. The Term Loan is to be repaid monthly in 42 installments of principal in the amount of 1/54 of the Term Loan amount beginning in month seven of the Credit Agreement. The Acquisition Loan is to be repaid monthly based upon a five-year amortization schedule, commencing on the first month following funding. Interest rates under the Facilities are payable at the prime rate plus 2.75%. The Credit Agreement contains a number of restrictive covenants which, among other things, require the Company to maintain specified financial ratios and impose certain limitations on the Company with respect to the amount of funding available for each acquisition under the Acquisition Loan. As of March 31, 1997 and December 31, 1996, the Company was in violation of certain of these restrictive covenants. Foothill has waived its rights pursuant to these violations. As of May 14, 1997, approximately $11,746,000 was borrowed pursuant to the Credit Agreement. These proceeds have been used as follows: $1,700,000 in connection with the acquisition of an RBL in the Chicago market, $2,900,000 to retire preferred stock, $1,000,000 to retire debt, $720,000 for capital expenditures, $400,000 related to loan costs, $860,000 to repay miscellaneous interest and principal, and approximately $4,166,000 for working capital and cash reserves. 6 RISK FACTORS AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. WHEN USED BELOW AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THE WORDS "BELIEVES," "ANTICIPATES" AND "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS," AS DEFINED IN THE LITIGATION REFORM ACT. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. POTENTIAL PURCHASERS OF THE COMPANY'S COMMON STOCK ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. ACQUISITIONS. One of the Company's strategies used to expand its national network of radio stations broadcasting Aahs World Radio-SM- is to acquire RBLs in key markets. To date, the Company has acquired 13 RBLs, 12 of which are currently owned and operated. The Company has acquired RBLs through the acquisition of securities or assets of radio stations and intends to continue to acquire RBLs in the future. Unless the acquisition is of an existing affiliate, the Company will generally convert an acquired RBL to the Aahs World Radio-SM-format. Although the Company believes it has identified a number of potential acquisitions, there can be no assurance that the Company will be successful in acquiring additional RBLs. The Company expects to face competition in acquiring additional RBLs as it seeks to build its national radio network. In the event the Company is unable to continue to acquire RBLs, the Company may not achieve market penetration levels required by major advertisers and the Company's ability to attract national advertising and maximize the rates charged for advertising and air time could be materially adversely affected. See "--Development of National Radio Network." COMPANY DEVELOPMENT; HISTORY OF OPERATING LOSSES. Since inception, the Company has experienced substantial net losses as a result of its efforts to develop its national radio network. The Company is continuing to develop its radio network and is generally subject to the risks attendant to a new or emerging business venture. The Company has incurred net losses since its inception in 1990 and has not generated positive cash flow sufficient to fund its ongoing operations. For the two years ended December 31, 1995 and 1996, and the three months ended March 31, 1997, the Company incurred net losses of $6,108,000, $9,868,000 and $2,780,000 respectively. The Company has not generated positive cash flow from operations and has had frequent working capital shortages. The Company expects to continue to incur operating losses throughout 1997 and that it will continue to experience negative cash flow from operations. Working capital requirements have been met by short-term borrowings from investors, including affiliates of the Company, and from the proceeds of public offerings of the Company's Common Stock, and through the use of the Facilities. The Company continues to seek additional sources of financing for its working capital needs and for acquisitions. If the Company should be unable to obtain working capital when required, its operations and prospects would be materially and adversely affected. In connection with their audit reports on the Company's financial statements as of and for the years ended December 31, 1995 and 1996, Ernst & Young LLP and BDO Seidman, LLP, the Company's independent auditors as of such dates, expressed substantial doubt about the Company's ability to continue as a going concern because of recurring losses and negative cash flow from operations. As of March 31, 1997, the Company had an accumulated deficit of $29,084,000 and had used approximately $19,979,000 of cash to fund its losses. See "Prospectus Summary -- Foothill Financing." The Company raised a total of $12,500,000 of capital through the Credit Agreement with Foothill in November 1996. Additionally, as a part of the Credit Agreement the Company may borrow an additional $4,000,000 to acquire future assets. The Company believes the Credit Agreement will meet the working capital needs of the Company and provide adequate resources for acquisitions until the fall of 1997. Beyond the fall of 1997, the Company's ability to obtain funding to meet its future capital requirements will depend upon a number of factors including, but not limited to, (i) the ability of the Company to generate cash flow from operations, (ii) the acceptance of the Company's children's radio format, (iii) the relative profitability of the 7 format on a local and national basis and (iv) the general availability of debt and equity financing to the Company. The Company continues to seek additional sources for its working capital and long-term capital requirements, including debt and equity financing and strategic partnership activities. SUBSTANTIAL LEVERAGE; ADDITIONAL FINANCING REQUIREMENTS. As of March 31, 1997, the Company's consolidated indebtedness approximated 51% of the sum of its shareholders' equity and consolidated indebtedness, assuming full funding under the Facilities, which occurred on April 23, 1997. Based on current interest rates, the debt service obligations associated with the Credit Agreement necessitate payments of principal and interest of approximately $3,000,000 in 1997. Further, substantially all assets of the Company serve to secure this loan. This degree of leverage increases the Company's vulnerability to adverse general economic and broadcasting industry conditions and to increased competitive pressures, including pressure from better capitalized competitors. Issuance of additional debt, including the Debt Securities, would increase this degree of leverage and the Company's vulnerability to such market conditions. In the event that the Company should default on its obligations under the Credit Agreement, all or substantially all of its assets would be at risk. There can be no assurance that the Company will be able to repay or refinance such indebtedness when due, or that the Company would be able to sell all or any portion of its assets or raise additional capital to make required payments on maturing indebtedness. Furthermore, the Company was in violation of certain covenants contained in the Credit Agreement as of March 31, 1997 and December 31, 1996. An inability to make payments when due or to comply with covenants and restrictions associated with such indebtedness could give Foothill the right to foreclose on properties securing payment obligations, which would have a material adverse effect upon the Company. Foothill has waived its rights pursuant to the aforementioned covenant violations. Part of the Company's strategy for development and expansion of its network includes acquiring RBLs and/or operating radio properties in key U.S. markets. It is the Company's desire to purchase RBLs in each of the top 15 markets; however, there can be no assurance that the Company will be able to complete suitable acquisitions on terms favorable or acceptable to the Company. In the event the Company purchases additional RBLs, the limitations on the Credit Agreement may require the Company to seek additional financing for acquisitions and to fund future operations. There can be no assurance that such additional financing will be available to the Company when required, or if available, that it would be on terms acceptable or favorable to the Company. Additional financing could require the sale of equity securities, which could result in significant dilution to the Company's shareholders. DEVELOPMENT OF NATIONAL RADIO NETWORK. Since late 1992, the Company has been developing a network of affiliated and owned or operated radio stations to carry its satellite-transmitted programming to domestic radio markets. The Company's affiliation agreements have terms varying from one to three years. There can be no assurance that the Company will be able to retain existing affiliates or attract additional affiliates. Since the inception of the network, the Company has gained and lost affiliates. As of May 14, 1997, the Company had 30 affiliates. In cases where the Company deems it appropriate, it intends to seek affiliates by entering into affiliation agreements or LMAs, through which third-party owned stations broker broadcast time to the Company, or by acquiring stations in key markets. In addition, the Company could encounter substantial delays, expenses or other unforeseen difficulties in completing the establishment of its network in the major markets. The Company also risks the potential loss of strategic alliances which it has developed in connection with its strategy to develop the Company's brand, to assist in growth of the Company's network, and to pursue related business opportunities. Furthermore, the signal of the Company's affiliates and of its owned and operated stations may not cover households in certain portions of the markets in which such stations broadcast. In addition, the Company's management has limited experience in the development or operation of a national radio network. The success and viability of the Company's network will depend upon its ability to generate substantial revenue from network advertisers. For the year ended December 31, 1996, and the quarter ended March 31, 1997, the Company's network generated revenue totaling $1,594,000 and $206,000, respectively. Since the inception of the Company, the primary sources of the Company's revenue have been from the sale of local advertising and air time and network revenue. A substantial portion of the Company's local advertising revenue is derived from Company-owned stations not broadcasting the Aahs World Radio-SM- format. For the 8 years ended December 31, 1995 and 1996, and the quarter ended March 31, 1997, approximately 42%, 38% and 40%, respectively, of the Company's revenue was derived from its radio stations which do not carry the Aahs World Radio-SM-format: KTEK-AM, Houston, Texas, KCNW-AM, Kansas City, Kansas, WZER-AM, Milwaukee, Wisconsin and KYCR-AM, Minneapolis, Minnesota. For the years ended December 31, 1995 and 1996, and the quarter ended March 31, 1997, the Company derived approximately 13%, 12% and 14%, respectively, of its revenue from KTEK-AM; approximately 9%, 9% and 8%, respectively, of its revenue from KCNW-AM; approximately 11%, 8% and 8%, respectively, of its revenue from WZER-AM; and approximately 9%, 9% and 10%, respectively, of its revenue from KYCR-AM. If the Company converts any of these stations to the Aahs World Radio-SM- format, its revenue may be negatively affected until a new advertising base is developed for the Aahs World Radio-SM- format in those markets. No assurance can be given that the Company will be able to acquire additional stations in major markets or to increase the number of network affiliates to a level which would enable it to increase network advertising, even if desired additional acquisitions are made or affiliate relationships are created, or that the Company will be able to generate sufficient advertising revenue to operate profitably in the future. One of the Company's primary methods of expansion has been to acquire RBLs through the acquisition of assets of broadcasters in such major markets as New York City, Los Angeles, Chicago, Philadelphia, Detroit and Dallas/Fort Worth. The Company's expansion strategy is to acquire additional RBLs which would enable it to broadcast in each of the top 15 U.S. markets. Such strategy is designed to achieve market penetration levels required by major advertisers who may be reluctant or unwilling to purchase advertising time until the Company's geographic penetration is extended. The Company believes additional market penetration will improve its ability to maximize the rates charged for advertising and air time. ACCEPTANCE OF RADIO FORMAT. The Company produces and distributes a 24-hour children's radio format. There can be no assurance that the Company's programming will gain acceptance by listeners and advertisers. In addition, the Company's primary target audience is not rated by a recognized radio rating service, such as Arbitron. Such ratings are generally used by potential advertisers in making advertising decisions. The Company is working with research companies to attempt to develop such ratings for the pre-teen market. However, there can be no assurance that such ratings can be developed or that the Company will be able to attract additional national advertisers. RISKS RELATED TO ACQUISITION OF RADIO ELIZABETH. 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. 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 10 kw power, which provides coverage of a significant portion of the New York City market. WJDM has been broadcasting the Company's Aahs World Radio-SM-programming in the nation's largest city radio market since February 1, 1996, over its 1660 kHz frequency. 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. Most radio receivers produced prior to 1990 cannot receive Expanded Band frequencies. 