Exhibit 1
STOCK PURCHASE AGREEMENT
This Agreement (hereinafter referred to as this Agreement) is made and
entered into as of the 21st day of July, 1997, among Children's Broadcasting
Corporation, a Minnesota corporation (hereinafter referred to as the Purchaser),
Xxxxxx Xxxxxxxx, an individual (hereinafter referred to as the Seller), and
Harmony Holdings, Inc., a Delaware corporation (hereinafter referred to as
Harmony).
RECITALS
FIRST: Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser, 600,000 of the authorized and outstanding shares of common stock,
par value $.01 per share (hereinafter referred to as the Common Stock) of
Harmony held by Seller (such 600,000 shares being hereinafter sometimes referred
to as the Shares). Purchaser also desires to acquire from Seller, and Seller
also desires to sell to Purchaser, options owned by Seller, as described in
Schedule 1 attached to this Agreement, to purchase from Harmony 550,000 shares
of Common Stock (hereinafter referred to as the Options). Purchaser,
concurrently, also desires to acquire from Unimedia, S.A., a corporation with
its SIEGE SOCIAL in the Republic of France (hereinafter referred to as
Unimedia), or an affiliate of Unimedia, 1,000,000 shares of Common Stock held by
Unimedia (hereinafter referred to as the Unimedia Shares).
SECOND: Harmony, Seller and Unimedia are parties to litigation in the
action entitled UNIMEDIA S.A. V. HARMONY HOLDINGS, INC. AND XXXXXX XXXXXXXX
(Case No. 96-7109 JGD (RNBx) (hereinafter referred to as the Pending Litigation)
in the United States District Court for the Central District of California.
Purchaser has, at the request of Harmony, agreed to negotiate with Unimedia to
secure the dismissal of the Pending Litigation, for the purpose of bringing to
an end what the parties to this Agreement believe will be costly litigation and
of eliminating the risks to Harmony and Seller associated therewith. Harmony and
Seller acknowledge that they will benefit substantially from the termination of
the Pending Litigation.
THIRD: Upon acquiring the Shares and the Unimedia Shares, Purchaser desires
to effect certain changes in the management of Harmony. Harmony and Purchaser
also desire to secure the continued employment of Seller and Seller has agreed
to remain in the employ of Harmony.
FOURTH: Harmony is a reporting company as that term is understood in
connection with the Securities and Exchange Act of 1934, as amended (hereinafter
referred to as the 0000 Xxx) and shares of the Common Stock appear in reports
furnished by the National Association of Securities Dealers, Inc. in the Small
Cap section of the National Market List of NASDAQ.
(Page 12 of 142 Pages)
FIFTH: Purchaser is a reporting company as that term is understood in
connection with the Securities and Exchange Act of 1934, as amended (hereinafter
referred to as the 0000 Xxx) and its Common Stock par value $0.02 per share
(hereinafter sometimes referred to as Common Shares), appear in reports
furnished by the National Association of Securities Dealers, Inc. in the
National Market List of NASDAQ.
SIXTH: In addition to the monetary consideration hereinafter in this
Agreement set forth to be paid by Purchaser to Seller upon the purchase of the
Shares, Purchaser will issue and deliver to Seller 60,000 of its Common Shares
(hereinafter referred to as CBC Shares).
NOW, THEREFORE, in consideration of the foregoing and the covenants,
representations and warranties hereinafter in this Agreement set forth, the
parties hereto hereby agree as follows:
1. OWNERSHIP AND SALE OF SHARES AND OPTIONS.
(a) Seller represents that he is the owner of 950,000 shares of Common
Stock and that he does not own any other shares of Common Stock. Seller
represents and covenants that prior to the closing (as that term is
hereinafter defined) of the transactions contemplated by this Agreement, he
will not acquire any additional shares of Common Stock. Seller further
represents that he is the owner of options to purchase 825,000 shares of
Common Stock, of which the Options are a part. Seller further represents
and warrants that the Options are freely assignable and transferable to
Purchaser. Seller will not, prior to the closing (as that term is so
defined), assign or transfer any of the options retained by him exercisable
for 275,000 shares of Common Stock.
(b) Subject to the terms and conditions hereinafter in this Agreement
set forth, Seller agrees to sell, assign and transfer the Shares to
Purchaser on the closing date (as that term is hereinafter defined), free
and clear of all security interests, liens and encumbrances, and Seller
similarly agrees to sell, assign and transfer the Options to the Purchaser
on the Closing Date. The number of shares comprising the Shares and the
purchase price thereof set forth in subsection (a) of Section 2 of this
Agreement shall be subject to adjustment in the event of any subdivision or
combination of shares of Common Stock, any dividend thereon payable in
stock or any reorganization or recapitalization affecting the outstanding
shares of Common Stock.
2. PURCHASE AND CONSIDERATION.
(a) On the basis of the representations and warranties, and subject to
the terms and conditions set forth in this Agreement, Purchaser agrees to
purchase the Shares from Seller on the Closing Date. The purchase price
payable to Seller for each of the Shares is Two Dollars and Fifty Cents
($2.50), subject to adjustment as provided in Section 1 of this Agreement
and Purchaser will issue and deliver to Seller one or more certificates
representing the CBC Shares. On the basis of the representations and
warranties, and subject to the terms and conditions set forth in this
Agreement, Purchaser agrees to purchase the Options from Seller on the
Closing
(Page 13 of 142 Pages)
Date. The purchase price payable to Seller for the Options is Two
Hundred Sixty Thousand ($260,000) Dollars.
