Children's Broadcasting Corporation Announces Amendment to Catholic Radio Network Agreement Closing October 30, 1998, and Sale of Three Radio Stations to Radio Unica.

MINNEAPOLIS--(BUSINESS WIRE)--Oct. 27, 1998--Children's Broadcasting Corporation ("CBC") (Nasdaq National Market: AAHS) entered into a Second Amendment to Purchase Agreement with Catholic Radio Network, LLC ("CRN") on October 26, 1998, amending the earlier agreement between CBC and CRN for the sale of ten of CBC's radio stations to CRN. Under the Second Amendment to Purchase Agreement, CRN will purchase seven radio stations from CBC instead of ten stations as previously agreed, and, in a concurrent transaction, CRN has effectively assigned its rights to purchase three of the stations in a transaction to be discussed below. The Second Amendment to Purchase Agreement provides that CRN will pay CBC $37.0 million for the seven stations it is now purchasing. Of the total purchase price of $37.0 million, $18,890,000 will be paid in cash at closing; $110,000 will be withheld by CRN pursuant to earlier agreements; $15.0 million will be paid by a promissory note to be executed by CRN at closing; and $3 million has already been paid as earnest money on the transaction. The $15 million promissory note provides that monthly interest payments, at the rate of 10% simple interest per annum, will be made pending repayment of the principal amount, which is due to be repaid in full 18 months after closing. CBC will hold a first security interest in the assets being conveyed to CRN as security for its $15 million loan to CRN, and a $1 million interest reserve will be established to secure CRN's interest payment requirements. Closing of the transaction with CRN is scheduled to occur on October 30, 1998.

On October 26, 1998, CBC also entered into an Asset Purchase Agreement with Radio Unica Corporation for the purchase of the three radio stations not being purchased by CRN. Radio Unica has agreed to purchase CBC's stations in Phoenix, Dallas and New York for $29,250,000 to be paid in cash at closing. The closing of the transaction between CBC and Radio Unica is subject to receipt of FCC approval, Hart-Scott-Rodino clearance, and other customary conditions of closing. Closing is expected to occur before the end of 1998. Radio Unica has deposited $10 million into escrow accounts, $2.5 million to CBC as pre-payment of LMA (Local Marketing Agreement) fees, pursuant to which Radio Uncia will continue to operate CBC's New York radio station and with an additional $500,000 LMA pre-payments, subject to receipt of Hart-Scott-Rodino approval, will operate the Phoenix and Dallas radio stations for two years or until closing, whichever occurs first. Radio Unica currently operates CBC's New York station under an LMA. Any unused portion of the LMA fee paid to CBC will be credited to the purchase price of the transaction at closing.

Christopher T. Dahl, CEO of CBC said, "The net effect of these transactions, taken together, is to increase the amount CBC will receive for the sale of its ten radio stations by $9,250,000 when compared to the original agreement between CBC and CRN. Another effect of these transactions is that the amount to be financed by CBC has increased, from approximately $5 million to $15 million."

Upon completion of the above sale of the stations and including the sale of its stations of Detroit for $2.0 million and the sale of one Minneapolis station and a station in Houston to Salem for $2.7 million, which will also occur on October 30, 1998, CBC will realize a total sale price of approximately $71.0 million for all stations. CBC originally purchased the stations for approximately $28.0 million, netting the Company a gain of approximately $43 million.

As previously reported, on September 30, 1998, a jury in the United States District Court for the District of Minnesota ruled in favor of Children's Broadcasting Corporation in connection with litigation for breach of contract and misappropriation of trade secret that Childrens had commenced against The Walt Disney Company and ABC Radio Networks, Inc. Childrens is seeking to have judgment entered by the Court upon that verdict in the amount of $20 million against ABC and $10 million against Disney, as well as additional amounts to that award for taxes, pre-judgment interest and for exemplary damages for wilful and malicious misappropriation of trade secret. The entry of judgment is currently pending before the Court.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements contained herein regarding the Company's future outlook and opportunities are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of Children's Broadcasting Corporation and which may cause actual results to differ from those projected.