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 City market, thereby resulting in a substantial diminution of the value of the Company's investment in REI. ABC/DISNEY LITIGATION. In November 1995, the Company entered into an Operations Agreement with ABC pursuant to which ABC's affiliate development and national advertising sales staffs would augment the Company's efforts to market its children's radio format to broadcasters and advertisers. On July 25, 1996, ABC notified the Company that ABC would terminate such agreement effective October 24, 1996. Following 9 the termination by ABC of the Operations Agreement, the Company filed a lawsuit in the United States District Court for the District of Minnesota against Disney and ABC for injunctive relief and to recover damages for their alleged attempts to misappropriate the Company's confidential information and trade secrets acquired through their strategic relationship with the Company in order to unfairly compete with the Company in the children's radio market. As a result of the termination by ABC of its Operations Agreement with the Company, the Company has had to rebuild its own affiliate development and national advertising sales staff and is in the process of rebuilding that capability. The Company has commenced rebuilding of its national sales and affiliate development organizations and has hired eight individuals to staff its national sales and affiliate development departments. The Company expects to have its national sales and affiliate development programs in place during the first half of 1997. The Company is, however, unable to determine the full impact of damages it has sustained as a result of the actions by ABC, which are the basis of the Company's claims in the ABC/Disney litigation. Further, there can be no assurance that the Company will be able to rebuild its national sales and affiliate development organizations or that it will prevail in the ABC/Disney litigation or recover any of the damages sought. Such litigation is costly to the Company and legal fees and costs associated with the litigation have reduced and may continue to reduce the Company's working capital. Further, the Company has issued and may in the future issue securities to finance the litigation which could result in substantial dilution to the Company's existing shareholders. In November 1996, the Company registered 200,000 shares of Common Stock on behalf of its litigation counsel. COMPETITION. The Company currently derives the majority of its revenue from the sale of local radio advertising time on its owned and operated stations to advertisers in their respective metropolitan markets and faces substantial competition from other radio and television stations as well as other media in those markets. Factors contributing to the Company's ability to attract local advertisers include the success of a station in attracting listeners and the perceived quality of the Company's programming. There can be no assurance that the Company can successfully compete for listeners and advertising revenues with other radio and television networks and other entertainment organizations. The Company may also experience competition from developing technologies in the radio industry. In addition to the Company's current competition for local advertising, the Company also competes for network advertising. On information and belief, Disney has commenced broadcasting of its own children's radio programming in four U.S. markets, thereby entering into direct competition with the Company. Further, other entertainment organizations, including but not limited to radio syndicators and radio stations, many of which have greater resources than the Company, could develop a children's radio format similar to Aahs World RadioSM. Although radio stations must be licensed by the FCC, there are no significant impediments to the entry of new competitors into the Company's markets. While the Company continues to seek protection for its original programming, where appropriate, under applicable copyright and trademark laws, the Aahs World RadioSM format can be and has been imitated by others seeking to enter the children's radio field. VOLATILITY OF MARKET PRICE OF COMMON STOCK. The market price of the Company's Common Stock has been subject to significant fluctuations in response to numerous factors, including variations in the annual or quarterly financial results of the Company or its competitors, changes by financial research analysts in their estimates of the earnings of the Company or its competitors, conditions in the economy in general or in the radio industry in particular, unfavorable publicity or changes in applicable laws and regulations (or judicial or administrative interpretations thereof) affecting the Company or the radio industry. During fiscal year 1996, the market price of the Company's Common Stock ranged from a high of $14.00 on January 31 and February 22, 1996 to a low of $3.25 on November 20, 1996. During the first four months of 1997, the Company's Common Stock has ranged from $6.63 on January 13, 1997 to $3.19 on April 7, 1997. There can be no assurance that purchasers of the Company's Common Stock can sell such stock at or above the prices at which it was purchased. IMPACT OF SALE OF SHARES; SHARES ELIGIBLE FOR FUTURE SALE. As of May 14, 1997, the Company had 6,031,501 shares of Common Stock outstanding and had warrants and options outstanding to purchase an 10 additional 2,634,213 shares of Common Stock exercisable at prices ranging from $2.00 to $13.80 per share. Between July 1996 and February 1997, the Company registered 3,234,277 shares of Common Stock for secondary offerings. The sale of such shares, the Common Stock offered pursuant to this Prospectus, and the sale of additional Common Stock which may become eligible for sale in the public market from time to time upon exercise of warrants and stock options could have the effect of depressing the market prices for the Company's Common Stock. RELIANCE ON CURRENT MANAGEMENT. The Company is dependent on the management services of its current management team. If the Company were to lose the services of these individuals, its business could be adversely affected. Most of the members of the Company's current senior management team are not subject to employment contracts with the Company. The Company does not maintain insurance on the lives of its key employees. POTENTIAL CONFLICTS OF INTEREST. The Company leases certain broadcast and office facilities from its President, Christopher T. Dahl, and another director, Richard W. Perkins, and the WWTC and KYCR radio transmission tower site from Mr. Dahl. The Company also shares with Community Airwaves Corporation ("CAC"), a corporation owned by the Company's President, Christopher T. Dahl, a director, Richard W. Perkins, and a shareholder, Russell Cowles II, certain management services which are provided by another entity, Radio Management Corporation, owned by Messrs. Dahl, Perkins and Cowles. The management services consist of administrative, legal and accounting services. Such arrangements present potential conflicts of interest in connection with the pricing of services provided. In addition, CAC may acquire interests in additional stations. Such ownership could, under current FCC regulations, limit the markets in which the Company could acquire additional RBLs. In addition, the Company has entered into an agreement with CAC whereby the Company is required to obtain the consent of CAC for any acquisition of an FM station or of an AM station located outside the largest 125 U.S. markets. FCC REGULATION. Although the RBLs of the stations owned by the Company are already granted, the continuation of any RBL acquired by the Company depends upon its compliance with the laws, rules and regulations of the FCC. The FCC can revoke licenses for serious misconduct, subject to the right to an evidentiary hearing, or it may fail to renew a license or impose monetary fines for breach of its rules. Neither the Company nor CAC has ever been denied any FCC license or renewal, or had a fine imposed by the FCC. In recent years, a number of competing applications and formal and informal objections have been filed with respect to broadcast renewal applications. Even though the vast majority of all license renewal applications are granted, and under the Telecommunication Act of 1996 (the "1996 Act") competing applications in license renewal proceedings are no longer allowed, there can be no assurance that renewal of the Company's licenses will be granted. Furthermore, approvals are required for the transfer of ownership. Three directors and attributable shareholders of the Company have interests in AM and FM radio stations unrelated to the Company. Under current FCC regulations, these interests are attributed to the Company and may limit the markets in which the Company can acquire stations. The 1996 Act eliminated the limit upon the number of stations that can be under common ownership or control nationally. Local ownership was substantially relaxed according to market size. See "Risk Factors -- Risks Related to Acquisition of Radio Elizabeth." ANTI-TAKEOVER PROVISIONS. The Board of Directors, without any action by the Company's shareholders, has the authority to issue the remaining undesignated and unissued authorized shares and to fix the powers, preferences, rights and limitations of such shares or any class or series thereof, without shareholder approval. Persons acquiring such shares could have preferential rights with respect to voting, liquidation, dissolution or dividends over existing shareholders. The Company is subject to certain provisions of the Minnesota Business Corporation Act which limit the voting rights of shares acquired in "control share acquisitions" and restrict certain "business combinations." Such provisions, as well as the ability to issue undesignated shares, could have the effect of deterring or delaying a takeover or other change in control of the Company, deny shareholders the receipt of a premium on their Common Stock and depress the market price of the Company's Common Stock. 11 CONTROL BY PRINCIPAL SHAREHOLDERS. Approximately 24% of the Company's outstanding Common Stock is beneficially owned by the Company's current officers and directors. Accordingly, such persons may be able to significantly influence the Company's business and affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control of the Company. NO ASSURANCE AS TO LIQUIDITY ON THE NASDAQ NATIONAL MARKET SYSTEM. The Common Stock is currently listed on the Nasdaq National Market System. There can be no assurance that the Common Stock will be actively traded on such market or that, if active trading does develop, it will be sustained. ABSENCE OF DIVIDENDS. The Company has not paid any cash dividends since its inception and does not anticipate paying cash dividends in the foreseeable future. The Company presently expects to retain its earnings to finance the development and expansion of its business. The declaration or payment by the Company of dividends, if any, on its Common Stock in the future is subject to the discretion of the Board of Directors and will depend on the Company's earnings, financial condition, capital requirements and other relevant factors. The declaration or payment by the Company of dividends is also subject to the Company's Credit Agreement with Foothill. Without Foothill's prior written consent, the Company cannot declare or pay any cash dividends. 12 SELLING SHAREHOLDERS The following table sets forth, as of the date of this Prospectus, the name of each Selling Shareholder, certain beneficial ownership information with respect to the Selling Shareholders, and the number of Shares that may be sold from time to time by each pursuant to this Prospectus. There can be no assurance that the shares offered hereby will be sold.
PERCENTAGE OF OUTSTANDING SHARES SHARES SHARES BENEFICIALLY BENEFICIALLY BENEFICIALLY OWNED SHARES OWNED UPON OWNED UPON PRIOR TO OFFERED COMPLETION OF THE COMPLETION OF THE SELLING SHAREHOLDER OFFERING HEREBY OFFERING OFFERING - -------------------------------- ------------ ----------- ----------------- ----------------- Metro National Title Company 268,607 268,607 0 0 Foothill Capital Corporation 50,000 50,000 0 0
This Prospectus includes 268,607 shares owned by Metro National Title Company for ultimate benefit of Bonneville International Corporation and Bonneville Holding Company (collectively, "Bonneville"), which may be deemed beneficial owners of such shares. Such shares were issued in connection with Bonneville's sale to the Company of the RBL and certain related assets of Radio Station KIDR(AM), Phoenix, Arizona. Metro National Exchange Services, Inc., a subsidiary of Metro National Title Company, is acting as a "qualified intermediary" to allow Bonneville International Corporation to obtain certain permitted tax benefits pursuant to Section 1031 of the Internal Revenue Code. This Prospectus also includes 50,000 shares, issuable pursuant to a warrant, owned by Foothill. The Company has agreed to bear all expenses (other than selling commissions and fees) in connection with the registration and sale of the Shares being offered by the Selling Shareholders in over-the-counter market transactions or in negotiated transactions. See "Plan of Distribution." The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act with respect to the resale of the Shares from time to time in over-the-counter market transactions or in negotiated transactions. This Prospectus forms a part of such Registration Statement. USE OF PROCEEDS The Shares offered hereby will be sold by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. See "Selling Shareholders." PLAN OF DISTRIBUTION The Shares offered hereby may be offered by the Selling Shareholders from time to time. The Company will receive no proceeds from the sale of the Shares. Sales may be effected by the Selling Shareholders in transactions on The Nasdaq Stock Market, in negotiated transactions, or in a combination of such methods of sale, at prices relating to prevailing market prices or at negotiated prices. The Selling Shareholders may effect such transactions by selling the Shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of discounts or commissions from the Selling Shareholders and/or the purchasers of the Shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). The Selling Shareholders and any persons who participate in the sale of the Shares from time to time, may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any commissions paid or discounts or concessions allowed to any such persons and any profits received on resale of the Shares, may be deemed to be underwriting compensation under the Securities Act. 13 In order to comply with the securities laws of certain states, if applicable, the Shares will be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available. The