(b) Harmony and Seller acknowledge that as additional consideration
for Purchaser's services in negotiating the termination of the Pending
Litigation, Harmony shall, if such negotiations are successful and the
Pending Litigation shall be dismissed by Unimedia with prejudice, execute
and deliver to the Purchaser a registration rights agreement in the form of
the form attached to this Agreement as Exhibit 1 and incorporated herein by
reference as if set forth in full (hereinafter sometimes referred to as the
Registration Rights Agreement).
3. CLOSING.
(a) The Closing of the transactions contemplated by this Agreement
("xxx Xxxxxxx") shall take place at the offices of Xxxx & Xxxxx, 0000
Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000 at 9:00 o'clock in the
forenoon, Pacific Daylight time, on July 22, 1997 (such date of Closing is
hereinafter sometimes referred to as the Closing Date). The Closing shall
be subject to the satisfaction of all of the conditions to Purchaser's
obligations set forth in Section 9 of this Agreement (hereinafter referred
to as Purchaser's Conditions).
AT THE CLOSING:
(i) Seller shall deliver, assign and transfer to Purchaser
certificates representing the Shares, appropriately endorsed or
accompanied by a separate instrument or instruments of assignment in
writing, in proper form for registration of transfer, against payment
to Seller of the purchase price in funds immediately available in Los
Angeles, CA;
(ii) Seller shall deliver, assign and transfer the Options to
Purchaser against payment of the sum of Two Hundred Sixty Thousand
($260,000) Dollars. in funds available as set forth in clause (i) of
subsection (a) of this Section 3.
(iii) Purchaser will issue and deliver to Seller one or more
certificates registered in the name of the Seller representing the CBC
Shares.
(iii) Harmony shall execute and deliver the Registration Rights
Agreement to Purchaser against delivery to Harmony or its counsel of
an executed document of dismissal with prejudice of the Pending
Litigation.
(iv) Seller shall deliver the resignations referred to in Section
9 of this Agreement.
(v) Seller shall execute and deliver the employment agreement in
the form of the form of the agreement attached to this Agreement as
Exhibit 2 and incorporated herein by reference as if set forth in full
(hereinafter
(Page 14 of 142 Pages)
sometimes referred to as the Employment Agreement) (this Agreement,
the Registration Rights Agreement and the Employment Agreement are
hereinafter sometimes referred to as the Transaction Documents).
The purchase price for the Shares and Options shall be sent by wire
transfer, value dated the date of transmission or the Closing Date,
whichever shall be earlier, to such account or accounts in one or more
banks in the United States of America as Seller shall specify in writing
delivered to Purchaser not less that forty-eight (48) hours prior to the
Closing Date; otherwise such purchase price shall be payable in cash or by
instruments in or under which funds shall be immediately available in Los
Angeles, CA.
(b) [Intentionally omitted]
4. REPRESENTATION, WARRANTIES AND COVENANTS OF HARMONY.
To induce Purchaser to enter into this Agreement and to carry out the
transactions contemplated by this Agreement to be carried out by Purchaser,
Harmony hereby represents and warrants to Purchaser, or covenants with
Purchaser, or both, that:
4.1 ORGANIZATION, STANDING, ETC. Harmony and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite
corporate power and authority to own its properties and to carry on its
business in all material respects as now being conducted. Harmony has the
requisite corporate power and authority to perform its obligations under
this Agreement. Harmony and each Subsidiary is duly qualified to do
business and in good standing (or its equivalent) in all jurisdictions in
which its ownership of property or the character of its business requires
such qualification. Copies of the Certificate of Incorporation of Harmony,
including all amendments to the date of this Agreement, certified by the
Secretary of State of the State of Delaware, copies of the Certificate or
Articles of Incorporation of each Subsidiary, including all amendments to
the date of this Agreement, certified by the Secretary of State or similar
official of the respective jurisdictions of organization of each
Subsidiary, and copies of the By-laws of Harmony and each Subsidiary
including all amendments to the date of this Agreement, certified by the
respective secretaries thereof, have been or will be delivered prior to the
Closing to Purchaser.
4.2 SUBSIDIARIES, ETC. Subsidiary means a corporation a majority or
more of whose outstanding shares of capital stock entitling the holders
thereof to vote in the election of directors of such corporation is owned,
directly or indirectly, by Harmony, or by one or more other subsidiaries or
by Harmony and one or more other subsidiaries. The Subsidiaries, their
respective jurisdictions of organization and the percentage of outstanding
shares of capital stock held by Harmony and other Subsidiaries are as
follows:
(Page 15 of 142 Pages)
PERCENTAGE OF CAPITAL
JURISDICTION OF STOCK OWNED BY HARMONY
NAME OF SUBSIDIARY ORGANIZATION AND SUBSIDIARIES
----------------------------- --------------- ----------------------
Harmony Pictures, Inc. California 100%
The End, Inc. California 100%
Curious Pictures Corporation New York 99%
Harmony Media Communications. California 100%
Inc.
The End (London) Ltd. United Kingdom 100%
4.3 PUBLIC INFORMATION ETC. Harmony has delivered to Purchaser its
Annual Report to the Securities and Exchange Commission (hereinafter
referred to as the SEC) for the fiscal year ended June 30, 1996, on Form
10-K and its Quarterly Report to the SEC for the quarter ended March 31,
1997, on Form 10-Q, as well as the latest registration statement filed with
the SEC on Form S-1 and the latest registration statement so filed on Form
S-8. All such filings were made in conformity with the requirements
relating thereto at the time of such filing and contained all information
required to be set forth therein. In addition, Harmony has delivered or
will deliver to Purchaser copies of all press releases issued by Harmony
from and after March 31, 1997. From and after March 31, 1997, Harmony
represents, and from and after the date of this Agreement, Harmony
covenants, that it has not and will not, as the case may be, taken or take
or suffered or suffer any action which would require it to file a report
with the SEC relating thereto or to issue a press release in respect
thereof, or both, except as may be required because of the execution of
this Agreement and the carrying out of the transactions contemplated
hereby.
