EXHIBIT 10.2
CHILDREN'S BROADCASTING CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 25, 1998, between Children's Broadcasting Corporation, a
Minnesota corporation (the "Company"), and each buyer named on the signature
page hereto (collectively, the "Buyer").
This Agreement is made pursuant to the Securities Purchase Agreement
between the Company and the Buyer, dated as of the date hereof (the "Securities
Purchase Agreement").
The Company and the Buyer hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein, and not otherwise defined herein, shall have
the meanings given such terms in the Securities Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the 1933 Act), as amended
or supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means the Conversion Shares and the Warrant
Shares.
"Registration Statement" means the registration statement contemplated by
Section 2(a) (covering such number of Registrable Securities and any additional
Registration Statements contemplated in the definition of Registrable
Securities), including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre-effective and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Required Effectiveness Date" means the 120th day following the Closing
Date, if such day is not a Business Day, the Required Effectiveness Date shall
be the next succeeding Business Day.
"Required Filing Date" means the 45th day following the Closing Date or, if
such day is not a Business Day, the Required Filing Date shall be the next
succeeding Business Day.
"Rule 158" means Rule 158 promulgated by the SEC pursuant to the 1933 Act,
as such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such rule.
"Rule 415" means Rule 415 promulgated by the SEC pursuant to the 1933 Act,
as such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such rule.
"Underwritten Registration" or "Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
2. SHELF REGISTRATION
(a) On or prior to the Required Filing Date the Company shall prepare and
file with the SEC a Registration Statement, covering the Conversion Shares
reserved for issuance pursuant to conversion of the Preferred Stock and the
Warrant Shares, for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form S-3 promulgated under the
1933 Act or, if the Company is not then permitted to register the resale of
Registrable Securities on Form S-3, the Registration Statement shall be on such
other appropriate form in accordance herewith. The Company shall use its best
efforts to cause the Registration Statement to be declared effective under the
1933 Act as promptly as possible after the filing thereof, but in any event
prior to the Required Effectiveness Date, and to keep such Registration
Statement continuously effective under the 1933 Act until the date which is two
(2) years after the date that such Registration Statement is declared effective
by the SEC or such earlier date when all Registrable Securities covered by such
Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) promulgated under the 1933 Act, as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed to the Company's transfer agent (the "Effectiveness Period");
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell all of the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the SEC has not declared it
effective.
(b) If the Holders of a majority of the Registrable Securities so elect,
an offering of Registrable Securities pursuant to the Registration Statement may
be effected in an Underwritten Offering of the Company. In such event, the
investment banker that will administer the offering will be selected by the
Holders of a majority of the Registrable Securities to be included in such
offering. In connection with any Underwritten Offering, if the managing
underwriters advise the Company and the participating Holders in writing that in
their opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
among the Holders proposing to sell Registrable Securities in such Underwritten
Offering. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such arrangements.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the SEC on or prior to the Required Filing Date,
a Registration Statement (and any additional Registration Statements as may be
required hereunder) in accordance with Section 2(a), and cause the Registration
Statement to become effective and remain effective as provided herein; provided,
however, that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Holders, their counsel, if any, and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their counsel and such managing underwriters, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the opinion
of respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the 1933 Act. The Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto if the Holders of a majority of the Registrable Securities,
their counsel, or any managing underwriters, shall reasonably object in writing
within two (2) Business Days of their receipt thereof (provided, that any days
that shall elapse after the date the Holders of a majority of the Registrable
Securities, their counsel, or any managing underwriters provides the Company
such objection and the date such party approves the filing of the Registration
Statement shall not count towards determining the Required Filing Date or the
Required Effectiveness Date).
(b) (i) Prepare and file with the SEC such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to all Registrable
Securities for the Effectiveness Period and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
1933 Act all of the Registrable Securities; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the 1933 Act; (iii) respond as
promptly as practicable to any comments received from the SEC with respect to
the Registration Statement or any amendment thereto and promptly provide the
Holders true and complete copies of all correspondence from and to the SEC
relating to the Registration Statement; and (iv) comply with the provisions of
the 1933 Act and the 1934 Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their counsel
and any managing underwriters immediately (and, in the case of (i)(A) below, not
less than three (3) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than three (3) Business Days
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or
representatives of the Company receive on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the
Holders; and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish the Holders with copies of all intended written responses
to the comments contemplated in clause (i)(C) of this Section 3(c) in advance of
the filing of such responses with the SEC so that the Holder shall have the
opportunity to comment thereon.