Company has agreed to indemnify the Selling Shareholders and their control persons with respect to certain liabilities in connection with the sale of the Shares pursuant to this Prospectus, including liabilities under the Securities Act and the Exchange Act. In addition, the Selling Shareholders have agreed to indemnify the Company, its directors, officers, agents and control persons against certain liabilities incurred as a result of information provided by the Selling Shareholders for use in this Prospectus. Insofar as indemnification for liabilities arising under the Securities Act may be permitted pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL MATTERS The validity of the Shares offered hereby and certain legal matters pertaining to the Company, including matters incorporated herein by reference relating to the regulation of the Company by the FCC and related matters, were passed upon on behalf of the Company by Lance W. Riley, Esq., Secretary and General Counsel to the Company. EXPERTS The consolidated financial statements as of December 31, 1996 of Children's Broadcasting Corporation, incorporated by reference in this Prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, as set forth in their reports thereon (which contain an explanatory paragraph with respect to substantial doubt about the Company's ability to continue as a going concern and management's plans described in Note 2 to the consolidated financial statements). Such consolidated financial statements are incorporated by reference herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements as of December 31, 1995 of Children's Broadcasting Corporation, incorporated by reference in this Prospectus have been audited by Ernst & Young LLP, independent certified public accountants, as set forth in their reports thereon (which contain an explanatory paragraph with respect to substantial doubt about the Company's ability to continue as a going concern and management's plans described in Note 2 to the consolidated financial statements). Such consolidated financial statements are incorporated by reference herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of Radio Elizabeth, Inc. for the eleven months ended March 31, 1996 and 1995 and for the years ended April 30, 1993, 1994 and 1995, incorporated by reference in this Prospectus have been audited by Smolin, Lupin & Co., P.A., Certified Public Accountants, independent auditors, as set forth in their report thereon. Such financial statements are incorporated by reference herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of Wolpin Broadcasting Company as of December 31, 1994 and 1995 and for each of the three years in the period ended December 31, 1995, incorporated by reference in this Prospectus, have been audited by Kleiman, Carney & Greenbaum, Certified Public Accountants, independent auditors, as set forth in their report thereon. Such financial statements are incorporated by reference herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE OF ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE. -------------------- TABLE OF CONTENTS -------------------- PAGE Available Information . . . . . . . . . . . . . . . . . . . . . 2 Incorporation of Certain Documents by Reference. . . . . . . . . . . . . . . . . . . . . . . . . 2 Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . 4 Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . 7 Selling Shareholders. . . . . . . . . . . . . . . . . . . . . . 13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 13 Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . 13 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 14 Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 318,607 SHARES CHILDREN'S BROADCASTING CORPORATION COMMON STOCK -------------------- PROSPECTUS -------------------- _________________, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the various expenses payable by the Company in connection with the sale and distribution of the Shares being registered. All amounts shown are estimates, except the registration fee. SEC registration fee . . . . . . . . . . . . . . . . . $ 350 Legal fees and expenses. . . . . . . . . . . . . . . . 5,000 Accounting fees and expenses . . . . . . . . . . . . . 5,000 Blue sky and related fees and expenses . . . . . . . . 350 Miscellaneous (including listing fees, if applicable). 5,500 ------- Total . . . . . . . . . . . . . . . . . . . . . . . $16,200 ------- ------- ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant is a Minnesota corporation. Reference is made to Minnesota Statutes Section 302A.521 which provides that a Minnesota business corporation shall indemnify any director, officer, employee or agent of the corporation made or threatened to be made a party to a proceeding, by reason of the former or present official capacity (as defined) of the person, against judgments, penalties, fines, settlements and reasonable expenses incurred by the person in connection with the proceeding if certain statutory standards are met. "Proceeding" means a threatened, pending or completed civil, criminal, administrative, arbitration or investigative proceeding, including one by or in the right of the corporation. Section 302A.521 contains detailed terms regarding such right of indemnification and reference is made thereto for a complete statement of such indemnification rights. Article 6.2 of the Company's Amended and Restated Bylaws, as amended, provides that directors, officers, employees and agents, past or present, of the Company, and persons serving as such of another corporation or entity at the request of the Company, shall be indemnified by the Company for such expenses and liabilities, in such manner, under such circumstances, and to such extent as permitted under Minnesota Statutes 302A.521. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 5 Opinion of Lance W. Riley, Esq. 10.1 Asset Purchase Agreement between Bonneville International Corporation, Bonneville Holding Company and Children's Broadcasting Corporation re KIDR(AM), Phoenix, Arizona. * 10.2 Loan and Security Agreement by and between Children's Broadcasting Corporation and Foothill Capital Corporation. 23.1 Consent of Lance W. Riley, Esq. (included in Exhibit 5). 23.2 Consent of BDO Seidman, LLP. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Smolin, Lupin & Co., P.A. 23.5 Consent of Kleiman, Carney & Greenbaum, Certified Public Accountants. 24 Power of Attorney (included on signature page to the Registration Statement). __________ * Incorporated by reference from the Registrant's Current Report on Form 8-K, filed on December 20, 1996, relating to the Company closing on a $16,500,000 loan from Foothill Capital Corporation. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-1 (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that the undertakings set forth in paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions summarized in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that (1) for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance on Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective and (2) for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and State of Minnesota, on May 30, 1997. CHILDREN'S BROADCASTING CORPORATION By /s/ Christopher T. Dahl -------------------------------- Christopher T. Dahl, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Lance W. Riley and James G. Gilbertson as his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on the dates and in the capacities indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Christopher T. Dahl President, Chief Executive May 30, 1997 - ------------------------- Christopher T. Dahl Officer and Director (Principal Executive Officer) /s/ James G. Gilbertson Chief Operating Officer and May 30, 1997 - ------------------------- James G. Gilbertson Treasurer (Principal Accounting Officer and Principal Financial Officer) /s/ Richard W. Perkins Director May 30, 1997 - ------------------------- Richard W. Perkins /s/ Rodney P. Burwell Director May 30, 1997 - ------------------------- Rodney P. Burwell /s/ Mark A. Cohn Director May 30, 1997 - ------------------------- Mark A. Cohn EXHIBIT INDEX NUMBER DESCRIPTION - ------ ----------------------------------------------------------- 5 Opinion of Lance W. Riley, Esq. 10.1 Asset Purchase Agreement between Bonneville International Corporation, Bonneville Holding Company and Children's Broadcasting Corporation re KIDR(AM), Phoenix, Arizona. *10.2 Loan and Security Agreement by and between Children's Broadcasting Corporation and Foothill Capital Corporation. 23.1 Consent of Lance W. Riley, Esq. (included in Exhibit 5). 23.2 Consent of BDO Seidman, LLP. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Smolin, Lupin & Co., P.A. 23.5 Consent of Kleiman, Carney & Greenbaum, Certified Public Accountants. 24 Power of Attorney (included on signature page to Registration Statement). - ---------- * Incorporated by reference from the Registrant's Current Report on Form 8-K, filed on December 20, 1996, relating to the Company closing on a $16,500,000 loan from Foothill Capital Corporation. EX-5 2 EXH 5 OPINION OF LANCE RILEY EXHIBIT 5 May 30, 1997 Children's Broadcasting Corporation 724 First Street North Minneapolis, Minnesota 55401 Gentlemen: I am General Counsel to Children's Broadcasting Corporation, a Minnesota corporation (the "Company"), in connection with its filing of a registration statement on Form S-3 (the "Registration Statement"), under the Securities Act of 1933, as amended, in connection with the proposed sale by Selling Shareholders of 318,607 shares of common stock, $.02 par value, of the Company (the "Shares"). Certain of the Shares are issuable upon the exercise of warrants held by the Selling Shareholders. I have examined the Registration Statement and those documents, corporate records, and other instruments I deemed relevant as a basis for the opinion herein expressed. Based on the foregoing, it is my opinion that when the Registration Statement shall have been declared effective by order of the Securities and Exchange Commission, and the Shares have been sold as contemplated by the Registration Statement, the Shares will be legally and validly issued, fully-paid and nonassessable. I hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference to myself under the caption "Legal Matters" in the Prospectus included in such Registration Statement. /s/ Lance W. Riley ----------------------------------- Lance W. Riley General Counsel Children's Broadcasting Corporation EX-10.1 3 EXH 10.1 ASSET PURCHASE AGREEMENT EXHIBIT 10.1 Asset Purchase Agreement THIS AGREEMENT, dated as of May 20, 1997, is made among BONNEVILLE INTERNATIONAL CORPORATION, a Utah corporation ("BIC"); BONNEVILLE HOLDING COMPANY, a Utah corporation ("BHC"; BIC and BHC are collectively referred to herein as "Sellers"); and CHILDREN'S BROADCASTING CORPORATION, a Minnesota corporation, or its assigns ("CBC" or "Buyer"); and W I T N E S S E T H : THAT, WHEREAS, BHC is the Federal Communications Commission ("FCC") licensee of Radio Station KIDR(AM), licensed to Phoenix, Arizona ("Station"); WHEREAS, pursuant to an operating agreement with BHC, BIC operates the Station and BIC owns substantially all of the assets of the Station other than the Licenses (as defined below); WHEREAS, BHC is also the licensee of radio station KHTC(FM) in Phoenix, Arizona and the studios and offices of KHTC(FM) are co-located with the studios and offices of the Station; and WHEREAS, subject to and conditioned upon the consent of the FCC, the Sellers desire to sell and transfer and Buyer desires to purchase and acquire the Station and all of the tangible and intangible assets of the Sellers primarily used or held for use in connection with the operation of the Station, except as excluded herein. NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions contained herein, the parties hereto hereby agree as follows: ARTICLE 1 SALE AND TRANSFER OF ASSETS 1.1. ASSETS. At closing of the transaction described herein ("Closing"), the Sellers shall sell, convey, assign, transfer and deliver to Buyer, free and clear of any lien, encumbrance, interest, reservation, restriction, mortgage or security interest of any nature whatsoever, except as expressly provided herein, all the material assets owned or leased by the Sellers primarily relating to, used or held for use in connection with the operation of the Station, specifically excluding the Excluded Assets (as defined below), and including, without limitation, the following (collectively, the "Assets") (except to the extent any of the following Assets are Excluded Assets): 1.1.1. All licenses, permits and authorizations ("Licenses") issued by the FCC, all of which are listed on SCHEDULE A attached hereto; 1.1.2. All of the Sellers' owned real property including that described in SCHEDULE B attached hereto ("Real Property"); 1.1.3. All tangible personal property owned by the Sellers including, without limitation, that listed on SCHEDULE C attached hereto, and any replacements therefor or improvements thereof acquired or constructed prior to Closing ("Personal Property"), provided that the Assets shall not include such items of tangible personal property as are disposed of or consumed in the ordinary course of the business of the Station or with the consent of Buyer between the date hereof and the Closing Date; 1.1.4. All of the Sellers' rights and benefits under the business agreements, leases and contracts listed on SCHEDULE D attached hereto, including any renewals, extensions, amendments or modifications thereof, all time sales agreements upon terms consistent with the Station's usual and customary selling practices, and any additional agreements, leases and contracts made or entered into by the Sellers in the ordinary course of business between the date of such Schedule and the Closing approved in writing by Buyer or otherwise permitted hereunder ("Leases and Agreements"); 1.1.5. All right, title and interest of BHC in and to the use of the call letters KIDR for the Station (referred to herein as the "Call Letters"), to the extent they can be conveyed; together with all trademarks, service marks, trade names and other similar rights held by Sellers including all accretions thereto, as listed on SCHEDULE E attached hereto ("General Intangibles"); 1.1.6. All magnetic media, electronic data processing files, systems and programs, logs, public files, records required by the FCC, historical