EXHIBIT 99.2
PURCHASE AGREEMENT
THIS AGREEMENT, dated as of July 27, 1999, effective as of August 1,
1999, is made by and among CHILDREN'S BROADCASTING CORPORATION, a Minnesota
corporation (referred to herein as "CBC"); HARMONY HOLDINGS, INC., a Delaware
corporation (referred to herein as "HHI"); CURIOUS PICTURES CORPORATION, a New
York corporation (referred to herein as "Curious"); and XXXXX XXXXXX; XXXXXXX
XXXXX; XXXXXXX XXXXXXX; AND XXXXX XXXXX , as individuals (collectively referred
to herein as "CP Management").
W I T N E S S E T H:
THAT, WHEREAS, Curious has currently issued and outstanding 100 shares
of its Common Stock, which shares represent all of the issued and outstanding
Common Stock of Curious;
WHEREAS, pursuant to an Option and Share Transfer Agreement dated as
of December 15, 1996 among CP Management, Curious and HHI ("Option Agreement"),
a copy of which is attached hereto as Exhibit A, HHI is the holder of 99 shares
(or 99%) of Curious and CP Management is the holder of 1 share or 1% of Curious
(the 1 share owned by CP Management shall be referred to herein as the "Curious
Share");
WHEREAS, under the Option Agreement, CP Management has the right,
based upon Curious reaching certain net income levels, to receive shares of
Curious up to an amount not to exceed 50% of the Common Stock of Curious;
WHEREAS, contemporaneously herewith and incorporated herein, CP
Management, Curious and HHI have entered into an agreement whereby the parties
agree that Curious has reached such net income levels; that CP Management
currently has the right to receive 50 shares (or 50%) of the issued and
outstanding common stock of Curious; and that such shares are to be transferred
from HHI to CP Management (the "Curious Agreement");
WHEREAS, contemporaneously herewith and incorporated herein, each
member of CP Management has entered into five (5) year employment agreeements
with Curious; and
WHEREAS, CP Management desires to sell, transfer and assign the
Curious Share and the
Option Agreement to CBC, and CBC desires to purchase such Curious Share and the
Option Agreement, and HHI consents to such sale, transfer and assignment on the
terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and the covenants,
representations and warranties hereinafter in this Agreement set forth, the
parties hereto hereby agree as follows:
1. OWNERSHIP, TRANSFER, SALE AND ASSIGNMENT OF CURIOUS SHARE AND OPTION
AGREEMENT.
(a) CP Management represents that collectively they are the
owner of the Curious Share and none of them owns any other
shares of Curious Common Stock other than the right(s) to
receive shares under the Option Agreement. CP Management and
HHI represent that under the Option Agreement, CP Management
has earned the right to receive 50 shares or 50% of the
issued and outstanding Common Stock of Curious from HHI, and
that CP Management has the right to sell, transfer and
assign their interest in the Option Agreement and the
Curious Share to CBC.
(b) Subject to the terms and conditions hereinafter in this
Agreement, CP Management agrees to sell, transfer and
deliver the Curious Share and their entire interest in the
Option Agreement to CBC on the Closing Date (as that term is
hereinafter defined), free and clear of all security
interests, liens and encumbrances, except for any
subordination obligations to Fremont Financial Services,
Inc.
2. PURCHASE AND CONSIDERATION.
(a) On the basis of the representations and warranties, and
subject to the terms and conditions set forth in this
Agreement, CBC hereby agrees to purchase and CP Management
agrees to sell, the Curious Share and CP Management's
interest in the Option Agreement on the Closing Date. The
total purchase price for the purchase of the Curious Share
and assignment of the Option Agreement (the "Purchase
Price"), will be the sum of Three Million and no/100 Dollars
($3,000,000.00) consisting of Two Million Seven Hundred
Thousand and no/100 Dollars ($2,700,000.00) for the Option
Agreement and Three Hundred Thousand and no/100 Dollars
($300,000.00) for the Curious Share and payable as follows:
1. The sum of $1,500,000 in cash at Closing (as
defined below) to CPManagement ($375,00 to each
member); and
2. The execution of a promissory note at Closing in
the amount equal to $1,500,000 ($375,000 to each
member) payable on May 31, 2000 at an interest
rate equal to eight percent (8%) per annum. The
interest payments shall be paid to CP Management
in quarterly payments. In the event any member(s)
of CP Management's employment with Curious is
terminated
pursuant to 5(b) of his/her employment agreement
or any member(s) of CP Management terminates
his/her employment agreement prior to the payment
of the promissory note, the principal amount of
this promissory note shall be reduced by the sum
of $375,000 for such member(s). Any cancellation
or reduction of the promissory note pursuant to
this section shall be in addition to any other
remedies CBC may have against the members of CP
Management and shall not be deemed to be
liquidated damages.