(d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a majority
in interest of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein and (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their counsel and any managing underwriters,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
(g) As promptly as practicable, deliver to each Holder, their counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form
of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders and any underwriters in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions as any Holder or underwriter reasonably requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to a Registration Statement, which certificates
shall be free of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
managing underwriters or Holders may request at least two Business Days prior to
any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as
promptly as practicable, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed on the Nasdaq National Market and any
other securities exchange, quotation system, or market, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Securities Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in Underwritten Offerings) and take all such other reasonable actions
in connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders
and such underwriters as are customarily made by issuers to underwriters in
underwritten public offerings, and confirm the same if and when requested; (ii)
obtain and deliver copies thereof to each Holder and the managing underwriters,
if any, of opinions of counsel to the Company and updates thereof addressed to
each selling Holder and each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and counsel to the
selling Holders covering the matters customarily covered in opinions requested
in Underwritten Offerings and such other matters as may be reasonably requested
by such counsel or such underwriters; (iii) prior to the effectiveness of the
Registration Statement or at the time of delivery of any Registrable Securities
sold pursuant thereto (at the option of the underwriters), obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each Person and in
such form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 6
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their counsel and any managing underwriters
to evidence the continued validity of the representations and warranties made
pursuant to clause 3(l)(i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 not later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts Underwritten Offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement, which statement shall cover said 12-month period, or end shorter
periods as is consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement or any amendment
thereto or any supplement to the Prospectus and the Company may exclude from
such registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving such
request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (i) the inclusion therein of language, in form and substance
reasonably satisfactory to such Holder, to the effect that the ownership by such
Holder of such securities in not to be construed as a recommendation by such
Holder of the investment quality of the Company's securities covered thereby
that such Holder will assist in meeting any future financial requirements of the
Company , or (ii) if such reference to such Holder by name or otherwise is not
required by the 1933 Act or any similar Federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable Securities that
(i) it will not offer or sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the Company that
such Registration Statement and any post-effective amendments thereto have
become effective as contemplated by Section 3(c) and (ii) it will comply with
the prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
4. REGISTRATION EXPENSES
(a) All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne
by the Company whether or not pursuant to an Underwritten Offering and whether
or not the Registration Statement is filed or becomes effective and whether or
not any Registrable Securities are sold pursuant to the Registration Statement.
The fees and expenses referred to in the foregoing sentence shall include, (i)
all registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with The Nasdaq Stock
Market and the Nasdaq National Market and each other securities exchange or
market on which Registrable Securities are required hereunder to be listed and
(B) in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the underwriters in connection
with Blue Sky qualifications of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the Holders of a majority of Registrable Securities may
reasonably designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) fees and disbursements
of counsel for the Company, (iv) 1933 Act liability insurance, if the Company so
desires such insurance, and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
(b) If the Holders desire to participate in an Underwritten Offering
pursuant to the terms hereof, the Holders shall be responsible for all costs,
fees and expenses in connection therewith, except for the fees and disbursements
of the Company's legal counsel and accountants, which shall be borne by the
Company.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement and without limitation as to time, indemnify
and hold harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), each Person who controls any such Holder (within the
meaning of Section 15 of the 1933 Act or Section 20 of the 0000 Xxx) to the
fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
or any such underwriter furnished in writing to the Company by
or on behalf of such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the 1933 Act and Section 20 of the 1934 Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact or alleged untrue statement of material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
independent outside counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party
in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party), provided,
however that the Indemnifying Party shall only be responsible for the fees and
expenses of one law firm as separate counsel for the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
5(d), the Buyer shall not be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by the
Buyer from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that the Buyer has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate. In the event that the Registration Statement
has not been declared effective under the 1933 Act by the SEC on or prior to the
Required Effectiveness Date, the Company shall pay the Holder, as liquidated
damages, the per diem sum of One Thousand Three Hundred Thirty-Three Dollars and
Thirty-Three Cents ($1,333.33) for each day thereafter until such date as the
Registration Statement has been declared effective under the 1933 Act by the
SEC.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of at least a majority of the then outstanding Registrable Securities;
provided, however, that, for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(c) NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Minneapolis time)
on a
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in the Purchase Agreement later than 4:30 p.m. (Minneapolis
time) on any date and earlier than 11:59 p.m. (Minneapolis time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Children's Broadcasting Corporation
000 Xxxxx Xxxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx and Xxxxxx, P.A.
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
If to the Buyer: Talisman Capital Opportunity Fund Ltd.
00000 Xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxx
Dominion Capital Limited
00 Xxxxx xxxxxx
Xxxxxxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxx
Sovereign Partners LP
00 Xxxxx Xxxxxx
Xxxxxxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxx
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the
stock transfer books of the Company or such other
address as
may be designated in writing hereafter, in the same
manner, by such Person.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. The Buyer may assign its rights hereunder in the manner and to the
Persons as permitted under the Securities Purchase Agreement.
(e) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Buyer hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Buyer to any assignee or transferee of all or a
portion of the Registrable Securities without the consent of the Company if: (i)
the Buyer agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to such registration rights are being transferred or assigned, (iii) at
or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement, and (iv)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement. The rights to assignment
shall apply to the Buyer's (and to subsequent) successors and assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
(h) CUMULATIVE REMEDIES. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(i) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CHILDREN'S BROADCASTING CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxxxx
Chief Operating Officer
TALISMAN CAPITAL OPPORTUNITY FUND LTD.
By: /s/ Xxxxx Xxxxx
------------------------------------------
Xxxxx Xxxxx
Vice President
DOMINION CAPITAL LIMITED
By: /s/ Xxxx Xxxxxxxxx
------------------------------------------
Xxxx Xxxxxxxxx
Agent
SOVEREIGN PARTNERS LP
By: /s/ Xxxx Xxxxxxxxx
------------------------------------------
Xxxx Xxxxxxxxx
Agent