billing information, record program libraries, promotional material, supplies, customer files, correspondence, maintenance records or any other business records, but not including records pertaining to corporate affairs (including tax records) and original journals. The Sellers shall have reasonable access to all such records which might be in the possession of Buyer for a period of five (5) years following the Closing, and shall, at its own expense, have the right to make copies thereof; and 1.1.7. All other personal property whether tangible or intangible, not hereinbefore mentioned. The Sellers agree that the Assets conveyed to Buyer on the Closing Date pursuant to this Agreement will be conveyed free and clear of all liens, charges, claims and encumbrances whatsoever, excepting (i) those obligations from and after the Closing Date with respect to obligations of the Sellers expressly agreed to be assumed by Buyer hereunder, (ii) with respect to the Real Property, easements, restrictions, rights, limitations or encumbrances of record, (iii) with respect to the Assets, materialmen's or similar liens for ongoing or recently completed work and (iv) liens for current taxes, and assessments not yet due and payable ("Permitted Encumbrances"). All of the Licenses shall be assigned and transferred to Buyer by BHC. All other items comprising the Assets shall be assigned and transferred to Buyer by BIC. 1.2. EXCLUDED ASSETS. Certain assets shall be specifically excluded from the Assets and shall be retained by Sellers (the "Excluded Assets") (such designation as an Excluded Asset shall control in the event there is any overlap in the description of items as Assets or Excluded Assets), including the following: 1.2.1. Cash on hand, cash equivalents, accounts receivable, corporate tax and accounting records, security deposits, and insurance policies, proceeds and claims, except as otherwise expressly provided herein; 1.2.2. Corporate and management information and company-wide licensed software; 1.2.3. Any employee benefit plans of Sellers; 1.2.4. Test equipment and other technical equipment not used primarily in the operation of the Station; 1.2.5. Any and all causes of action and claims of Sellers arising out of or relating to transactions or time periods prior to Closing, including, without limitation, insurance claims and claims for the refunds; 1.2.6 The Services Agreement and the Office and Studio Sublease Agreement between BIC and Nationwide Communications, Inc. identified on SCHEDULE D; and 1.2.7. Other property as more fully described on SCHEDULE F attached hereto. ARTICLE 2 PURCHASE PRICE AND PAYMENTS 2.1. PURCHASE PRICE. As the purchase price for the Assets, Buyer agrees to pay to the Sellers the sum of One Million and no/100 Dollars ($1,000,000.00), subject to adjustment as provided in Section 2.3 as the purchase price for the Assets (the "Purchase Price"). 2.2. METHOD OF PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as follows: 2.2.1. EARNEST MONEY ESCROW. The amount of Twenty-five Thousand and no/100 Dollars ($25,000.00) (the "Escrowed Funds") shall be paid into escrow contemporaneously with the execution hereof pursuant to the terms of that Escrow Agreement (the "Escrow Agreement") a copy of which is attached hereto as EXHIBIT A. 2.2.2. CBC COMMON STOCK. The Purchase Price shall be payable by the issuance by Buyer to Sellers of tradable shares of CBC $.02 per share par value Common Stock (the "CBC Stock"). The number of shares of CBC Stock to be issued equals One Million and no/100 Dollars ($1,000,000.00) divided by the "Price Per Share" as hereinafter defined. Any fractional share shall be paid in cash based upon the Price Per Share. The Price Per Share shall be equal to the average closing price of such stock for the thirty (30) trading days prior to five (5) days prior to Closing as reported by the Nasdaq National Market System. The number of shares of CBC Stock issued to Sellers shall not be less than Two Hundred Thousand (200,000) shares. Notwithstanding the foregoing, if between the date of this Agreement and the Closing Date the outstanding shares of CBC 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 number of shares of CBC Stock described above shall be correspondingly and proportionately adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares. Buyer reserves the right to pay cash at Closing in lieu of all or part of the CBC Stock payment called for hereunder, provided Buyer gives Sellers notice of its intention to pay cash at least one week prior to the Closing Date. 2.3. PRORATIONS. The operations of the Station and the income and expenses attributable thereto up to 12:01 A.M. on the day of the Closing (the "Adjustment Time"), shall, except as otherwise provided in this Agreement, be for the account of the Sellers and thereafter (except with respect to any Excluded Assets) shall be for the account of Buyer. Expenses such as power and utility charges, lease rents, property taxes according to year of payment, frequency discounts, annual license fees (if any), wages, commissions, payroll taxes, and other fringe benefits of employees of the Sellers who enter the employment of the Buyer, and similar deferred items shall be prorated between the Sellers and the Buyer. Prepaid deposits shall not be prorated but shall remain the property of the Sellers and shall be paid to Sellers by Buyer at Closing. Employees' employment with the Sellers shall be terminated as of the Closing Date, and Buyer shall employ employees of its choice from and after said date upon terms acceptable to Buyer and such employees. Any prorations shall be made and paid insofar as feasible at the Closing, with a final settlement within ninety (90) days after the Closing. 2.4 ASSUMED LIABILITIES. Except as expressly provided for in this Agreement, at the Closing Buyer shall not assume, incur or be charged with, in connection with the transactions herein contemplated, any liabilities or obligations of any nature whatsoever, contingent or otherwise. Without limitation of the foregoing, Buyer shall not assume any obligations to the Sellers or the Station's employees under any employee benefit plans or employment contracts. Notwithstanding the foregoing, Buyer agrees to assume all obligations relating to the Station, including without limitation those payment and performance obligations under the Leases and Agreements, which arise after Closing and Buyer agrees to pay and perform such obligations in a timely manner. 2.5. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among the Assets by Buyer and Sellers as Buyer and Sellers shall agree pursuant to an arm's length negotiation. Such allocation shall be agreed upon within sixty (60) days following the Closing Date and shall be consistent with Section 1060 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. The parties agree to jointly complete and separately file IRS Forms 8594 with their respective income tax returns for the tax year in which the Closing Date occurs. The parties further agree that neither Buyer nor Sellers will take any position on any income, transfer or gains tax return before any governmental agency charged with the collection of any such tax or in any judicial proceeding that is in any manner inconsistent with the terms of such allocation without the written consent of the other. 2.6. COLLECTION OF BIC'S ACCOUNTS RECEIVABLE. During the four-month period commencing on the Closing Date (the "Collection Period"), Buyer shall collect and receive payment in the ordinary course of business with respect to BIC's accounts receivable and shall pursue collection thereof in accordance with Buyer's normal practices, provided, however, that Buyer shall not have the right to compromise, settle or adjust the amounts of any of BIC's accounts receivable without BIC's prior written consent. No later than fifteen (15) days after the end of each calendar month during the Collection Period, Buyer shall remit to BIC all BIC's accounts receivable collected hereunder. All payments received by Buyer from any person obligated with respect to any of BIC's accounts receivable shall be applied first to BIC's account and only after full satisfaction thereof to Buyer's account, unless the account debtor contests the amount owed to BIC or gives contrary remittance instructions or advice to Buyer. Upon the expiration of the Collection Period, all rights and obligations related to collecting BIC accounts receivable will revert back to BIC and Buyer will cease to have any further responsibilities related to the uncollected BIC accounts receivable (except that Buyer shall promptly remit to BIC any amounts subsequently received by Buyer on account of BIC's accounts receivable). Thereafter, BIC may collect any of BIC's accounts receivable in any manner BIC chooses. ARTICLE 3 FEDERAL SECURITIES LAW MATTERS 3.1. DEFINITIONS. As used in this Article 3, the following terms shall have the following meanings: "ACT" means the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "ADVICE" has the meaning set forth in Section 3.3. "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. "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. "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 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. "REGISTRATION STATEMENT" means any registration statement of CBC that covers any of the Shares 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 CBC Stock issued to the Sellers pursuant to this Agreement. "SUSPENSION NOTICE" has the meaning set forth in Section 3.3. 3.2. REGISTRATION EFFECTIVENESS. On February 11, 1997, the Commission declared effective CBC's Registration Statement on Form S-4 (the "S-4") which registered the Shares under the Act. CBC will use reasonable efforts to keep the Registration Statement effective until the Closing date. 3.3. REGISTRATION PROCEDURES. In connection with the obligation of CBC to use reasonable efforts to cause the Registration Statement to remain effective in accordance with the provisions of this Agreement, CBC shall promptly: (a) Prepare and file with the Commission such post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective and shall timely file with the Commission all required filings under the Act and 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 Act; and shall comply with the provisions of the Act applicable to it with respect to the disposition of all Shares covered by the Registration Statement during the applicable period; (b) Furnish to the Sellers such number of copies of the Prospectus and any amendments or supplements thereto, as the Sellers may reasonably request in order to facilitate the public sale or other disposition of the Shares being sold by the Sellers; (c) Notify the Sellers (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed with respect to the Registration Statement or any post-effective amendment thereto, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement or post-effective amendment thereto or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the 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 Shares under state securities or "blue sky" laws, and (v) of the happening or failure to occur of any event which happening or failure makes any statement made in the Registration Statement or related Prospectus untrue or requires the making of any changes in the 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 made therein, in light of the circumstances under which they were made, not misleading. As soon as practicable following the occurrence of an event described in subsections (ii) through (iv) above, CBC shall prepare and file with the Commission and furnish a supplement or amendment to such Prospectus which remedies the event so described. As soon as practicable following the occurrence of an event described in subsection (v) above, CBC 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 Shares, 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 the Sellers from CBC of the happening of any event of the kind described in Section 3.3(c)(ii) through (v), the Sellers shall forthwith discontinue disposition of the Shares pursuant to the Registration Statement covering the Shares until the Sellers' receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3.3(c) or until the Sellers are advised in writing (the "Advice") by CBC 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 CBC, will, or will request any broker-dealer acting as the Sellers' agent to, deliver to CBC (at CBC's expense) all copies, other than permanent file copies then in Sellers' or broker-dealer's possession, of the Prospectus covering such Shares current at the time of receipt of such notice; PROVIDED, HOWEVER, that in no event shall the period from the date on which Sellers receive a Suspension Notice to the date on which Sellers receive either the Advice or copies of the supplemented or amended Prospectus contemplated by Section 3.3(c) (the "Suspension Period") exceed forty-five (45) days. 3.4. REGISTRATION AND OTHER EXPENSES. CBC shall bear all expenses incurred in connection with causing the registration of the Shares to remain effective pursuant to Section 3.2 of this Agreement. Such expenses shall include, without limitation, all printing, legal and accounting expenses incurred by CBC and all registration and filing fees imposed by the Commission, any state securities commission or the Nasdaq Stock Market. CBC agrees to pay directly when due (and in any case to indemnify Sellers immediately upon demand for) any and all transfer taxes, stamp duties or other similar taxes or expenses payable by or on behalf of Sellers in connection with (i) the issuance to Sellers by CBC of the Shares (ii) the acquisition by Sellers of the Shares or (iii) the consummation by CBC of any of its obligations hereunder. The Sellers 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 Shares by the Sellers and for any legal, accounting and other expenses incurred by the Sellers in connection therewith. 3.5. INDEMNIFICATION AND CONTRIBUTION. 