Such reports and registration statements and any other forms,
registration statements, reports and other documents filed by Harmony with
the SEC (i) were prepared in accordance with the requirements of the
Securities Act of 1933 as amended (hereinafter sometimes referred to as the
Act) and the 1934 Act, as the case may be, and the rules and regulations
adopted by the SEC thereunder and (ii) did not at the time they were filed,
or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were or are made, not
misleading. Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the reports and registration
statements was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each fairly presented
the consolidated financial position, results of operations and cash flows
of Harmony and its consolidated subsidiaries as the case may be, as at the
respective dates thereof and for the respective periods indicated therein
(subject, in the case of
(Page 16 of 142 Pages)
unaudited statements, to normal and recurring year-end adjustments that
were not and are not expected, individually or in the aggregate, to be
material in amount).
4.4 SHARES AND UNIMEDIA SHARES. The Shares and the Unimedia Shares
have been duly authorized, are validly issued and outstanding and fully-
paid and nonassessable.
4.5 CHANGES, DIVIDENDS, ETC. Except for the transactions contemplated
by this Agreement and except as set forth in Schedule 4.5 attached to this
Agreement, since March 31, 1997 neither Harmony nor any Subsidiary has: (i)
incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due, except current liabilities
incurred in the ordinary course of business which (individually or in the
aggregate) will not materially and adversely affect the business,
properties or prospects of Harmony or any Subsidiary; (ii) paid any
obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing current liabilities, in each case in
the ordinary course of business; (iii) declared or made any payment to or
distribution to its Stockholders as such, or purchased or redeemed any of
its shares of capital stock, or obligated itself to do so; (iv) mortgaged,
pledged or subjected to lien, charge, security interest or other
encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business; (v) sold, transferred or leased any of its
assets except in the ordinary course of business; (vi) suffered any
physical damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the properties, business or prospects of
Harmony or any Subsidiary; (vii) entered into any transaction other than in
the ordinary course of business; (viii) encountered any labor difficulties
or labor union organizing activities: (ix) issued or sold any shares of
capital stock or other securities or granted any options, warrants or other
purchase rights with respect thereto: (x) made any acquisition or
disposition of any material assets or become involved in any other material
transaction, other than for fair value in the ordinary course of business;
(xi) increased the compensation payable, or to become payable, to any of
its directors or employees, or made any bonus payment or similar
arrangement with any directors or employees or increased the scope or
nature of any fringe benefits provided for its employees or directors; or
(xii) agreed to do any of the foregoing other than pursuant to this
Agreement. There has not been any material adverse change in the financial
condition, operations, results of operations or business of Harmony or any
Subsidiary since March 31, 1997.
4.6 OPTIONS. Upon surrender of the instrument or instruments embodying
or representing the Options endorsed or assigned in the same manner as the
Shares as set forth in clause (i) of subsection (a) of Section 3 of this
Agreement, Harmony will issue and deliver to Purchaser on the Closing Date
new option agreements, containing the same terms, conditions and dates as
the Options.
4.7 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been, or on the
Closing Date will have been, duly authorized by all necessary corporate
action on behalf of Harmony, has been duly executed and delivered by
officers of Harmony thereunto duly authorized, and is a valid and binding
agreement on Harmony
(Page 17 of 142 Pages)
enforceable against it, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratoria, reorganization or other
similar laws affecting the enforcement of creditors' rights generally
and to judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
4.8 CORPORATE EXISTENCE. Until the Closing date, Harmony will maintain
its corporate existence and the corporate existence of each Subsidiary, in
good standing.
4.9 INSPECTION. Harmony will permit Purchaser or any representatives
designated by it and reasonably satisfactory to Harmony, to visit and
inspect, at Purchaser's expense, any of the properties of Harmony,
including its books and records (and to make photocopies thereof or make
extracts therefrom), and to discuss its affairs, finances and accounts with
its officers, lawyers and accountants, all to such reasonable extent and at
such reasonable times and intervals as Purchaser may reasonably request.
4.10 ABSENCE OF CHANGE OF CONTROL PROVISIONS. The acquisition by
Purchaser of the Shares, the Unimedia Shares and the Options will not(i)
cause any payment to be made by Harmony to any person or entity, or (ii)
cause Harmony to issue any securities or rights to purchase its securities,
or (iii) result in the termination of any contract or arrangement to which
Harmony or any Subsidiary is a party, or (iv) cause the loss of any rights
under any contract to which any of Harmony or any Subsidiary is bound,
under any "change of control" or similar provisions of any contract,
document or plan by which Harmony or any Subsidiary is bound.
4.11 TAKEOVER LAWS. Harmony will take all reasonable steps to assist
Purchaser in any action by Purchaser to challenge, either as a plaintiff or
defendant, the validity or applicability of any state "takeover" or similar
law or regulation to Purchaser's acquisition.
