1
EXHIBIT 2.4
OPTION AGREEMENT
This is an OPTION AGREEMENT ("Agreement") entered into as of
this 17th day of December, 1999, among CUMULUS BROADCASTING, INC., a Nevada
corporation, CUMULUS LICENSING CORP., Nevada corporation, CUMULUS WIRELESS
SERVICES INC., a Nevada corporation, their successors and assigns (collectively
"Cumulus" or "Optionee"), and MCDONALD MEDIA GROUP, INC., a Delaware corporation
("McDonald" or "Optionor").
W I T N E S S E T H :
WHEREAS, McDonald is the licensee of radio stations KVEN-AM,
KHAY-FM, KBBY-FM (licensed to Oxnard-Ventura, California), and has an option to
purchase KKSB-FM and KMGQ-FM (licensed to Santa Barbara, California)
(collectively the "Stations") under the rules and regulations of the Federal
Communications Commission ("FCC" or "Commission");
WHEREAS, Cumulus and McDonald have previously entered into a
Management Agreement regarding the Stations (the "Management Agreement"); and
WHEREAS, Cumulus desires to acquire an Option to acquire all
of the assets of McDonald used or intended for use in the Stations' operations,
including all permits, authorizations and licenses issued by the FCC, in
accordance with the terms and conditions set forth below;
WHEREAS, Cumulus and McDonald on this date have entered into
an Escrow Agreement among themselves and AmSouth Bank ("Escrow Agent"), pursuant
to which Escrow Agent shall carry out various duties to implement the sale and
purchase transaction:
NOW, THEREFORE, in consideration of the mutual promises set
forth in this Option Agreement, the parties, intending to be legally bound,
agree as follows:
1. GRANT OF OPTION. McDonald hereby grants to Cumulus an option
(the "Option") to acquire all of the assets of McDonald used or intended for use
in the Stations' operations, including, but not limited to, all permits,
authorizations and licenses issued by the FCC, in accordance with the terms and
conditions set forth below, in consideration of the previous payment by Cumulus
to McDonald the amount of Eight Million and no/100 Dollars ($8,000,000) in cash
by wire transfer of immediately available U.S. funds (the "Option Money") (
which amounts shall not be refundable to Cumulus in the event Cumulus does not
fully exercise the Option hereunde), and for other good and valuable
consideration.
2. TERM. This Option will be for a term commencing with the
Effective Date of this Agreement and ending March 31, 2000 (provided that upon
exercise the provisions of the Asset Purchase Agreement shall apply to the
closing of the transaction contemplated therein). The
1
2
Option may be exercised by Cumulus at any time from March 1, 2000 to and
including March 31, 2000, by the delivery of notice by Cumulus to McDonald as
provided below.
3. SPECIFIC PERFORMANCE. The parties mutually understand and
agree that the assets which are the subject of this Option Agreement are unique
and cannot readily be purchased in the open market. The parties further agree
that this Option, and any extensions of it, will be subject to enforcement by
decree of specific performance.
4. STATION ASSETS. As used in this Option Agreement, the term
"Station Assets" shall have the same meaning as set forth in set forth in the
Asset Purchase Agreement attached hereto as Exhibit A ("the Asset Purchase
Agreement").
5. PURCHASE PRICE. The Purchase Price to be paid McDonald as
consideration for the Station Assets shall be an amount equal to Thirty-Three
Million and no/100 Dollars ($33,000,000) (and towards which Cumulus shall
receive a credit in the amount of the Option Price), payable on the terms and
conditions set forth in the Asset Purchase Agreement.
6. EXERCISE OF THE OPTION
(a) Cumulus may exercise the Option by delivering to
McDonald and to Escrow Agent, within the time period set forth in Section 2,
written Notice that it is exercising the Option. Such written Notice shall be to
McDonald's address set forth in this Option Agreement.
(b) Within five (5) business days of the delivery of
Cumulus's exercise of the Option, Escrow Agent shall date two executed copies of
the Asset Purchase Agreement with the date of the receipt of notice, and shall
deliver one such dated, executed copy of the Asset Purchase Agreement to each of
Cumulus and McDonald, respectively, and shall carry out the other duties of the
Escrow Agent specified in the Escrow Agreement.