3.5.1. INDEMNIFICATION BY CBC. CBC agrees to indemnify and hold harmless, to the full extent permitted by law, the Sellers, their stockholders, directors and officers, from and against all losses, claims, damages, liabilities and expenses (including without limitation reasonable legal fees and expenses incurred by the Sellers) (collectively, the "Damages") to which the Sellers may become subject under the Act, the Exchange Act or otherwise, insofar as such Damages (or proceedings in respect thereof) arise out of or are based upon any untrue statement of material fact contained in any Registration Statement (or any amendment thereto) pursuant to which the Shares were registered under the Act, or caused by any 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 of a material fact contained in any Prospectus (as amended or supplemented if CBC shall have furnished any amendments or supplements thereto), or caused by any 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 the Sellers furnished in writing to CBC by the Sellers specifically for use therein; PROVIDED, HOWEVER, that CBC shall not be liable to the Sellers under this Section 3.5.1 to the extent that any such Damages were caused by the fact that the Sellers sold Shares 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) CBC has previously furnished copies of such amended or supplemented Prospectus to the Sellers and (ii) such Damages were caused by any untrue statement or omission contained in the Prospectus so delivered which was corrected in such amended or supplemented Prospectus. 3.5.2. INDEMNIFICATION BY THE SELLERS. The Sellers agree to indemnify and hold harmless CBC, its stockholders, directors, officers and each person, if any, who controls CBC within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from CBC to the Sellers, but only with reference to information relating to the Sellers furnished in writing to CBC by the Sellers specifically for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that the Sellers shall not be obligated to provide such indemnity to the extent that such Damages result from the failure of CBC 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 the Sellers to CBC expressly for such purpose. In no event shall the liability of the Sellers hereunder be greater in amount than the amount of the proceeds received by the Sellers upon the sale of the Shares giving rise to such indemnification obligation. 3.5.3 CONTRIBUTION. To the extent that the indemnification provided for in paragraph 3.5.1 or 3.5.2 of this Section 3.5 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 CBC on the one hand and the Sellers 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 CBC on the one hand and of the Sellers on the other hand shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by CBC or by the Sellers 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 3.5.1 or 3.5.2 of this Section 3.5, 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 3.5.3. CBC and the Sellers agree that it would not be just or equitable if contribution pursuant to this Section 3.5.3 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. 3.6. REPRESENTATIONS AND WARRANTIES. Sellers make to CBC the following representations and warranties: (a) Sellers are 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, as amended (the "1940 Act"), required to register as such under the 1940 Act. (b) Sellers (i) have received the prospectus contained in the S-4; and (ii) have received copies of the documents incorporated by reference into the S-4, which the Sellers have deemed relevant for purposes of evaluating their acquisition of the Shares. (c) Sellers are "accredited investors" as defined in Rule 501(a) of Regulation D of the Act. 3.7. As a material inducement to Sellers to enter into this Agreement and to consummate the transactions contemplated hereby, CBC represents and warrants as follows, which representations and warranties shall be deemed to have been made again at the Closing: (a) Neither the Commission nor any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement or the Prospectus or any part thereof and no proceedings for a stop order suspending the effectiveness of the Registration Statement or the trading of any of the CBC Stock have been instituted or are pending or, to the knowledge of CBC, threatened. As of the effective dates thereof, as of the date hereof and as of the Closing, the Registration Statement and the Prospectus (as amended or as supplemented if CBC shall have filed with the Commission any amendment or supplement thereto), including the reports and financial statements included or incorporated by reference in the Prospectus, complies in all material respects with applicable provisions of the Act. As of the effective dates thereof, as of the date hereof and as of the Closing, no part of the Registration Statement, the Prospectus or any amendment or supplement thereto, at the time thereof, contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. Since the date of the most recent financial statements included in the Prospectus, there has been no material adverse change in the condition (financial or other), earnings, business or properties of CBC, whether or not arising from transactions in the ordinary course of business, except as set forth or contemplated in the Prospectus or disclosed in materials incorporated by reference therein. (b) Upon the issuance and delivery of the Shares to Sellers pursuant to the terms hereof, Sellers will have acquired good and indefeasible title to the Shares free and clear of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction of any kind whatsoever. The Shares, when issued and delivered at Closing, shall be duly authorized, validly issued, fully paid and nonassessable. (c) No consent, approval, authorization or order of, or filing or declaration with, any court or governmental agency or body is required for or in connection with the issuance and delivery of the Shares pursuant hereto under the Act or as may be required under state securities or Blue Sky laws or the bylaws and rules of the National Association of Securities Dealers (the "NASD"), except such as shall have been obtained prior to the Closing. (d) The CBC Stock is, and the Shares shall be at the Closing, listed for trading on the Nasdaq National Market under the symbol "AAHS," and CBC is not aware of any threatened or pending proceedings or actions by the NASD to revoke or suspend such listing. ARTICLE 4 THE SELLERS' REPRESENTATIONS, WARRANTIES AND AGREEMENTS Sellers represent, warrant and agree as follows, which representations, warranties and agreements shall be deemed to have been made again at Closing: 4.1. CORPORATE EXISTENCE AND POWERS. The Sellers are corporations organized and existing in good standing under the laws of the State of Utah with full power and authority to enter into this Agreement and to enter into and complete the transactions contemplated herein. BIC is, and will be at the time of Closing, qualified to do business in the State of Arizona. All required corporate action has been taken by the Sellers to make and carry out this Agreement, which is a valid and binding obligation of Sellers and which is enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar law affecting the rights of creditors generally, and equitable principles. The execution of this Agreement and the completion of the transactions herein involved will not result in the material violation of any order, licenses, permit, rule, judgment or decree to which either of the Sellers is subject or the breach of any material contract, agreement or other commitment to which either of the Sellers is a party or by which it is bound. Except for receipt of the FCC Approval (as defined below) with respect to the assignment of the Licenses to Buyer, no other consents of any kind are required that have not been obtained for the Sellers to make or carry out the terms of this Agreement, except with respect to those consents required of parties to Leases and Agreements listed on SCHEDULE B or SCHEDULE D, with respect to assignment and assumption of specific contract rights and obligations. The Sellers shall use their best efforts to obtain third party consents with respect to any leases, contracts or agreements designated by Buyer and the Sellers as "material," to the extent required by such documents. Buyer shall cooperate with the Sellers in obtaining all such required consents. Sellers have delivered to Buyer true and complete copies of the Sellers' Articles of Incorporation and Bylaws and will deliver to Buyer at Closing certificates of good standing of Sellers issued by the States of Utah and Arizona. 4.2. LICENSES AND PERMITS. BHC is the holder of the Licenses listed on SCHEDULE A, all of which are valid, in full force and effect and which have been unconditionally issued for the full license term. The Licenses constitute all of the licenses, grants, permits, waivers and authorizations issued by the FCC and required for and/or used in the operation of the Station as it is currently being operated. BHC is fully qualified to hold all such Licenses. All ownership and employment reports, renewal applications, and other material reports and documents required to be filed for the Station have been properly and timely filed. The Station is operating in all material respects in accordance with the Licenses, and in compliance with the Communications Act of 1934, as amended, and the rules and regulations of the FCC, including, without limitation, those regulations governing the Station's equal employment opportunity practices and public file, and any other applicable laws, ordinances, rules and regulations. The Licenses are unimpaired in any material respect by any act or omission of Sellers or their officers, directors, employees and agents and Sellers will not, without Buyer's prior written consent, by an act or omission, surrender, modify, forfeit or fail to seek renewals on regular terms, of any License, or cause the FCC or other regulatory authority to institute any proceeding for the cancellation or modification of any such License, or fail to prosecute with due diligence any pending application to the FCC or other regulatory authority. There is not now pending, or to the best of Sellers' knowledge threatened, any action by or before the FCC or other regulatory authority to revoke, cancel, rescind, modify or refuse to renew in the ordinary course any of the Licenses, or any investigation, order to show cause, notice of violation, notice of inquiry, notice of apparent liability or of forfeiture or complaint against the Station or Sellers relating to the Station, and Sellers have no knowledge of any basis for the commencement of any such proceeding in the future. Should any such action or investigation be commenced, order or notice be released, or complaint be filed, Sellers will promptly notify Buyer and take all actions reasonably necessary to protect the Station and the Licenses from any material adverse impact. 4.3. ASSETS. The Assets and Excluded Assets (along with related personnel) represent all the assets necessary for the Station's current operations and represent all the assets owned by the Sellers and used for the Station's current operations. Until Closing, none of the Assets will be sold, leased or otherwise disposed of unless replaced by a similar Asset of equal or greater value or disposed or consumed in the ordinary course of business. At Closing, all of the Assets shall be owned by and transferred by the Sellers to Buyer free and clear of all liens, encumbrances, interests or restrictions of any kind whatsoever except Permitted Encumbrances. The Assets have been maintained in good condition, subject to normal wear and tear. 4.4. CONTRACTS, LEASES, AGREEMENTS, ETC. Except as set forth on SCHEDULE D, each of the Leases and Agreements are in full force and effect in accordance with their respective terms, and there are no outstanding notices of cancellation, acceleration or termination in connection therewith. Sellers are not in material breach or default in connection with any of the Leases and Agreements and, to the best of Sellers' knowledge, there is no basis for any material claim, breach or default with respect to Sellers or any other party under any of said Leases and Agreements. Sellers have made available to Buyer true and correct copies of all agreements and instruments listed on SCHEDULE D. On the Closing Date there will be no Leases or Agreements relating to the Station (not including this Agreement) which will be binding on the Buyer other than those specifically identified herein, including the Schedules attached hereto, or as otherwise approved in writing by Buyer. 4.5. LITIGATION. Except as set forth on SCHEDULE G, no strike, labor dispute, investigation, litigation, court or administrative proceeding is pending or, to the best of Sellers' knowledge, threatened, against the Sellers relating to the Station, its employees or any of the Assets to be conveyed hereunder which may result in any material adverse change in the business, operations, assets or financial condition of the Sellers or may materially adversely affect Buyer's use and enjoyment of the Assets, or which would hinder or prevent the consummation of the transaction contemplated by this Agreement, and the Sellers know of no basis for any such possible action. 4.6. HAZARDOUS WASTE. As of now and as of the Closing Date, Sellers have not participated in nor approved, nor has there occurred any production, disposal or storage on the Real Property of any hazardous waste or toxic substance (other than small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations and maintained in the ordinary course of business) in material violation of law or which has not been substantially remedied, nor does such waste or substance exist on the Real Property in material violation of law or which has not been substantially remedied (above or beneath the surface), nor is there any proceeding or inquiry, by any governmental authority (federal or state) with respect to the presence of such waste or substance on the Real Property, nor are there any underground storage tanks on the Real Property. "Hazardous waste" shall consist of the substances defined as "hazardous substances," "hazardous materials," or "toxic substances" in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 USC Section 9601, et seq., or in the Hazardous Materials Transportation Act, 49 USC Section 1801, et seq., or in the Resources Conservation and Recovery Act, 42 USC Section 6901, et seq., and all substances defined as "hazardous waste" under the Statutes of the State of Arizona or any regulations adopted pursuant to those statutes. 4.7. INSURANCE. Until Closing, the Sellers shall keep the Assets insured to full insurable value against loss or damage by fire or from other causes customarily insured against by other radio stations similarly situated, and have provided Buyer with an abstract of such casualty insurance coverage. 