4.12 PROCEEDINGS AND CLAIMS. Other than the Pending Litigation and
litigation described in any of the Reports referred to in subsection 4.3 of
this Section 4, and except as set forth in Schedule 4.12 attached to this
Agreement, (a) there are not any legal actions, suits, arbitrations or
other legal, administrative or governmental proceedings or investigations
pending, or to the knowledge of Harmony or Seller, threatened against
Harmony or any Subsidiary, or their respective properties or businesses;
(b) neither Harmony nor Seller is aware of any facts which might result in
or form the basis for any such action, suit or other proceeding; (c)
Harmony is not in default with respect to any judgment, order or decree of
any court or any governmental agency or instrumentality; (d) neither
Harmony nor any Subsidiary nor any of their respective officers has filed a
case under any federal bankruptcy or insolvency laws for the restructuring
of its or his or her debts within the past five (5) years, nor has any
involuntary case for such restructuring been filed against Harmony or any
Subsidiary or any of their respective officers pursuant to any such
bankruptcy or insolvency laws within such five (5) year period; (e) no
legal action or suit alleging fraud or improper business dealings has been
filed against any of the officers of Harmony or any Subsidiary during the
past five (5) years; (f) neither Harmony nor
(Page 18 of 142 Pages)
any officer or director of Harmony or any Subsidiary has been
permanently or temporarily enjoined by any order, judgment or decree of
any court or governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the business of
Harmony or any Subsidiary; and (g) there is not in existence on the date
of this Agreement any order, judgment or decree of any court, tribunal
or agency enjoining or requiring Harmony or any Subsidiary to take any
action of any kind with respect to its business, assets or properties.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller hereby
represents and warrants to Purchaser, or covenants with Purchaser that:
5.1 SHARES. Seller represents and warrants that the Shares are owned
by Seller and that upon transfer of the Shares to Purchaser on the Closing
Date pursuant to this Agreement, Purchaser will obtain absolute title to
the Shares, free and clear of all liens, pledges, security interests,
claims, charges, options, encumbrances or other adverse claims of any kind
whatsoever.
5.2 OPTIONS. Seller hereby makes the same warranties and
representations with respect to the Options as are made with respect to the
Shares in subsection 5.1 of this Section 5.
5.3 [Intentionally omitted]
5.4 NON-DISTRIBUTION INTENT. The CBC Shares are being purchased for
Seller's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Act. Seller understands that the CBC Shares and the sale thereof as
contemplated by this Agreement have not been registered under the Act or
qualified under any state or territorial securities laws. Purchaser has
provided to Seller, and Seller acknowledges that he has received and
reviewed, the information specified in Section 7.6.
6. NO BROKERS OR FINDERS.
Each of the parties to this Agreement represents and warrants to the other
parties to this Agreement that not any person, firm or corporation will have, as
a result of any act or omission by any of the parties to this Agreement, any
valid claim against the other parties to this Agreement for any commission, fee
or other compensation as a broker or finder in connection with the transactions
contemplated by this Agreement, except that Seller has certain obligations to
Xxxxxxx Xxxx Incorporated in respect of the transactions contemplated by this
Agreement. Seller covenants to satisfy the claims of Xxxxxxx Xxxx Incorporated.
Each party to this Agreement hereby indemnifies and agrees to harmless the other
parties to this Agreement against any and all liability with respect to any
such commission, fee or other compensation which may be payable or determined to
be payable in connection with the transactions contemplated by this Agreement,
arising from the act or omission of such indemnifying party.
(Page 19 of 142 Pages)
7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
To induce Harmony and Seller to enter into this Agreement, Purchaser
hereby represents and warrants to Harmony and Seller, or covenants with
Harmony and Seller that:
7.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota, and
has all requisite power and authority (corporate and otherwise) to own its
properties and to carry on its business as now being conducted. A copy of
the Certificate of Incorporation of Purchaser, including all amendments to
the date of this Agreement, certified by the Secretary of State of the
State of Minnesota and a copy of the By-laws of Purchaser, including all
amendments to the date of this Agreement, certified by the Secretary of
Purchaser, have been or will be delivered prior to the Closing to Seller.
7.2 NON-DISTRIBUTION INTENT. The Shares are being purchased for
Purchaser's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Act. Purchaser understands that the Shares and the sale thereof as
contemplated by this Agreement have not been registered under the Act or
qualified under any state or territorial securities laws.
7.3 ACTS AND PROCEEDINGS. This Agreement has been duly authorized by
all necessary action on the part of the Purchaser and has been duly
executed and delivered by its officers thereunto duly authorized, and is a
valid and binding agreement of the Purchaser enforceable in accordance with
its terms.
7.4 ACCESS TO INFORMATION. Purchaser acknowledges that it has been
furnished with information about Harmony which would be disclosed in a
registration statement on a general form filed by Harmony with the SEC
under the Act, that it has had the opportunity to ask questions of, and
receive answers from, officers and employees of Harmony about the business
and affairs of Harmony and that it has been granted access to the books and
records of Harmony.
7.5 INVESTMENT COMPANY. Purchaser is not an investment company or an
affiliate of an investment company as that term is defined and used in the
Investment Company Act of 1940, as amended and the rules and regulations
issued by the SEC thereunder.
7.6 PUBLIC INFORMATION ETC. Purchaser has delivered to Seller its
Annual Report to the Securities and Exchange Commission (hereinafter
referred to as the SEC) for the fiscal year ended December 31, 1996, on
Form 10-KSB and its Quarterly Report to the SEC for the quarter ended March
31, 1997, on Form 10-QSB, as well as the latest registration statement
filed with the SEC on Form S-1 and the prospectus contained in the latest
registration statement so filed on Form S-3. All such filings were made in
conformity with the requirements relating thereto at the time of such
filing and contained all information required to be set forth therein. In
addition, Purchaser has delivered or will deliver to Seller copies of all
press releases issued by Purchaser from and after January 1, 1997.
