EXHIBIT 10.4
OPTION AGREEMENT
THIS OPTION AGREEMENT is made and entered into effective the 1st day
of April, 1997, by and between REDWOOD BROADCASTING, INC., a Colorado
corporation ("RBI" or "Redwood"), and POWER SURGE, INC., a Delaware
corporation ("Power Surge");
WITNESSETH
WHEREAS, Power Surge is the owner of radio broadcast stations KNRO-
AM, Redding, California, and KARZ-FM, Burney, California (the "Power Surge
Stations"), including all tangible and intangible assets used in connection
therewith including, without limitation, all applicable licenses issued by the
Federal Communications Commission ("FCC Licenses"); and
WHEREAS, the assets and liabilities associated with the Power Surge
Station constitutes substantially all of the assets and liabilities of Power
Surge; and
WHEREAS, Power Surge desires to sell to RBI and RBI desires to
acquire the Power Surge Stations;
NOW, THEREFOR, in consideration of the mutual covenants and
agreements hereinbelow set forth, the parties agree as follows:
1. GRANT OF OPTION. Power Surge hereby grants to RBI, its successors
and assigns, the exclusive right to purchase and acquire the Power Surge
Stations in accordance with the terms of this Agreement.
2. TERM OF OPTION. RBI may exercise the rights granted herein for a
period of six months commencing April 1, 1997 and terminating September 30,
1997; provided, however, that the parties may mutually agree in writing to
extend the term of this Option.
3. PURCHASE PRICE. The purchase price to be paid by RBI to Power Surge
for the Power Surge Stations shall be One Million Two Hundred Thousand Dollars
($1,200,000). At the sole and exclusive election and option of Power Surge,
Power Surge may structure the transaction and payment of the purchase price in
either of the following alternate fashions:
3.1 RBI may purchase the Power Surge Stations from Power Surge in
consideration of a cash payment at closing of $1,200,000; or
3.2 RBI may elect to acquire the Power Surge Stations by
consummating a tax-free reorganization under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "B-Reorganization"), pursuant
to which RBI may issue an aggregate of 1,000,000 shares of its common stock,
$.004 par value (the "Common Stock") in exchange for One Hundred Percent
(100%) of the issued and outstanding shares of common stock of Power Surge.
In the event RBI elects to structure the acquisition of the Power Surge
Stations as a B-Reorganization, the shares of RBI Common Stock to be issued to
the Power Surge shareholders, pro rata, shall be "restricted securities" under
the Securities Act of 1933, as amended (the "Securities Act").
4. CONDITIONS PRECEDENT. The right of RBI to exercise the Option
granted herein is expressly conditioned upon (i) the parties executing a
definitive agreement covering the acquisition of the Power Surge assets;
(ii) the transaction obtaining the approval of the FCC and all other
regulatory authorities; and (iii) the consents and approvals of such third
parties as may be necessary to consummate the transaction.
5. COVENANTS DURING OPTION PERIOD. During the period of this Option,
the parties agree as follows:
5.1 Power Surge shall not incur any indebtedness with respect to
the Power Surge Stations which shall constitute any lien, security interest,
mortgage or other incumbrance against the assets of the Power Surge Stations,
it being understood that all assets of the Power Surge Stations shall be
maintained free and clear of all such liens and encumbrances during the option
period;
5.2 All license, permits, permission and other authorizations
necessary for the conduct of the Power Surge Stations, including those issued
by the FCC and other governmental agencies, shall be maintained in full force
and effect;
5.3 The tangible assets of the Power Surge Stations shall be
maintained in good condition and repair, ordinary wear and tear accepted;
5.4 Power Surge shall not transfer, assign, convey or grant to any
third party any right to acquire, directly or indirectly, any of the tangible
or intangible assets used in connection with the Power Surge Stations, nor
grant to any third party the right to acquire all or any portion of its
capital stock or other equity securities.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective on the day and year first above written.
REDWOOD BROADCASTING, INC.,
a Colorado corporation
By: ______________________________
Xxxx X. Power, President
POWER SURGE, INC.,
a Delaware corporation
By: ______________________________
Xxxx X. Power, President