4.8. ACCESS TO INFORMATION. Upon reasonable advance notice, the Sellers shall give Buyer and its representatives reasonable access during normal business hours throughout the period prior to Closing to the operations, properties, books, accounting records, contracts, agreements, leases, commitments, programming, technical and sales records and other records of and pertaining solely to the Station; provided, however, such access shall not disrupt the Sellers' normal operations. The Sellers shall furnish to Buyer all information solely concerning the Station's affairs as Buyer may reasonably request. Buyer will maintain the confidentiality of all the information and materials delivered to it or made available for its inspection by the Sellers hereunder, except where such information or materials are required to be filed with the FCC in connection with the assignment application or are disclosed to partners of Buyer or lenders thereto as reasonably required to secure financing to consummate the transactions contemplated herein. In the latter event, Buyer will use reasonable efforts to cause its partners or lenders to maintain confidentiality. If for any reason the transactions contemplated herein are not consummated, Buyer will return to the Sellers all such materials in its possession and keep all of the foregoing information confidential. 4.9. COPYRIGHTS, TRADEMARKS AND SIMILAR RIGHTS. KIDR are the call letters used by Sellers during the radio broadcast operations of the Station to identify the Station to its audience. Sellers have full right and authority from the FCC to use such call letters. Sellers have not licensed or consented to, and have no knowledge of, any other entity's or individual's use of such call letters. There is no other material name, trademark, service mark, copyright, or other trade or service right or mark currently being used in the business and operations of the Station other than those listed on SCHEDULE E. To the knowledge of Sellers, the current operations of the Station do not infringe on any trademark, service mark, copyright or other intellectual property or similar right owned by others. 4.10. EMPLOYEE BENEFITS. 4.10.1. All of BIC's material employee plans and compensation arrangements providing benefits to employees of the Station as of the date hereof are described in SCHEDULE H. Except as disclosed in SCHEDULE H, there is not now in effect or scheduled to become effective after the date hereof, any new employee plan or compensation arrangement or any amendment to an existing employee plan or compensation arrangement which will affect the benefits of employees or former employees of the Station. 4.10.2. Neither of Sellers has incurred or reasonably expects to incur (either directly or indirectly, including as a result of the proposed sale of the Assets to Buyer) any liability (including withdrawal liability) that could become a liability of Buyer under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and no event, transaction or condition has occurred or exists which could result in any such liability. BIC has made all required contributions to all multiemployee plans within the meaning of Section 3(37) of ERISA. 4.10.3. Sellers acknowledge that Buyer has no obligation hereunder to offer employment to any employee of BIC; however, Buyer shall have the right to offer employment to such of the employees of BIC employed at the Station as Buyer may select. With respect to any employees that Buyer hires, Sellers further acknowledge that Buyer shall have no obligation for, and shall not assume as part of the transaction contemplated by this Agreement, any "accrued vacation" or other accrued leave time of said employees as a consequence of their being hired by Buyer. Sellers also acknowledge that with respect to such employees as are hired by Buyer, and where any such accrued leave time exists for said employees, BIC will retain the responsibility for any liability arising therefrom. Buyer will notify Sellers on or before May 15, 1997, of which employees, if any, of Sellers that Buyer intends to hire following Closing. 4.11. LABOR RELATIONS. SCHEDULE I lists the names, dates of hire and current salaries of all persons employed by BIC directly and principally in connection with the operation of the Station. Sellers are not a party to or subject to any collective bargaining agreements with respect to the Station. Sellers have no written or oral contracts of employment with any employee of the Station, other than (i) oral employment agreements terminable at will without penalty, or (ii) those listed in SCHEDULE I. Sellers, in the operation of the Station, have substantially complied with all applicable laws, rules and regulations relating to the employment of labor, including those related to wages, hours, collective bargaining, occupational safety, discrimination and the payment of social security and other payroll related taxes. There is no representation or organizing effort pending or threatened against or involving or affecting Sellers with respect to employees employed at the Station. 4.12. PRE-CLOSING COVENANTS. Between the date hereof and the Closing, the Sellers covenant that: Sellers shall continue to operate the business of the Station in the ordinary course of business consistent with past practices, including without limitation, the maintenance of inventories of spare parts and expendable supplies at levels consistent with past practices, comply with the Licenses and all laws, rules, regulations, licenses and permits applicable to the Station's business and operations, file all required tax returns when due, pay all required taxes when payable, and maintain property damage and other insurance in the amount in effect on the date hereof. From the date hereof through the Closing Sellers shall not with respect to the Station: (i) sell, lease or dispose of any Asset, except in the ordinary course of business or with replacement with an asset of equivalent kind, utility and value; (ii) enter into any employment or professional services contract that would survive the Closing or any collective bargaining agreement; (iii) change employment terms, including, without limitation, wages, salary or bonuses, or institute or modify any benefit plans or programs, except for regularly scheduled compensation increases in accordance with historical practices; (iv) enter into any time brokerage agreement, joint sales agreement or similar agreement or arrangement; (v) enter into any new, or amend or terminate any existing Leases and Agreements, other than contracts for the sale of broadcast time for cash, involving annual consideration of more than $10,000 or entered into in the ordinary course of business; (vi) take or omit to take any action which would cause a material breach of any Station contract; (vii) take or omit to take any action which could jeopardize the validity or renewal expectancy of any of the Licenses or their assignability to Buyer; or (viii) enter into any transaction which is not in the ordinary course of business. The Sellers further represent, warrant and covenant: (a) Between the date hereof and Closing, the Sellers shall not take any action which will prevent or impede Buyer from obtaining at the Closing the actual and immediate occupancy and possession of the Assets purchased hereunder. (b) On the Closing date, the Sellers will be the owner of the Assets except such of the same replaced by suitable property of no less than equivalent value in the ordinary course of business, with title thereto, free and clear of all liens and encumbrances, except for Permitted Encumbrances; and that between the date of this Agreement and the Closing, there will be no more than the ordinary normal wear and tear and expendability of those Assets, and that the Assets will be in good working condition. (c) That the Sellers do not know of any facts relating to them or the Station which would cause (i) the applications for assignment of the Licenses to Buyer to be challenged, (ii) the FCC to deny its consent to the assignments of the Station's Licenses to Buyer, or (iii) the FCC to grant such application to assignment subject to material adverse conditions to Buyer. (d) The Sellers will have paid and discharged all taxes, assessments, excises, and levies known to the Sellers which are due and payable and have not been paid and that would materially interfere with the Sellers' assets, facilities, licenses or other items conveyed hereunder. (e) That the Sellers do not know of any facts which would cause any application for renewal by BHC of any of the Licenses to be challenged at the FCC or that would cause such renewal to be granted other than in the ordinary course for a full license term without material adverse condition. (f) Sellers shall continue to operate the Station as an affiliate of CBC, as set forth in that Affiliation Agreement, dated September 18, 1992, between Children's Satellite Network and BIC, until Closing. ARTICLE 5 BUYER'S REPRESENTATIONS AND WARRANTIES The Buyer represents and warrants as follows, which representations and warranties shall be deemed to have been made again at Closing. 5.1. CORPORATE EXISTENCE AND POWERS. Buyer is a corporation organized and existing in good standing under the laws of the State of Minnesota with full power and authority to enter into this Agreement and enter into and complete the transactions contemplated herein. Buyer is, or will be at the time of Closing, qualified to do business in the State of Arizona. All required corporate action has been taken by Buyer to make and carry out this Agreement. The execution of the Agreement and, once the consent referred to in the next sentence is obtained, the completion of the transactions herein involved will not result in the violation of any order, license, permit, rule, judgment or decree to which Buyer is subject or the breach of any contract, agreement or other commitment to which Buyer is a party or by which it is bound. Except for the consent of the FCC to the assignment of the Licenses to Buyer, no other consent of any kind is required that has not been obtained for Buyer to make or carry out the terms of this Agreement. 5.2. BUYER'S QUALIFICATIONS. At Closing, Buyer will be legally and financially qualified to become the licensee of the FCC. Buyer does not know of any facts relating to it which would cause the FCC to deny its consent, or which would materially hinder or delay receipt of such consent, to the assignment of the Licenses to Buyer. 5.3. STUDIO AND SERVICES. Buyer acknowledges that it will have to obtain a new studio location for the Station as of the Closing Date because no rights under the Lease identified on Schedule F or the Office and Studio Sublease Agreement identified on SCHEDULE D will be assigned to CBC. Buyer further acknowledges that the Services Agreement between Nationwide Communications Inc. and BIC identified on SCHEDULE D will terminate at Closing and that Buyer will have to make other arrangements following Closing for the services provided thereunder. 5.4. AM EXPANDED BAND. Buyer acknowledges that the Station does not qualify for migration to the AM expanded band. 5.5. REPRESENTATIONS AND WARRANTIES. Buyer hereby acknowledges that the only representations and warranties made by Sellers regarding the Station and the sale of the Assets to Buyer are the representations and warranties made by Sellers in Article 4 herein. Buyer has not relied on any other statement or information in entering into this Agreement. ARTICLE 6 BREACH OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES 6.1. BREACH OF THE SELLERS' AGREEMENTS, REPRESENTATIONS AND WARRANTIES. The Sellers shall indemnify and hold harmless Buyer and any of its directors, members, stockholders, officers, partners, employees, agents, consultants and representatives from and against any loss, damage, liability, claim, demand, judgment or expense, including claims of third parties arising out of ownership of the Assets or the operation of the Station by the Sellers prior to Closing, and including without being limited to, reasonable counsel fees and reasonable accounting fees, arising out of or sustained by Buyer by reason of any material breach of any warranty, representation, covenant or agreement of the Sellers contained herein or in the Schedules attached hereto; provided, however, that such indemnification shall be required only if written notice, with respect to any matter for which indemnification is claimed, is given. 6.2. BREACH OF BUYER'S AGREEMENTS, REPRESENTATIONS AND WARRANTIES. Buyer shall indemnify and hold harmless the Sellers and any of their directors, members, stockholders, officers, partners, employees, agents, consultants and representatives from and against any loss, damage, liability, claim, demand, judgment or expense, including claims of third parties arising out of ownership of the Assets or operation of the Station by Buyer after Closing, and including without being limited to, reasonable counsel fees and reasonable accounting fees, arising out of or sustained by the Sellers by reason of any material breach of any warranty, representation, covenant or agreement of Buyer contained herein; provided, however, that such indemnification shall be required only if written notice, with respect to any matter for which indemnification is claimed, is given. 6.3. THRESHOLD AND CAP. Neither Buyer nor Sellers shall be entitled to recover under this Agreement for any indemnification claims until the aggregate losses, damages or expenses suffered by such party in connection therewith exceed $25,000 (the "Threshold") and then only to the extent such aggregate losses, damages or expenses exceed the Threshold. The combined maximum aggregate liability of Sellers and the maximum aggregate liability of Buyer for indemnification claims under this Agreement shall be $250,000. 6.4. SPECIFIC PERFORMANCE. The Sellers acknowledge that the Assets and property to be transferred and assigned under this Agreement are unique and not readily bought or sold on the open market and, for that reason, among others, the Buyer would be irreparably harmed by any breach or failure of the other party to consummate this Agreement, and monetary damages therefor will be highly difficult, if not wholly impossible, to ascertain. It is therefore agreed that this Agreement shall be enforceable by Buyer in a court of equity by a decree of specific performance, and an injunction may be issued restraining any transfer or assignment of the Assets contrary to the provisions of this Agreement pending the determination of such controversy. The Sellers, for themselves and their successors and assigns, hereby waive the claim or defense that an adequate remedy at law exists. 