(Page 20 of 142 Pages)
Such reports and registration statements and any other forms,
registration statements, reports and other documents filed by Purchaser
with the SEC (i) were prepared in accordance with the requirements of
the Act and the 1934 Act, as the case may be, and the rules and
regulations adopted by the SEC thereunder and (ii) did not at the time
they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which
they were or are made, not misleading. Each of the consolidated
financial statements (including, in each case, any notes thereto)
contained in the reports and registration statements was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presented the
consolidated financial position, results of operations and cash flows of
Harmony and its consolidated subsidiaries as the case may be, as at the
respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments that were not and are not expected,
individually or in the aggregate, to be material in amount.
7.7 CBC SHARES. The CBC Shares have been duly authorized, and, when
certificates therefor shall have been issued and delivered in accordance
with this Agreement, will be validly issued and outstanding and
fully-paid and nonassessable.
8. PRE-CLOSING COVENANTS.
The parties to this Agreement agree with respect to the period from and
after the execution of this Agreement to and including the Closing:
8.1 GENERAL. Seller will use reasonable efforts to take all actions
and to do all things necessary in order to consummate and make effective
the transactions contemplated by this Agreement.
8.2 EXCLUSIVE DEALING. Seller agrees that he will not, directly or
indirectly, through any agent, representative or otherwise, (a) solicit,
initiate or encourage submission of proposals or offers from any person
relating to the acquisition or purchase of all or a material part of the
Shares or Options, or both, or (b) participate in any discussions or
negotiations regarding, or furnish to any other person any non-public
information with respect or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any
other person to do or to seek to do any of the foregoing. Seller agrees
promptly to notify Purchaser of any such proposal or offer, or any inquiry
or contact with respect thereto received by Seller.
9. CONDITION OF PURCHASER'S OBLIGATIONS.
The obligation of the Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment prior to or on the Closing Date
of the following
(Page 21 of 142 Pages)
Purchaser Conditions, any of which may be waived in whole or in part in
writing by the Purchaser:
9.1 NO ERRORS, ETC. The representations and warranties of Harmony and
Seller shall be true in all material respects as of the Closing Date with
the same effect as though made on and as of the Closing Date.
9.2 COMPLIANCE WITH AGREEMENT. Seller and Harmony shall have performed
and complied with all agreements, covenants or conditions required by this
Agreement to be performed and complied with by them prior to or as of the
Closing Date.
9.3 CERTIFICATE OF OFFICERS. Harmony shall have delivered to Purchaser
a certificate, dated the Closing Date, which shall be executed by the Chief
Executive Officer and the Chief Financial Officer of Harmony and which
shall certify to the satisfaction of the conditions applicable to Harmony
specified in subsections 9.1 and 9.2 of this Section 9.
9.4 OPINION OF COUNSEL. On the Closing Date, Harmony shall have
delivered to Purchaser an opinion, satisfactory to Purchaser, of counsel to
Harmony, dated the Closing Date, to the effect that:
(a) Harmony has been organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware
and has the power and authority to carry out the provisions of this
Agreement.
(b) This Agreement and the Transaction Documents have been duly
authorized, executed and delivered by Harmony, are the legal, valid
and binding obligations of Harmony and Seller and are enforceable in
accordance with their terms, subject to the effect of applicable
bankruptcy, insolvency, moratoria and other similar laws affecting
generally the enforcement of creditors' rights.
(c) Harmony has obtained the approval or consent of all
governmental agencies or bodies required for the legal and valid
execution and delivery of this Agreement and for the performance of
the obligations of Harmony under all provisions of this Agreement.
Harmony is not in violation of any term, provision or condition of its
Certificate of Incorporation or, to the best of such counsel's
knowledge, after due inquiry, in violation of any agreement or other
instrument to which Harmony is a party or by which it is bound or to
which any of its properties, assets or business is subject or any
judgment, decree or order or any statute, rule or regulation. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement will
not result in any breach or violation of the terms or provisions of,
or constitute a default under, the Certificate of Incorporation of
Harmony or any statute or, to the best of such counsel's knowledge,
after due inquiry, any rule or regulation affecting Harmony.
(Page 22 of 142 Pages)
(d) Harmony's Board of Directors has approved Purchaser's
acquisition of the Unimedia Shares, the Shares and the Options, for
the purposes of Section 203(a) of the Delaware General Corporation
Law.
(e) To the best knowledge of such counsel, after due inquiry, the
Shares and the Unimedia Shares have been duly authorized, are validly
issued and outstanding, full paid and non-assessable. The Shares and
Options will, upon receipt of all consideration to be paid or provided
to Seller under the provisions of this Agreement will, based solely on
those matters and documents which may be required and examined by a
professional transfer agent for securities in the process of
registration of transfer of shares of capital or common stock, be
transferred to Purchaser, free and clear of all liens, pledges,
security interests, claims, charges, options, encumbrances or other
adverse claims of any kind.
(f) the Options have been duly authorized and are validly
outstanding;
(g) the Options are assignable and transferable by the Seller to
Purchaser, free and clear of all restrictions;
(h) the Options represent, and when transferred, sold and
assigned to Purchaser will represent, the valid and binding
obligations of Harmony, enforceable in accordance with their terms.
9.5 ACTION BY HARMONY'S BOARD OF DIRECTORS.
(a) Harmony's Board of Directors, prior to the Closing Date,
shall have met and duly adopted resolutions, subject to the
consummation of the transactions contemplated by this Agreement: (i)
to accept the resignation of Seller as Chairman of the Board and as a
director of Harmony; (ii) to elect Xxxxxxxxxxx X. Xxxx (hereinafter
sometimes referred to as Xxxx) as a director of Harmony and as
Chairman of the Board of Harmony; (iii) to accept the resignation of
each director of Harmony, other than Xxxx, to be effective immediately
following the Closing or at such other time as may be specified by
Purchaser.