(b) HHI and Curious consent to the sale and purchase of the
Curious Share and Option Agreement as provided in Section
2(a), and the assignment of all of CP Management's rights
therein.
(c) As additional consideration and as an inducement for each
member of CP Management to enter into employment agreements
with Curious, CBC agrees to grant each member of CP
Management a warrant for the purchase of 75,000 shares of
CBC's common stock at a price equal to the ten (10) day
average closing price for the ten (10) trading days
preceding the date of Closing. The warrant shall be in the
form attached hereto as Exhibit B incorporated herein by
reference as if set forth in full.
3. CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") unless otherwise agreed to by the parties, shall take place
at the offices of Curious, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 9:00 a.m. on July 30, 1999 (such date of Closing is
hereinafter sometimes referred to as the Closing Date). The Closing
shall be subject to the satisfaction of all of the conditions to CBC's
obligations set forth in Section 8 of this Agreement.
At the Closing:
(i) CP Management shall deliver, assign and transfer
(or request that HHI deliver, assign and transfer)
to CBC certificate(s) representing the Curious
Share, appropriately endorsed or accompanied by a
separate instrument or instruments of assignment
in writing, in proper form for registration of
transfer;
(ii) CP Management shall deliver, assign and transfer
the Option Agreement to CBC;
(iii) CBC shall deliver to each member of CP Management
a warrant agreement for the purchase of 75,000
shares, a form of which is attached hereto as
Exhibit B;
(iv) CP Management shall deliver the resignations
referred to in Section 8.4 of this Agreement;
(v) Each member of CP Management shall execute and
deliver the employment agreements in the forms
attached hereto as Exhibits C to F incorporated
herein by reference as if set forth in full;
(vi) $1,500,000 in cash shall be sent by CBC by wire
transfer to such account or accounts in one or
more banks in the United States of America as CP
Management shall specify in writing delivered to
CBC not less than forty eight (48) hours prior to
the Closing Date, otherwise such purchase price
shall be payable by check or checks;
(vii) CBC shall execute a promissory note in the form of
Exhibit G attached hereto and incorporated herein
by reference as if set forth in full in the amount
of $1,500,000 payable to CP Management at eight
percent (8%) interest secured by the Curious Share
and the Option Agreement, subject to subordination
obligations with Fremont Financial Services, Inc.;
(viii) CP Management, HHI and Curious shall deliver an
executed Curious Agreement stating and confirming
that CP Management has the right to receive 50%
which equals 50 shares of the issued and
outstanding common stock of Curious from HHI and
consenting to assignment and transfer of the
Option Agreement and the Curious Share to CBC, a
form of which is attached hereto as Exhibit H; and
(ix) Certified Resolutions of Curious, HHI and CBC
approving the terms of this transaction.
4. REPRESENTATIONS AND WARRANTIES BY HHI.
HHI represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing; that
HHI is a corporation organized and existing in good standing under the
laws of the State of Delaware with full power and authority to enter
into this Agreement to which it is a party and enter into and complete
the transactions contemplated herein and therein; all required
corporate action has been duly and validly taken by HHI to make and
carry out this Agreement and the transactions contemplated herein;
this Agreement constitutes the valid and binding obligation of HHI
enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which HHI is subject or the breach of any
contract, agreement or other commitment to which HHI is a party or by
which it or its properties is bound or conflict with or violate any
provision of HHI's Articles of Incorporation, By-Laws, or other
organizational documents; and no other consent of any kind is required
that has not been obtained to make or carry out the terms of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES BY CURIOUS.