7. FCC CONSENT
(a) Joint Application. Closing on the purchase of the
Station Assets is subject to the prior approval of the Federal Communications
Commission. Within five (5) business days of the Escrow Agent's dating and
delivery of the Asset Purchase Agreement to Cumulus and McDonald, McDonald will
deliver to Cumulus, fully executed and with all necessary exhibits, the Seller's
section of FCC Form 314 requesting FCC consent to the assignment to Cumulus
designee of the FCC licenses, permits, and authorizations of the Stations.
Cumulus will combine the same with Buyer's section of the form and file the
application with the FCC (the "Application").
(b) Fees. Cumulus and McDonald each will pay their
respective FCC filing fees required in connection with the Application.
(c) Closing. The Closing on the purchase of the Station
Assets shall take place following FCC approval, at a date and place set forth in
the Asset Purchase Agreement (the
2
3
"Closing Date").
8. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF MCDONALD.
McDonald represents and warrants that the representations, warranties, and
covenants McDonald makes, as Seller, in the Asset Purchase Agreement are true
and correct as of the date hereof, as if the Asset Purchase Agreement had been
executed and delivered as of the date hereof, and such representations,
warranties, and covenants are incorporated herein by reference. Cumulus is
entitled to rely on such representations, warranties, and covenants as if the
Asset Purchase Agreement had been dated and executed as of the date hereof.
9. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF CUMULUS. Cumulus
represents and warrants that the representations, warranties, and covenants
Cumulus makes, as Buyer, in the Asset Purchase Agreement are true and correct as
of the date hereof, as if the Asset Purchase Agreement had been executed and
delivered as of the date hereof, and such representations, warranties, and
covenants are incorporated herein by reference. McDonald is entitled to rely on
such representations, warranties, and covenants as if the Asset Purchase
Agreement had been dated and executed as of the date hereof.
10. AFFIRMATIVE COVENANTS OF MCDONALD. Subject to the terms of the
Management Agreement, McDonald shall, through the Closing Date, with respect to
the Station:
(a) Operation. Carry on its business and operations,
maintain its facilities and equipment, maintain its inventory of supplies, parts
and other materials and keep its books of account, records, and files in the
ordinary and usual course of business. McDonald will continue to keep and
maintain the Public Inspection Files of the Station in accordance with FCC rules
and regulations. Subject to the terms of the Management Agreement, McDonald
shall continue to operate the Station in all material respects in accordance
with the terms of their FCC Licenses and in compliance in all material respects
with all applicable laws, FCC rules and regulations, the Communications Act and
Standards of Good Engineering Practice. McDonald will promptly execute any
necessary application for renewal of the FCC Licenses. McDonald will deliver to
Buyer, within ten days after filing, copies of any reports, applications or
responses to the FCC or any other governmental entity related to the Stations
which are filed between the date of this Option Agreement and the Closing Date.
(b) Insurance. Maintain in full force and effect through
the Closing Date adequate property damage, liability, and other insurance with
respect to the Station Assets providing coverage against such risks and in at
least the amounts as provided by the insurance policies currently maintained by
McDonald.
(c) Notification.
(i) Give detailed written notice to Cumulus
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a breach of
any of McDonald's representations or warranties contained in this Option
Agreement or in any schedule referred to by it.
3
4
(ii) Promptly notify Cumulus in writing upon
becoming aware of any offer or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of this Option Agreement or the
transactions contemplated by it, or upon receiving any notice from any
governmental department, court, agency, or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Option Agreement or such transactions, or to
nullify or render ineffective this Option Agreement or such transactions if
consummated.
(d) Fulfill Conditions. Use its respective best efforts
to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Option Agreement and to cause the
transactions contemplated by this Option Agreement to be fully carried out.
(e) Provide Access. Allow Cumulus and representatives of
Cumulus, upon reasonable notice and during normal business hours, to inspect the
titles, contracts, books of account, records and affairs of the Station. Cumulus
shall be entitled to all such other information concerning the affairs of the
Station as Cumulus shall reasonably request.
(f) Disclose Problems. Disclose to Cumulus any unusual
and significant problems or developments or any competing offers with respect to
the Station or the Station Assets. McDonald shall give prompt written notice to
Cumulus if the Station Assets shall have suffered damage on account of fire,
explosion or other cause of any nature which is sufficient to prevent operation
of the Station.