(b) Harmony's Board of Directors shall have also met, prior to
the Closing Date, and shall have approved the following:
(1) the Registration Rights Agreement in the form of the
form attached to this Agreement as Exhibit 1; and
(2) the Employment Agreement in the form of the form
attached to this Agreement as Exhibit 2.
(c) Prior to the Closing Date, Harmony's Board of Directors shall
have also met and approved for the purposes of Section 203(a) of the
Delaware
(Page 23 of 142 Pages)
General Corporation Law, Purchaser's acquisition, as an "interested
stockholder", of the Shares, the Unimedia Shares, the Options and the
550,000 shares of Common Stock issuable on the exercise thereof.
(d) Prior to the Closing Date, Harmony's Board of Directors shall
have also met and amended Harmony's 1991 Stock Option Plan so as to
permit the Options freely to be transferable and assignable.
9.6 ACTIONS BY SELLER.
(a) Seller shall have tendered written resignations from his
positions as a director and Chairman of the Board of Harmony, as a
director of Harmony, and as a director, officer and employee of each
Subsidiary (hereinafter sometimes collectively referred to as the
Resignations).
(b) Seller shall have executed and delivered the Employment
Agreement.
9.7 RESIGNATIONS OF CURRENT BOARD. the remaining members of Harmony's
Board of Directors (other than Xxxx) shall have tendered their resignations
as directors immediately following the actions described in subsection 9.5
of this Section 9.
9.8 SUPPORTING DOCUMENTS. Purchaser shall have received the following:
(a) a copy of the resolutions adopted by the Board of Directors
of Harmony certified by the Secretary of Harmony authorizing and
approving the execution, delivery and performance of this Agreement
and the actions and documents referred to in subsection 9.5 of this
Section 9.
(b) Such additional supporting documentation and other
information with respect to the transactions contemplated by this
Agreement as Purchaser may reasonably request.
9.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
actions in connection with the transactions contemplated by this Agreement
and all certificates, opinions. agreements, instruments and documents
mentioned in this Agreement or incident to any transaction shall be
satisfactory to Purchaser in form and substance.
9.10 REGISTRATION RIGHTS AGREEMENT. Harmony shall have executed and
delivered the Registration Rights Agreement in exchange for the delivery to
Harmony or its counsel of the dismissal referred to in subsection 2(b).
9.11 TRANSFER OF OPTIONS. Harmony shall have issued to Purchaser new
option agreement(s) in accordance with subsection 4.6 of Section 4 of this
Agreement,
(Page 24 of 142 Pages)
except that the purchase price or exercise price set forth in such new
agreement or agreements shall be $1.50 per share of Common Stock.
9.12 PARTIES TO TAKE ACTIONS. Harmony and Seller shall use all
reasonable efforts and shall take all actions necessary to satisfy
Purchaser's Conditions and to complete, execute and deliver the Transaction
Documents.
9A CONDITION OF SELLER'S OBLIGATIONS. The obligation of the Seller to
consummate the transactions contemplated by this Agreement is subject to
the fulfillment prior to or on the Closing Date of the following Seller
conditions, any of which may be waived in whole or in part in writing by
the Seller:
9A.1 NO ERRORS, ETC. The representations and warranties of Purchaser
shall be true in all material respects as of the Closing Date with the same
effect as though made on and as of the Closing Date.
9A.2 COMPLIANCE WITH AGREEMENT. Purchaser shall have performed and
complied with all agreements, covenants or conditions required by this
Agreement to be performed and complied with by them prior to or as of the
Closing Date.
9A.3 CERTIFICATE OF OFFICERS. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date, which shall be executed by the Chief
Executive Officer of Purchaser and which shall certify to the satisfaction
of the conditions specified in subsections 9A.1 and 9A.2 of this Section 9.
9A.4 OPINION OF COUNSEL. On the Closing Date, Purchaser shall have
delivered to Seller an opinion, satisfactory to Seller, of counsel to
Purchaser, dated the Closing Date, to the effect that:
(a) Purchaser has been organized and is validly existing as a
corporation in good standing under the laws of the State of Minnesota
and has the power and authority to carry out the provisions of this
Agreement.
(b) This Agreement and the Transaction Documents have been duly
authorized, executed and delivered by Purchaser, are the legal, valid
and binding obligations of Purchaser and are enforceable in accordance
with their terms, subject to the effect of applicable bankruptcy,
insolvency, moratoria and other similar laws affecting generally the
enforcement of creditors' rights.
(c) Purchaser has obtained the approval or consent of all
governmental agencies or bodies requires for the legal and valid
execution and delivery of this Agreement and for the performance of
the obligations of Purchaser under all provisions of this Agreement.
Purchaser is not in violation of any term, provision or condition of
its Certificate of Incorporation or, to the best of such counsel's
knowledge, after due inquiry, in violation of any agreement or other
instrument to which Purchaser is a party or by which it is bound or to
which any of its properties, assets or business is subject or any
judgment, decree or
(Page 25 of 142 Pages)
order or any statute, rule or regulation. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in any breach or
violation of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation of Purchaser or any statute
or, to the best of such counsel's knowledge, after due inquiry, any
rule or regulation affecting Harmony.
(d) the CBC Shares have been duly authorized, and upon issue and
delivery of certificates therefor in accordance with this Agreement,
will be validly issued and outstanding, fully paid and non-ssessable,
free and clear of all liens, pledges, security interests, claims,
charges, options, encumbrances or other adverse claims of any kind.
9A.5 ACTION BY PURCHASER'S BOARD OF DIRECTORS. Purchaser's Board of
Directors shall have also met, prior to the Closing Date, and shall have
approved a registration rights agreement in favor of the Seller in the form
of the form attached to this Agreement as Exhibit 1, MUTATIS MUTANDIS.