Curious represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing, that
Curious is a corporation organized and existing in good standing under
the laws of the State of New York with full power and authority to
enter into this Agreement to which it is a party and enter into and
complete the transactions contemplated herein and therein; all
required corporate action has been duly and validly taken by Curious
to make and carry out this Agreement and the transactions contemplated
herein; this Agreement constitutes the valid and binding obligation of
Curious enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which Curious is subject or the breach of any
contract, agreement or other commitment to which Curious is a party or
by which it or its properties is bound or conflict with or violate any
provision of Curious' Articles of Incorporation, By-Laws, or other
organizational documents; and no other consent of any kind is required
that has not been obtained to make or carry out the terms of this
Agreement; that there are only 100 issued and outstanding shares of
Curious and that Curious will not issue any additional shares of its
Common Stock without receiving the prior written consent of HHI and
CBC; and that the financial statements prepared by Curious are
substantially correct in all material respects and there has not been
any material adverse change in the financial condition of Curious
since the latest financial statements.
6. REPRESENTATION AND WARRANTIES BY CBC.
CBC represents and warrants as follows, which representations and
warranties shall be deemed to have been made again at Closing, that
CBC is a corporation organized and existing in good standing under the
laws of the State of Minnesota with full power and authority to enter
into this Agreement to which it is a party and enter into and complete
the transactions contemplated herein and therein; all required
corporate action has been duly and validly taken by CBC to make and
carry out this Agreement and the transactions contemplated herein;
this Agreement constitutes the valid and binding obligation of CBC
enforceable in accordance with its terms; the execution of the
Agreement and, the completion of the transactions herein involved will
not result in the violation of any order, license, permit, rule,
judgment or decree to which CBC is subject or the breach of any
contract, agreement or other commitment to which CBC is a party or by
which it or its properties is bound or conflict with or violate any
provision of CBC's Articles of Incorporation, By-Laws, or other
organizational documents; that the Curious Share and Option Agreement
are being purchased for CBC's own account and not with a view to, or
for resale; and that the warrants issued to members of CP Management
are duly authorized and upon the exercise of the warrants will be
validly issued non-assessable shares of CBC.
7. REPRESENTATION AND WARRANTIES BY CP MANAGEMENT.
Each member of CP Management represents and warrants, which
representations and warranties shall be deemed to have been made again
at Closing that each member has the full right, power, authority and
capacity, and is free, without restriction, to enter into and perform
this Agreement; each member of CP Management represents and warrants
that the Curious Share is owned by CP Management that upon the
transfer of the Curious Share to CBC on
the Closing Date, CBC will obtain absolute title to the Curious Share,
free and clear of all liens, pledges, security interests, claims,
charges, options, encumbrances or other adverse claims of any kind
whatsoever other than any security interest which has been granted to
Fremont Financial; that CP Management makes the same warranties and
representations with respect to the Option Agreement, except that the
Option Agreement may be subject to subordination obligations with
Fremont Financial Services, Inc.; that each member is an accredited
investor within the meaning of Regulation D, Rule 501(a) under the
Securities Xxx 0000, as amended.
8. CONDITION OF CBC'S OBLIGATIONS.
The obligations of CBC to consummate the transactions contemplated by
this Agreement is subject to the fulfillment prior to or on the
Closing Date of the following conditions, any of which may be waived
in whole or in part in writing by CBC:
8.1 The representations and warranties of CP Management, Curious
and HHI shall be true in all material respects as of the
Closing Date with the same effect as though made on and as
of the Closing Date.
8.2 CP Management and HHI shall have performed and complied with
all agreements, covenants or conditions required by this
Agreement to be performed and complied with by them prior to
or as of the Closing Date.
8.3 ACTION BY HHI AND CURIOUS BOARD OF DIRECTORS.
(a) HHI's Board of Directors, prior to the Closing
Date, shall have met and duly adopted resolutions,
subject to the consummation of the transactions
contemplated by this Agreement: (i) to approve the
terms of this transaction; (ii) to amend the
Option Agreement to allow CP Management to freely
assign and transfer CP Management's interest; and
(iii) to approve the terms of the employment
agreements.