6.5. INDEMNITY UNIMPAIRED BY KNOWLEDGE. The right to indemnification, payment of damages or any other remedy hereunder shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, regardless of whether before or after the execution and delivery of this Agreement or the Closing. The waiver of any condition by a party shall not affect any right to indemnification, payment of damages or any other remedy hereunder based on the subject matter of such condition. 6.6. PROCEDURES: THIRD PARTY CLAIMS. The indemnified party agrees to give written notice within ten (10) business days to the indemnifying party of any claim or other assertion of liability by third parties which could give rise to a claim for indemnification hereunder (hereinafter collectively "Claims," and individually a "Claim"), it being understood that the failure to give such notice shall not affect the indemnified party's obligation to indemnify as set forth in this Agreement, unless, and then only to the extent, the indemnifying party's ability to contest, defend or settle with respect to such Claim is thereby demonstrably and materially prejudiced. The obligations and liabilities of the parties hereto with respect to their respective indemnities pursuant to this Article 6 resulting from any Claim, shall be subject to the following additional terms and conditions: (a) Provided the indemnifying party acknowledges in writing its obligation to indemnify the indemnified party with respect to the Claim and further provides reasonable assurances to the indemnified party as to its financial ability to satisfy such indemnification obligation, the indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. (b) Subject to subsection (d) below, in the event that the indemnifying party shall either (i) elect not to undertake, or shall fail to satisfy any requirements to undertake, such defense or opposition, or (ii) fail to properly elect within thirty (30) days after notice of any such Claim from the indemnified party or thereafter fail to defend or oppose such Claim, then, in either such event, the indemnified party shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party. (c) Anything in this Section 6.6 to the contrary notwithstanding, (i) the indemnifying party shall not, without the indemnified party's written consent, which consent shall not be unreasonably withheld, settle or compromise any Claim or consent to entry of any judgment which includes any admission of liability or does not include as a term thereof the giving by the claimant or the plaintiff to the indemnified party of an unconditional release from all liability in respect of such Claim, and (ii) in the event that the indemnifying party undertakes defense of or opposition to any Claim, the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate in good faith with respect to such Claim. (d) Anything in this Section 6.6 to the contrary notwithstanding, the indemnifying party shall have the right to contest through appropriate proceedings its obligation to provide indemnification hereunder. ARTICLE 7 RISK OF LOSS 7.1. BUYER'S OPTIONS. The risk of any loss, damage or destruction to any of the Assets to be transferred to the Buyer hereunder from fire or other casualty or loss shall be borne by the Sellers at all times prior to the Closing. Except for loss or damage affecting the broadcast transmission capabilities of the Station, which is covered by the terms of Section 7.2 below, upon the occurrence of any material loss or damage to any of the Assets to be transferred hereunder having an aggregate fair market value in excess of $150,000 as a result of fire, casualty, or other causes prior to the Closing, the Sellers shall notify the Buyer of same in writing immediately, stating with particularity the reasonable estimates of the loss or damage incurred, the cause of damage, if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed is believed reimbursable under any insurance policy with respect thereto. Provided the Sellers, at their sole expense, have not repaired, restored or replaced the damaged Assets to Buyer's reasonable satisfaction by the Closing, Buyer shall have the option (but not the obligation) exercisable at the Closing to: (i) terminate this Agreement in which case none of the parties shall have any further liability to the other parties and all Escrowed Funds shall be returned to Buyer, except that the Sellers shall have a reasonable period of time, not to exceed thirty (30) days, to effect repairs of the damaged Assets before Buyer may exercise its option under this subparagraph 7.1 (i); (ii) postpone the Closing for up to sixty (60) days to allow the property to be completely repaired, replaced or restored, at the Sellers' sole expense; or (iii) elect to consummate the Closing and accept the property in its "then" condition, in which event the Sellers shall assign to Buyer all rights under any insurance claim covering the loss and pay over to the Buyer the proceeds under any such insurance policy heretofore received by the Sellers with respect thereto and Sellers shall otherwise not have any responsibility to Buyer. 7.2. BROADCAST TRANSMISSION OF THE STATION PRIOR TO CLOSING. If, prior to the Closing Date, the Station incurs any unusual operating problems (including any event described below), the Sellers shall provide Buyer with prompt written notice of such problem and the measures being taken, at Sellers' sole expense, to correct same. If, after the date hereof and prior to the Closing Date, any event occurs which prevents the authorized power broadcast transmission of a station pursuant to its FCC license authority, except for ordinary maintenance, for (i) a period of 72 consecutive hours or more, (ii) three separate periods of 4 hours or more, or (iii) ten separate occasions of 1 hour or more, Buyer shall have the right, by giving written notice to the Sellers of its election to do so, to terminate this Agreement and all Escrowed Funds shall be returned to Buyer. ARTICLE 8 APPLICATION FOR FCC APPROVAL 8.1. FILING AND PROSECUTION OF APPLICATION. Buyer and the Sellers shall, as soon as practicable after the date of this Agreement and in any event not later than five business days thereafter, join in an application to be filed with the FCC requesting its written consent to the assignment of the Licenses of the Station from BHC to Buyer. The parties shall prepare their own portions of the application. Buyer and the Sellers shall take all steps necessary to the expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. 8.2. EXPENSES. The parties shall bear their own legal, accounting and other expenses in connection with the consummation of the contemplated transaction. The parties shall cooperate with the preparation of the FCC application and in connection with the prosecution of such application. The filing fee or fees shall be shared equally by the Sellers and Buyer. 8.3. DESIGNATION FOR HEARING. If, for any reason, any application for an assignment of license is designated for hearing by the FCC prior to grant thereof, either of the parties shall have the right by written notice within thirty (30) days of such designation for hearing, to terminate this Agreement. 8.4. TIME FOR FCC CONSENT. If the FCC has not given its written consent to the assignments of the Licenses set forth herein, or if the Closing has not otherwise taken place by May 30, 1997, either of the parties, if not then in default, may terminate this Agreement by giving written notice to the other party. Upon such termination, neither of the parties shall have any right or liability hereunder and all Escrowed Funds shall be promptly disbursed pursuant to the Escrow Agreement. 8.5. CONTROL OF STATION. Until Closing, Buyer shall not directly or indirectly, control, supervise, direct or attempt to control, supervise or direct the operation of the Station, but such operation shall be the sole responsibility of the Sellers, subject to and consistent with all rules, regulations and policies of the FCC. 8.6. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each other prior to making any public announcement regarding the purchase of the Station, except pursuant to any filings with the FCC or any other governmental authorities contemplated by this Agreement, and except as may be required by law, governmental rule or regulation or the rules of the Nasdaq Stock Market or any stock exchange on which the disclosing party or one of its Affiliates has securities listed for trading or in connection with any Registration Statement filed pursuant to the Act by the disclosing party or one of its Affiliates, provided reasonable advance notice will be given whenever possible. ARTICLE 9 CLOSING Subject to the terms and conditions herein stated, the parties agree as follows: 9.1. CLOSING DATE. The Closing of this Agreement shall be held at such time and date as shall be mutually agreed by the Sellers and Buyer; provided, however, that the Closing must occur by May 30, 1997. (The date scheduled, or required to be scheduled for Closing hereunder is referred to herein as the "Closing Date.") Closing shall take place at the offices of the Buyer in Minneapolis, or, at either party's option, by mail. 9.2. THE SELLERS' OBLIGATIONS AT CLOSING. At Closing, the Buyer shall have received from the Sellers the following: 9.2.1. An Assignment of the Licenses described in SCHEDULE A; a Special Warranty Deed for the Real Property described in SCHEDULE B conveying all of the Sellers' interest in such Real Property and an Assignment and Bill of Sale, or similar instruments transferring to Buyer all other Assets to be transferred hereunder, free and clear of all liens, encumbrances and restrictions of any kind whatsoever, except for Permitted Encumbrances. 9.2.2. The business records described in Section 1.7; 9.2.3. A duly executed opinion letter from Sellers' legal counsel dated as of the Closing Date, in form and substance satisfactory to Buyer and its counsel, to the effect that: (a) Sellers are corporations duly organized and validly existing and in good standing in the State of Utah and they have all necessary corporate power to own the Station; and BIC is qualified to do business in the State of Arizona; (b) This Agreement and all collateral documents have been duly and validly authorized, executed and delivered by Sellers, constitute the valid and binding obligations of Sellers, and are enforceable (assuming the Agreement is governed by the laws of the State of Utah) in accordance with their terms, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; provided, however, that no opinion is to be given as to the enforceability of the remedies provided in Section 6.4 of the Agreement; (c) No suit, action, arbitration, legal or administrative proceeding, or any governmental investigation, is pending or, to the knowledge of counsel, threatened against Sellers, or any of their businesses or properties, which might materially adversely affect the Station or the sale of the Assets to Buyer; and (d) Neither the execution nor delivery of this Agreement, nor the consummation of the transactions contemplated in this Agreement, will constitute a violation of Sellers' Articles of Incorporation or Bylaws, or to the best of such counsel's knowledge after due inquiry, a default under, or violation or breach of, any indenture, license, lease, mortgage, instrument, or other agreement to which Sellers is a party, or by which Sellers' properties may be bound. 9.2.4. Certificates of Sellers' Presidents or Secretaries verifying that Sellers' representations, warranties and covenants as provided herein remain materially true and correct up to and through the Closing Date; 9.2.5. Instructions to the escrow agent pursuant to the Escrow Agreement to pay the Escrowed Funds to Buyer; 9.2.6. Certificates of Sellers' Secretaries certifying as to Sellers' Articles of Incorporation and Bylaws (copies of which shall be attached thereto); and 9.2.7. Such other documents and instruments as might reasonably be requested by Buyer to consummate the transaction contemplated hereunder consistent with the intent expressed herein. 9.3. BUYER'S OBLIGATIONS AT CLOSING. At Closing, Buyer shall deliver to the Sellers the following: 9.3.1. Shares of CBC Stock in an amount to be determined as set forth in Section 2.2.1, PROVIDED that such Shares shall be delivered at Closing to the Depository Trust Co. or such other depository for the benefit of Sellers in the name of such broker or other nominee as Sellers shall have designated in writing to Buyer; 9.3.2. An opinion of Buyer's counsel, addressed to the Sellers, confirming the correctness of Buyer's representations made in Sections 3.7 and 5.1; 9.3.3. A certificate of Buyer's President or Secretary verifying that Buyer's representations, warranties and covenants as provided herein remain materially true and correct up to and through the Closing Date; 9.3.4. An Assumption Agreement pursuant to which Buyer assumes all obligations relating to the Station, including without limitation, payment and performance obligations under the Leases and Agreements, which arise after Closing; and 9.3.5. Such other documents and instruments as might reasonably be requested by Sellers to consummate the transaction contemplated hereunder consistent with the intent expressed herein. 9.4. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to consummate the transaction herein contemplated at Closing are subject to and conditioned on: 9.4.1. The written consent of the FCC evidencing its written approval to the assignment to Buyer or its assigns of the Licenses, provided that such assignment is without any condition that is materially adverse to Buyer; 9.4.2. The satisfaction at or before Closing of all material agreements, obligations and conditions of the Sellers hereunder required to be performed or complied with by them on or before Closing; 9.4.3. The representations and warranties set forth in Article 4 above shall be true and correct in all material respects at and as of the Closing Date; 9.4.4. No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge is reasonably likely to (i) prevent consummation of the transaction contemplated by this Agreement, (ii) cause the transaction contemplated by this Agreement to be rescinded following consummation, or (iii) affect adversely the right of the Buyer to own the Assets. 