(g) Disclosure Schedule. At the request of Cumulus at any
time, and in any event no later than March 1, 2000, update the Disclosure
Schedule to accompany the Asset Purchase Agreement.
11. NEGATIVE COVENANTS OF MCDONALD. Prior to the Closing Date, McDonald
will not, without the prior written consent of Cumulus:
(a) No Alienation of Station Assets. Sell, lease,
transfer, or agree to sell, lease, or transfer any Station Assets without notice
to Cumulus and without replacement thereof with a substantially equivalent asset
of substantially equivalent kind, condition, and value.
(b) No Labor and Employment Contracts. Enter into any
contract of employment or collective bargaining agreement, permit any increases
or changes in the compensation or benefits of any of the Stations' employees or
otherwise hire any employee, except to replace any non-managerial or sales
employee whose employment terminates prior to the Closing Date on substantially
the same terms and conditions as the terminated employee, or except as in the
ordinary course of business in accordance with past practices.
(c) No Adverse Permits. Apply to the FCC for any
construction permit or
4
5
modification of license which would materially restrict
the Stations' operations, or make any material change in the Stations'
buildings, leasehold improvements, or fixtures.
(d) Negotiations for Sale. Hold out the Stations for
sale, entertain an offer to purchase the Station Assets or the interests of
McDonald, enter into any negotiations with any party other than Cumulus for the
assignment and transfer of the Station Assets to be assigned and conveyed under
this Option Agreement or the Asset Purchase Agreement, give an option to any
such other party to acquire the Station Assets or interests of McDonald, or
provide any information to any third-party (other than McDonald's employees,
agents, attorneys or accountants) regarding the Stations' finances or equipment.
(e) No New Encumbrances. Create or assume any new
mortgage, security interest or pledge, or subject to lien or encumbrance any of
the Station Assets, whether now owned or later acquired. Any existing security
interests or encumbrances shall be paid in full and cleared of record on or
before the Closing Date.
(f) FCC Obligations. By any act or omission of it, its
directors, officers, employees or agents, surrender, modify, forfeit or fail to
seek timely renewal of the FCC Licenses from the Commission or cause the
Commission to institute any proceedings for revocation, cancellation or
modification of the FCC Licenses, or fail to prosecute with due diligence, or
participate in the prosecution of, the Assignment Application, including all
amendments to it, as necessitated by FCC Rules and Regulations, or as requested
by the Commission Staff.
12. AFFIRMATIVE COVENANTS OF CUMULUS. Subject to the terms of the
Management Agreement, Cumulus shall, through the Closing Date, with respect to
the Stations:
(a) Notification.
(i) Give detailed written notice to McDonald
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a breach of
any of Cumulus' representations or warranties contained in this Option Agreement
or in any schedule referred to by it.
(ii) Promptly notify McDonald in writing upon
becoming aware of any offer or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of this Option Agreement or the
transactions contemplated by it, or upon receiving any notice from any
governmental department, court, agency, or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Option Agreement or such transactions, or to
nullify or render ineffective this Option Agreement or such transactions if
consummated.
(b) Fulfill Conditions. Use its respective best efforts
to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Option Agreement and to cause the
transactions contemplated by this Option Agreement to be fully carried out.
5
6
(c) Provide Access. Allow McDonald and representatives of
McDonald, upon reasonable notice and during normal business hours, to inspect
the titles, contracts, books of account, records and affairs of the Stations.
McDonald shall be entitled to all such other information concerning the affairs
of the Stations as McDonald shall reasonably request.
13. NOTICES.
(a) Notices. All notices, demands and requests required
or permitted hereunder shall be in writing and shall be deemed properly given if
delivered personally or sent by certified mail, postage prepaid, return receipt
requested, or by commercial overnight delivery service to the parties at the
following addresses or such other addresses as either party may specify by
written notice to the other. Notices shall be deemed given on the date of
receipt (if delivered in person) or on the date of delivery set forth in the
records of the delivery service (if delivered by commercial delivery service) or
on the return receipt (if delivered by certified mail).
If to McDonald: Mr. Jack Standridge
-------------- McDonald Media Group, Inc.