(b) Curious' Board of Directors, prior to the Closing
Date, shall have met and duly adopted resolutions,
subject to the consummation of the transactions
contemplated by this Agreement: (i) to approve the
terms of this transaction; and (ii) to approve the
terms of the employment agreements.
8.4. RESIGNATIONS OF CP MANAGEMENT FROM CURIOUS BOARD. The
members of Curious' Board of Directors and all of Curious'
subsidiaries (other than Xx. Xxxx and Xx. Xxxxxxx) shall
have tendered their resignations as directors
contemporaneously upon the Closing.
9. LEGAL FEES.
Provided this transaction is consummated, Curious agrees to pay for
any reasonable legal fees and expenses incurred by CP Management from
the law firm of Xxxxxxxx, Xxxxx & Deutsch, LLP in connection with this
transaction through April 28, 1999, provided that it receives
copies of all such legal bills along with any other reasonably
requested backup documentation. Beginning April 29, 1999, Curious
agrees to pay for any reasonable legal fees and expenses incurred by
CP Management in connection with assignment of the Option Agreement
and purchase of the Curious Share by CBC. Notwithstanding the
foregoing, CP Management shall pay for any legal fees and expenses
incurred in connection with their employment agreements and any and
all future issuances of shares, exercise of put rights and similar
matters that are to the benefit of CP Management. Other than as
provided for herein, each party shall be responsible for its or
his/her own legal fees and expenses.
10. INDEMNIFICATION.
10.1 MUTUAL INDEMNIFICATION. Each party hereby indemnifies and
agrees to hold harmless the other parties from and against
all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any
legal, accounting or other expenses of investigating or
defending any actions or threatened actions) (hereinafter
sometimes collectively referred to as Losses) in connection
with each of the following:
(a) Any misrepresentation or breach of any
representation or warranty made by such party in
this Agreement; and
(b) any breach of any covenant, agreement or
obligation of such party contained in this
Agreement, provided, however, that such party
shall not have any obligation under this Section
unless the aggregate Losses amount to more than
$25,000 (if the Losses exceed $25,000, the
indemnification obligations set forth in this
Section shall include all such Losses and not only
those in excess of $25,000).
10.2 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this section, the indemnified
party (hereinafter sometimes referred to as the Indemnified
Party) shall promptly notify the party against whom
indemnification is sought (hereinafter sometimes referred to
as the Indemnifying Party) of the claim and, when known, the
facts constituting the basis for such claim. In the event of
any such claim for indemnification under this Agreement
resulting from or in connection with any claim or legal
proceedings by a third party, the notice shall specify, if
known, the amount or an estimate of the amount of liability
arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party in respect of which it
is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed;
provided, however, that if action or suit shall have been
instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such
action or suit as provided in this Section after
notification thereof, the Indemnified Party shall have the
right to settle or compromise such claim after giving notice
to the Indemnifying Party as provided in this Section.
10.3 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim
that may give rise to
a right of indemnification under this Section resulting from
or arising out of any claim or legal proceeding by a person
other than the Indemnified Party, the Indemnifying Party, at
its or his/her sole cost and expense, may, upon written
notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if the Indemnifying Party
acknowledges to the Indemnified Party in writing the
obligation to indemnify the Indemnified Party with respect
to all elements of such claim or legal proceeding. If the
Indemnifying Party shall assume the defense of any such
claim or legal proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to the Indemnified
Party to conduct the defense of such claim or legal
proceeding at the sole cost and expense of the Indemnifying
Party, who shall take all steps necessary in the defense or
settlement thereof. An Indemnified Party shall be entitled
to participate in (but not control) the defense of any such
claim or legal proceeding with its own counsel and at its
own expense. If the Indemnifying Party shall not assume the
defense of such claim or legal proceeding within 15 days
after notice thereof shall have been given to in accordance
with this Section: (a) the Indemnified Party may defend such
claim or legal proceeding in such manner as it may deem
appropriate, including, but not limited to, the settlement
of such claim or legal proceeding, after giving notice of
the same to Indemnifying Party, on terms as the Indemnified
Party may deem appropriate and (b) Indemnifying Party shall
be entitled to participate in (but not control) the defense
of such claim or legal proceeding with their own counsel at
their own expense.