9.5. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the Sellers to consummate the transaction herein contemplated at Closing are subject to and conditioned on: 9.5.1. The written consent of the FCC evidencing its written approval of the assignment to Buyer of the Licenses ("FCC Approval"), provided that such assignment is without any condition that is materially adverse to the Sellers; 9.5.2. The satisfaction at or before Closing of all agreements, obligations and conditions of Buyer hereunder required to be performed or complied with by it at or before the Closing; and 9.5.3. The representations and warranties set forth in Section 3.7 and Article 5 above shall be true and correct in all material respects at and as of the Closing Date. 9.5.4. No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge is reasonably likely to (i) prevent consummation of the transaction contemplated by this Agreement, (ii) cause the transaction contemplated by this Agreement to be rescinded following consummation, or (iii) affect adversely the right of the Buyer to own the Assets. ARTICLE 10 MISCELLANEOUS PROVISIONS 10.1. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All representations, warranties and covenants of Sellers contained in this Agreement shall survive for a period of eighteen (18) months after the Closing Date. 10.2. ARBITRATION. 10.2.1 PROCEDURE. Except as specifically provided to the contrary in this Agreement, all disputes arising among the parties under this Agreement shall be resolved by arbitration under this Section 10.2. The parties do not intend that any matters relating to fraud or material misrepresentation shall be subject to arbitration. Any party desiring arbitration shall deliver notice to the other party and in such notice shall (i) specify in detail those matters (the "Disputed Matters") as to which such party has a claim, such party's position with respect to the Disputed Matter and the basis for such party's claim; and (ii) appoint as an arbitrator a disinterested person of recognized competence in the area at issue. Within fifteen (15) days thereafter, each party shall, by notice to the originating party, (i) specify in detail such party's position with respect to the Disputed Matters and the basis for such party's disagreement; and (ii) appoint another person similarly qualified as the additional arbitrator. Within fifteen (15) days thereafter, the arbitrators thus appointed shall appoint another person similarly qualified as an additional arbitrator, and all such arbitrators shall be directed to resolve such Disputed Matters within thirty (30) days, unless the arbitrators in good faith determine that such a deadline is impractical. The arbitrators shall resolve any Disputed Matters by adopting the position with respect thereto of one of the parties, and unless otherwise agreed by the parties, the arbitrator shall have not authority to adopt any other resolution of such Disputed Matters. The determination of the majority of the arbitrators or the sole arbitrator, as the case may be, shall, to the extent permitted by law, be conclusive and binding upon the parties. Any party shall, upon such determination, have the right to enforce the determination in a court of competent jurisdiction. The arbitrator or arbitrators shall give notice to the parties stating their determination, and shall furnish to each a copy of such determination signed by them. In the event of the failure, refusal or inability of any arbitrator to act, a new arbitrator shall be appointed in his or her stead, which appointment shall be made in the same manner as hereinbefore provided for the appointment of the arbitrator so failing, refusing or unable to act. 10.2.2. ARBITRATOR APPOINTMENT DISPUTE. Notwithstanding the provisions of the prior paragraph, (i) if the additional arbitrator shall not have been appointed as aforesaid, the first arbitrator shall determine such matter; and (ii) if the arbitrators appointed by the parties shall be unable to agree upon the appointment of another arbitrator within fifteen (15) days after the appointment of the lastly appointed arbitrator, they shall give written notice of such failure to agree to the parties, and, if the parties shall fail to agree upon the selection to such other arbitrator within fifteen (15) days thereafter, then within ten (10) days thereafter, any of the parties upon written notice to the other party may apply for such appointment to a local court of competent jurisdiction. 10.2.3. RULES AND PROCEDURES. (a) Any such arbitration shall be conducted in Phoenix, Arizona, in accordance with the Commercial Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA") to the fullest extent such Rules are permitted by, and to the fullest extent not inconsistent with, applicable law and the Rules set forth below, which shall be controlling to the extent they differ from the AAA Rules. (b) Each party shall be entitled to present evidence and arguments to the arbitrators. Each party hereby authorizes the arbitrators (i) to order such discovery (including third party discovery) as the arbitrators shall determine to be reasonable under the circumstances; (ii) to impose reasonable schedules and deadlines to ensure that discovery is conducted and concluded on a timely basis; (iii) to impose sanctions on any party for abuse or delay of the discovery; and (iv) to apply such Rules of evidence as the arbitrators in their sole discretion may determine. (c) Any party may elect, by notice to the other party and the arbitrators, to have the arbitration conducted on an expedited basis. In such event, the parties hereby agree that the arbitrator shall be authorized to authorize to expedite the proceedings by all reasonable means consistent with a fair hearing of the dispute. Such means may include the imposition of accelerated discovery and hearing schedules, requiring submissions within abbreviated time periods and imposing limitations on numbers of witnesses and the length of hearings. 10.2.4. COSTS AND COMPLIANCE WITH DECISION. Each party agrees to comply with any order or request of the arbitrators delivered pursuant to this Section 10.2. Each party will compensate the arbitrator selected by it, and the fees of the arbitrator appointed by the other arbitrators and the expenses of the proceeding will be shared equally by the parties. Subject to the foregoing sentence, each party shall bear its own expenses, including attorneys' fees, in connection with any arbitration proceedings hereunder. No party in any such arbitration, or in any action, trial or appeal thereon, shall be entitled to attorneys' fees or court, arbitration or other costs incurred, unless otherwise decreed by the court or arbitrators in the same or a separate suit. 10.3. EXECUTION OF DOCUMENTS. The parties agree to execute all applications, documents and instruments which may be necessary for the consummation of the transaction contemplated hereunder, or which might be from time to time reasonably requested by any party hereto in connection therewith, whether before or after the date of Closing. 10.4. NOTICES. All notices, requests, elections, demands and other communications given pursuant to this Agreement shall be in writing and shall be duly given when delivered personally or when deposited in the mails, certified or registered mail, postage prepaid, return receipt requested, and shall be addressed as follows: If to Sellers: Mr. Bruce Reese Bonneville International Corporation Broadcast House, 55 North 300 West Salt Lake City, Utah 84180 with copies to: David K. Redd, Esq. Bonneville International Corporation Broadcast House, 55 North 300 West Salt Lake City, Utah 84180 and Kenneth E. Satten, Esq. Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Washington, D.C. 20006 If to Buyer: Mr. Christopher Dahl Children's Broadcasting Corporation 724 First Street North, Fourth Floor Minneapolis, Minnesota 55401 with copy to: Lance W. Riley, Esq. Children's Broadcasting Corporation 724 First Street North, Fourth Floor Minneapolis, Minnesota 55401 10.5. EXHIBITS AND SCHEDULES. All Exhibits and Schedules referred to herein are incorporated into this Agreement by reference for all purposes and shall be deemed part of this Agreement. 10.6. ENTIRE AGREEMENT. This Agreement together with all Exhibits and Schedules referred to herein contain all of the terms and conditions agreed upon by the parties hereto with respect to the transaction contemplated hereunder. 10.7. ASSIGNABILITY. None of the parties may assign their rights or obligations under this Agreement without the prior written consent of the other parties, which consent will not be unreasonably denied or delayed, except that any party may make an assignment to an entity under essentially common control as the assigning entity. 10.8. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the representatives, heirs, estates, successors, and assigns of the parties hereto. 10.9. HEADINGS. The headings contained in this Agreement are for reference only and shall not effect in any way the meaning or interpretation of this Agreement. 10.10. COUNTERPARTS. This Agreement and any other instrument to be signed by the parties hereto may be executed by the parties, together or separately, in two or more identical counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument. 10.11. GOVERNING LAW. This Agreement has been entered into in the State of Arizona and shall be governed in accordance with the laws of the State of Arizona. 10.12. BROKER COMMISSION. The Sellers and Buyer each represent to the other that they have engaged no broker in connection with the contemplated transaction except for Star Media Brokerage, which has been engaged by and is to be paid by Sellers, and agree to indemnify and hold the other party or parties harmless against any claims made by a broker through it or them in connection with the transactions contemplated hereunder. 10.13. SALES TAX. Any sales tax, including bulk sales taxes (if applicable), and real property transfer tax, due upon consummation of this transaction will be computed at Closing and paid one-half each by the Buyer and by the Sellers. Buyer will pay any tax or fee necessary to cause title certificates to be issued in the name of Buyer for any of the Assets. [THIS SPACE LEFT INTENTIONALLY BLANK.] IN WITNESS WHEREOF, the parties hereto, by their properly authorized representatives, have caused this Agreement to be executed as of the day and date first above written. SELLERS: BUYER: BONNEVILLE INTERNATIONAL CHILDREN'S BROADCASTING CORPORATION CORPORATION BY: /s/ Bruce T. Reese BY: /s/ James G. Gilbertson ------------------ ----------------------- ITS: President ITS: Chief Operating Officer BONNEVILLE HOLDING COMPANY By: /s/ Robert A. Johnson --------------------- ITS: Vice President EXHIBIT A ESCROW AGREEMENT SEE SECTION 2.2.1 SCHEDULE A LICENSES, PERMITS AND AUTHORIZATIONS SEE SECTION 1.1.1 SCHEDULE B REAL PROPERTY SEE SECTION 1.1.2 SCHEDULE C PERSONAL PROPERTY SEE SECTION 1.1.3 SCHEDULE D LEASES AND AGREEMENTS SEE SECTION 1.1.4 SCHEDULE E GENERAL INTANGIBLES SEE SECTION 1.1.5 SCHEDULE F EXCLUDED ASSETS SEE SECTION 1.2.7 SCHEDULE G LITIGATION SEE SECTION 4.5 SCHEDULE H SELLERS' EMPLOYEE PLANS AND COMPENSATION ARRANGEMENTS SEE SECTION 4.10.1 SCHEDULE I PERSONS EMPLOYED IN CONNECTION WITH THE OPERATION OF THE STATION SEE SECTION 4.11 EX-23.2 4 EXH 23.2 CONSENT OF BDO SEIDMAN EXHIBIT 23.2 Consent of BDO Seidman, LLP We consent to the reference to our firm under the captions "Risk Factors - --Company Development; History of Operating Losses" and "Experts" in the Registration Statement on Form S-3 of Children's Broadcasting Corporation for the registration of 318,607 shares of common stock and to the incorporation by reference therein of our report dated February 28, 1997, except for Note 8 which is dated March 27, 1997, with respect to the consolidated financial statements of Children's Broadcasting Corporation included in its Annual Report (Form 10-KSB) for the year ended December 31, 1996. Our report contains an explanatory paragraph regarding the Company's ability to continue as a going concern. /s/ BDO Seidman, LLP BDO Seidman, LLP Milwaukee, Wisconsin May 30, 1997 EX-23.3 5 EXH 23.3 CONSENT OF ERNST & YOUNG EXHIBIT 23.3 Consent of Ernst & Young LLP We consent to the reference to our firm under the captions "Risk Factors -- Company Development; History of Operating Losses" and "Experts" in the Registration Statement (Form S-3) of Children's Broadcasting Corporation for the registration of 318,607 shares of its common stock and to the incorporation by reference therein of our report dated January 31, 1996, with respect to the consolidated financial statements of Children's Broadcasting Corporation included in its Annual Report (Form 10-KSB) for the year ended December 31, 1996, filed with the Securities and Exchange Commission. Minneapolis, Minnesota May 29, 1997 /s/ Ernst & Young LLP EX-23.4 6 EXH 23.4 CONSENT OF SMOLIN, LUPIN EXHIBIT 23.4 [Smolin, Lupin & Co., P.A. letterhead] Children's Broadcasting Corporation 724 First Street North, 4th Floor Minneapolis, Minnesota 55401 Gentlemen: We consent to the reference to our firm under the caption "Experts" and to the use of our reports for the eleven months ended March 31, 1996 and 1995, and the reports for the years ended April 30, 1993, 1994, and 1995, with respect to the financial statements of Radio Elizabeth, Inc. incorporated by reference in the Registration Statement (Form S-3) of Children's Broadcasting Corporation for the registration of shares of its common stock. /s/ Smolin, Lupin & Co., P.A. - ----------------------------- Smolin, Lupin & Co., P.A. West Orange, New Jersey May 29, 1997 EX-23.5 7 EXH 23.5 CONSENT OF KLEIMAN, CARNEY EXHIBIT 23.5 [Kleiman, Carney & Greenbaum, P.C. letterhead] May 29, 1997 Consent of Independent Auditors We consent to the reference of our firm under the caption "Experts" and to the use of our reports dated January 19, 1996, February 2, 1996 and May 30, 1996, with respect to the financial statements of Wolpin Broadcasting Company incorporated by reference in the Registration Statement (Form S-3) and related Prospectus of Children's Broadcasting Corporation for the registration of shares of its common stock. Very truly yours, KLEIMAN, CARNEY & GREENBAUM /s/ MARK CARNEY ------------------------------ MARK CARNEY Certified Public Accountant Farmington Hills, Michigan May 29, 1997 -----END PRIVACY-ENHANCED MESSAGE-----