One Office Park Circle
Suite 300
Birmingham, Alabama 35223
Phone: (205) 879-0456
Fax: (205) 879-0479
with copy to: J. Fred Powell, Esquire
Burr & Forman LLP
P.O. Box 830719
Birmingham, Alabama 35283
Phone: (205) 251-3000
Fax: (205) 458-5100
If to Cumulus: Terrence J. Leahy, Esq.
------------- Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
111 East Kilbourn Avenue, Suite 2700
Milwaukee, WI 53211
Phone: (414) 615-2800
Fax: (414) 615-2880
(b) Written notification to Counsel or by telephone
facsimile shall not constitute Notice for purposes of this paragraph.
14. NO WAIVER. The failure of any party at any time to require
performance of any
6
7
provision of this Option Agreement shall not affect its right at a later time to
enforce the provision. No waiver by any party of any condition or of any breach
of any term, covenant, representation or warranty contained in this Option
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be in other instances a waiver of any other
condition or breach of any other term, covenant, representation or warranty.
15. ENFORCEMENT. Should either party breach or be in default under
this Option Agreement, the other party shall be entitled to seek judicial
enforcement in law and equity, and such damages as a court of competent
jurisdiction may determine. In any court action, the prevailing party will be
entitled to recovery of reasonable expenses, court costs, and reasonable
attorney's fees.
16. CONTROL OF STATION. During the term of this Option Agreement,
and until such time as the Option has been exercised and the Commission has
approved the assignment of the Licenses for Station from McDonald to Cumulus,
Cumulus shall not control the operation of the Station, but such operation shall
be the responsibility of McDonald.
17. OTHER AGREEMENTS. The parties acknowledge that they have
previously executed a Management Agreement with respect to the Stations; that
simultaneously with the execution of this Option Agreement, they are executing
an Escrow Agreement; and that they are executing (but not dating) duplicate
originals of the Asset Purchase Agreement. Execution and delivery of the Escrow
Agreement and the duplicate originals of the Asset Purchase Agreement are
conditions to the effectiveness of this Option Agreement.
18. AMENDMENTS. The provisions of this Option Agreement may be
amended, terminated or waived only by an instrument in writing executed by both
of the parties or by the party granting a waiver.
19. HEADINGS. The headings contained in this Option Agreement are
for reference purposes only and shall not affect its meaning or interpretation.
20. COUNTERPARTS. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
21. COMPLIANCE WITH THE COMMUNICATIONS ACT AND FCC RULES. The
parties agree that the provisions of this Option Agreement are subject to all
applicable requirements under the Communications Act of 1934, as amended (the
"Communications Act"), and the rules, regulations and policies of the FCC
promulgated thereunder ("FCC Rules"). The parties agree that all actions
undertaken pursuant to this Option Agreement shall be in full compliance with
the requirements of the Communications Act and the FCC Rules, and the parties
shall take no action which would be in violation thereof. Each party agrees to
execute, and to cooperate in the filing and prosecution of, all applications and
other documents which in the opinion of counsel are
7
8
necessary to obtain FCC or other governmental approval of any transactions
contemplated by this Option Agreement.
23 FURTHER ASSURANCES. The parties to this Option Agreement
hereby each pledge to the other that they shall take whatever steps are
reasonably necessary, in good faith, and shall use their best efforts to carry
out their obligations under this Option Agreement so that the transactions
contemplated herein shall be consummated in a complete and expeditious manner.
24. OTHER DOCUMENTS. The parties shall execute such other
documents as may be necessary and desirable to the implementation and
consummation of this Option Agreement.
25. ASSIGNMENT. The rights granted to Cumulus by this Option
Agreement may be assigned by Cumulus to an entity which is controlled by or
under common control with Cumulus upon the providing of written Notice to
McDonald, provided that such assignment shall not relieve Cumulus of its
obligations under this Option Agreement.
26. CONSTRUCTION. This Option Agreement shall be construed in
accordance with the laws of the State of Delaware.
[ THE NEXT PAGE IS THE SIGNATURE PAGE ONLY ]
8
9
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the date and year first above written.
OPTIONOR:
McDONALD MEDIA GROUP, INC.
/s/ William W. McDonald
-------------------------
By: William W. McDonald
Title: President
-------------------------------
OPTIONEES:
CUMULUS BROADCASTING, INC.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
CUMULUS WIRELESS SERVICES INC.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
CUMULUS LICENSING CORP.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
9