11. MISCELLANEOUS PROVISIONS.
11.1 EXECUTION OF DOCUMENTS. The parties agree to execute all
applications, documents and instruments which may be
reasonably necessary for the consummation of the
transactions contemplated hereunder, or which might be from
time to time reasonably requested by any party hereto in
connection therewith, whether before or after the date of
Closing.
11.2 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision thereof may be changed, amended, waived,
discharged or terminated orally, but only in writing signed
by the party against which enforcement of the change,
amendment, waiver, discharge or termination is sought.
11.3 NOTICES. All notices, requests, elections, demands and other
communications given pursuant to this Agreement shall be in
writing and shall be duly given when delivered personally or
by facsimile transmission (upon receipt of confirmation) or
when deposited in the mail, certified or registered mail,
postage prepaid, return receipt requested, and shall be
addressed as follows:
If to CBC:
Xx. Xxxxxxxxxxx X. Xxxx
Children's Broadcasting Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
with copy to:
Xxxx Xxxxx, Esq.
Children's Broadcasting Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
If to HHI:
Xx. Xxxxxxxxxxx X. Xxxx
Harmony Holdings, Inc,
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
with copy to:
Xxxx Xxxxx, Esq.
Harmony Holdings, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
If to Curious:
Xx. Xxxxxxxxxxx X. Xxxx
Curious Pictures Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
with copy to:
Xxxx Xxxxx, Esq.
Curious Pictures Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
If to CP Management:
Xxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxx
c/o Curious Pictures Corporation
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
With copy to:
Xxxxx Xxxxxxxx, Esq.
XXXXXXXX, XXXXX & DEUTSCH, LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
11.4. EXHIBITS. All Exhibits referred to herein are incorporated
into this Agreement by reference for all purposes and shall
be deemed part of this Agreement.
11.5. ASSIGNABILITY. None of the parties may assign their rights
or obligations under this Agreement without the prior
written consent of the other parties which shall not be
unreasonably withheld or delayed, except that CBC, HHI and
Curious may make an assignment to a parent, subsidiary,
affiliate or successor of such party and each member of CP
Management may make an assignment to an entity that is
controlled by and 100% owned by such member.
11.6. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the xxxxxxxxxxxxxxx, xxxxx, xxxxxxx,
successors, and assigns of the parties hereto.
11.7. HEADING. The headings contained in this Agreement are for
reference only and shall not effect in any way the meaning
or interpretation of this Agreement.
11.8. COUNTERPARTS. This Agreement and any other instrument to be
signed by the parties hereto may be executed by the parties,
together or separately, in two or more identical
counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same
instrument.
11.9. CLAUSES SEVERABLE. The provisions of this Agreement are
severable. If any provision of this Agreement or the
application thereof to any person or circumstance is held
invalid, the provision or its application shall be modified
to the extent possible to reflect the expressed intent of
the parties but in any event, invalidity shall not affect
other provisions or applications of this Agreement which can
be given effect without the invalid provision or
application.
IN WITNESS WHEREOF, the parties hereto, by their properly authorized
representatives, have caused this Agreement to be executed as of the day and
date first above written.
CHILDREN'S BROADCASTING HARMONY HOLDINGS, INC.,
CORPORATION, a Minnesota corporation a Delaware corporation
By: /s/ Xxxxxxxxxxx X. Xxxx By: /s/ Xxxxx X. Xxxxxxxxxx
----------------------- -----------------------
Its: Chief Executive Officer Its: Chief Operating Officer
----------------------- -----------------------
CURIOUS PICTURES CORPORATION
a New York corporation
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------
Its: Chief Operating Officer
-----------------------
CP MANAGEMENT
/s/ Xxxxxxx Xxxxx /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxx Xxxxxxx Xxxxxxx
/s/ Xxxxx Xxxxx /s/ Xxxxx Xxxxxx
----------------- -------------------
Xxxxx Xxxxx Xxxxx Xxxxxx