9A.6 SUPPORTING DOCUMENTS. Seller shall have received the following:
(a) a copy of the resolutions adopted by the Board of Directors
of Purchaser certified by the Secretary of Purchaser authorizing and
approving the execution, delivery and performance of this Agreement
and the document referred to in subsection 9A.5 of this Section 9A.
(b) Such additional supporting documentation and other
information with respect to the transactions contemplated by this
Agreement as Seller may reasonably request.
9A.7 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and actions in connection with the transactions contemplated by this
Agreement and all certificated, opinions. agreements, instruments and
documents mentioned in this Agreement or incident to any transaction shall
be satisfactory in form and substance to Seller.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLER. Seller hereby indemnifies and agrees
to hold harmless Purchaser from and against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement
costs and any legal, accounting or other expenses of investigating or
defending any actions or threatened actions) (hereinafter sometimes
collectively referred to as Losses) in connection with each of the
following (hereinafter sometimes referred to as Breach of Warranty),
provided, however, that Seller shall not have any obligation under this
subsection 10.1 unless the aggregate Losses amount to more than $100,000
(if the Losses exceed $100,000,
(Page 26 of 142 Pages)
the indemnification obligation set forth in this subsection 10.1
shall include all such Losses and not only those in excess of $100,000,
provided, further that all such Losses shall be limited to $1,460,000:
(a) any material misrepresentation or breach of warranty of any
representation, warranty or covenant made by Seller in Section 1,
Section 5 and subsections 9.2 and 9.12 of Section 9 of this Agreement;
and
(b) any breach of any covenant, agreement or obligation of Seller
contained in this Agreement or in the Transaction Documents.
10.2 INDEMNIFICATION BY HARMONY. Harmony hereby indemnifies and agrees
to hold harmless the Purchaser from and against any and all Losses in
connection with each of the following:
(a) any misrepresentation or breach of any representation or
warranty made by Harmony in Section 4 of this Agreement; and
(b) any breach of any covenant, agreement or obligation of
Harmony contained in this Agreement or any other agreement, instrument
or document contemplated by this Agreement; provided, however, that
Seller shall not have any obligation under this subsection 10.2 unless
the aggregate Losses amount to more than $100,000, and, provided,
further, that the obligation of Harmony under this subsection 10.2
shall not in any event exceed $3,460,000.
10.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby indemnifies and
agrees to hold harmless the Seller from and against any and all Losses in
connection with each of the following:
(a) any misrepresentation or breach of any representation or
warranty made by Purchaser in Section 7 of this Agreement; and
(b) any breach of any covenant, agreement or obligation of Purchaser
contained in this Agreement or any other agreement, instrument or document
contemplated by this Agreement; provided, however, that Purchaser shall not
have any obligation under this subsection 10.3 unless the aggregate Losses
amount to more than $30,000, and, provided, further, that the obligation of
Purchaser under this subsection 10.3 shall not in any event exceed
$300,000.
10.4 CLAIMS FOR INDEMNIFICATION. whenever any claim shall arise for
indemnification under this Section 10, the indemnified party (hereinafter
sometimes referred to as Indemnified Party) shall promptly notify the party
against whom indemnification is sought (hereinafter sometimes referred to
as the Indemnifying Party) of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification under this Agreement resulting from or in connection with
any claim or legal proceedings by a third party, the notice shall specify,
if known, the amount or an estimate of the amount of liability arising
(Page 27 of 142 Pages)
therefrom. The Indemnified Party shall not settle or compromise any claim
by a third party in respect of which it is entitled to indemnification
under this Agreement without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonable withheld or delayed;
provided, however, that if action or suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have
taken control of such action or suit as provided in subsection 10.5 of this
Section 10 after notification thereof,Indemnified Party shall have the
right to settle or compromise such claim after giving notice to the
Indemnifying Party as provided in said subsection 10.5
10.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim that
may give rise to a right of indemnification under this Section 10 resulting
from or arising out of any claim or legal proceeding by a person other than
the Indemnified Party, the Indemnifying Party, at its or his sole cost and
expense, may, upon written notice to the Indemnified Party, assume the
defense of any such claim or legal proceeding if the Indemnifying Party
acknowledges to the Indemnified Party in writing the obligation to
indemnify the Indemnified Party with respect to all elements of such claim
or legal proceeding. If the Indemnifying Party shall assume the defense of
any such claim or legal proceeding, the Indemnifying Party shall select
counsel reasonably acceptable to the Indemnified Party to conduct the
defense of such claim or legal proceeding at the sole cost and expense of
the Indemnifying Party, who shall take all steps necessary in the defense
or settlement thereof. If the Indemnifying Party shall be the Seller,
Seller shall not consent to a settlement of, or the entry of judgment
arising from, any such claim or legal proceeding without the prior written
consent of Purchaser (which consent shall not be unreasonable withheld or
delayed). An Indemnified Party shall be entitled to participate in (but
not control) the defense of any such claim or legal proceeding with its
own counsel and at its own expense. If the Indemnifying Party shall be the
Seller, and Seller shall not assume the defense of such claim or legal
proceeding within 30 days after notice thereof shall have been given to
Seller in accordance with this subsection 10.5: (a) Purchaser may defend
such claim or legal proceeding in such manner as it may deem appropriate,
including, but not limited to, the settlement of such claim or legal
proceeding, after giving notice of the same to Seller, on such terms as
Purchaser may deem appropriate. and (b) Seller shall be entitled to
participate in (but not control) the defense of such claim or legal
proceeding with his own counsel and at his own expense.
11. STANDSTILL PROVISION.
Seller agrees that, for a period of three years from the date of this
Agreement, unless this requirement shall have been specifically waived in
writing by Harmony, neither Seller nor any of his affiliates, agents or
representatives will in any manner, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect, or cause or participate in or in
any way assist any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect, or cause or participate in, (i) any
acquisition of any securities (or beneficial ownership thereof) or assets of
Harmony or any of its Subsidiaries, except such shares of common stock of
Harmony as may be acquired upon the exercise of stock option agreements held
by Seller immediately following the Closing of the transactions
(Page 28 of 142 Pages)
contemplated hereby; or (ii) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote any voting securities of Harmony; (b) form or join in a
"group" (as defined under the 1934 Act); or (c) seek to control or influence
the management, Board of Directors or policies of Harmony.
12. MISCELLANEOUS.
12.1 CHANGES, WAIVERS, ETC. Neither this Agreement nor any provision
thereof may be changed, amended, waived, discharged or terminated orally,
but only by a statement in writing signed by the party against which
enforcement of the change, amendment, waiver, discharge or termination is
sought.
12.2 NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in writing
and shall be deemed given to the party to whom addressed (i) when delivered
personally to such party, (ii) on the business day after being sent within
the country of origin, and three days after being sent to a destination
outside the country of origin, to such party by overnight courier or
overnight mail, charges prepaid (iii) by facsimile transmission, charge
prepaid or chargeable to the transmitting party, confirmed by the sending
apparatus, (iv) on the next business day after being sent to such party by
telegraph, telex or cable, toll prepaid, or (v) five business days after
being sent to such party by registered or certified first class mail, or
the equivalent (return receipt requested or equivalent service, postage
prepaid) (provided that if such mailed material shall bear an address in
other than the country in which it is deposited in the mail, then it shall
be sent by registered or certified first class air mail, PROVIDED, HOWEVER,
that this requirement shall not apply to mail bearing an address in, and
originating from, Canada, the United States of America or the Republic of
Mexico, in each case addressed as follows:
(i)if to Purchaser: Children's Broadcasting
Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X Xxxxx,
Secretary and General Counsel
with a copy to: Xxxxx Xxxxxx, Esq.
Xxxxxx and Xxxxxx
2400 IDS CENTER
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
(Page 29 of 142 Pages)
(ii) if to Harmony: Harmony Holdings, Inc..
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxxx
Chairman of the Board
With a copy to: Xxxxxx X. Xxxxxxxxx, P.C.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
(iii) if to Seller: Xxxxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxxxxxx, P.C.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
Any party may change the address to which such communications are to be
directed to it, by giving written notice to the other parties hereto in the
manner provided in this subsection 12.2.
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by Purchaser and the sale and purchase of
the Shares and payment therefor.
12.4 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware, without
regard to its conflict of laws rules.
12.5 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns.
12.6. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto and any instrument, agreement or document
referred to in this Agreement) constitutes the entire agreement and
understanding of the parties to this Agreement with respect to the subject
matter of this Agreement, and supersedes all prior agreements and
understandings of the parties to this Agreement, written or oral, with
respect thereto.
12.7. NO ASSIGNMENT. This Agreement shall be binding upon and inure
solely to the benefit of the parties to this Agreement, and their
respective successors and permitted assigns, and nothing in this Agreement,
express or implied, is intended or
(Page 30 of 142 Pages)
shall be construed to confer upon any other person or entity any right or
remedy under this Agreement or by reason of this Agreement, except as
aforesaid. Neither this Agreement nor any right, remedy, obligation or
liability arising under this Agreement or by reason of this Agreement may
be assigned by any party to this Agreement, provided, however, that
Purchaser may assign to Xxxxxxxxxxx X. Xxxx and X. X. Xxxxxxx, severally,
its rights under this Agreement to purchase all or a part of the Shares
and all or a part of the Options, or either of them.
(Page 31 of 142 Pages)
IN WITNESS WHEREOF, Purchaser and Harmony have caused this Agreement to
be executed on their respective behalf by their respective officers thereunto
duly authorized, and Seller has executed this Agreement, all as of the date
first above written.
CHILDREN'S BROADCASTING CORPORATION
By /s/ Xxxxxxxxxxx X. Xxxx
--------------------------------------
Xxxxxxxxxxx X. Xxxx
Chief Executive Officer
HARMONY HOLDINGS, INC.
By /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxx
Chief Executive Officer
/s/ Xxxxxx Xxxxxxxx
-----------------------------------------
Xxxxxx Xxxxxxxx
Seller's spouse has executed this Agreement, all as of the date first
above written, to indicate that she is bound by this Agreement with respect
to any interest she may have in the Shares and Options, but does not make any
of the representations, warranties and covenants made by Seller in this
Agreement.
/s/ Xxxxxxxxxx Xxxxxxxx
-----------------------------------------
Xxxxxxxxxx Xxxxxxxx
(Page 32 of 142 Pages)
SCHEDULE 1
A. Options represented by Option Agreement dated October 1, 1996
between Harmony and Seller exercisable for 325,000 shares of Common Stock at
$1.50 per share and expiring October 1, 2001.
B. Options represented by Option Agreement dated February 12, 1996
between Harmony and Xxxx Xxxxxxxx, and assigned to Seller, exercisable for
225,000 shares of Common Stock at $1.50 per share and expiring May 1, 2001.
(Page 33 of 142 Pages)
SCHEDULE 4.5
Harmony guaranteed repayment of amounts due under a $250,000.00 line of
credit from Imperial Bank to Cinequanon Pictures, Inc. The guarantee is
secured by a lien on the receivables of Cinequanon Pictures, Inc.
(Page 34 of 142 Pages)
