Radio Sale Causes Split, Ends in Lawsuit

Wednesday was a bittersweet day for the owners of the Arkansas Priority Radio Network. After launching an affiliate in the stateð# largest market at 6 a.m. on July 5, Gordon Media Group of Little Rock was served with a breach of contract lawsuit at lunchtime asking for nearly $180,000.

The suit was brought by Stephen Freeman, who became GMGð# vice president and director of operations last November after selling a string of Internet-based radio stations and the makings of a statewide radio network to the company.

Freeman, who left the company May 14, now says Gordon Heiges, president of Gordon Media Group, broke the purchase contract by stopping payment on nearly $180,000 in loans and a credit line. As part of the sales agreement, Gordon Media was supposed to take over the debt, which Freeman accrued to cover startup costs.

ðGordon Media] agreed in the asset purchase agreement and the letter of intent to take over and assume the obligations to Metropolitan Bank for the three notes that all total around $180,000,ðÐsaid Jason Stuart, Freemanð# lawyer and a partner at Ball & Stuart LLC of Little Rock. ðøeð# liable; he has to keep paying those payments, and since heð# refused, heð# now liable to pay it all immediately.ðì/p>

Although Gordon Media did agree to take over those payments, the contract leaves Freeman as guarantor on loans of $76,500 and $75,000 and a $25,000 line of credit through Metropolitan National Bank of Little Rock.

ðÿf course weð"e worried about that provision because [Freeman] is primarily liable on those notes, and thatð# the basis of our damages,ðÐStuart said. ðhe bank is not only going to come get the hard assets, but to the extent that those hard assets are insufficient to cover those notes the bank is going to come after [Freeman] and itð# because [Heiges] has breached those agreements.ðì/p>

Heiges appears to have gotten a great deal should the lawsuit go nowhere in court.

ðFreeman] unfortunately entered into that agreement without an attorney and heð# learned his lesson,ðÐsaid Stuart. ðùn essence what it tried to do, but it failed, was to buy Steveð# assets with Steveð# own money, and what they were attempting to do is make cash flow to pay those notes and then they would remove Steve if they felt like it after a year.ðì/p>

The agreement states:

ðhile [Gordon Media Group] will take over the monthly payments on these loans and line of credit, you will remain listed as the guarantor on all such debts until such time as the operations to be conducted by [Gordon Media Group] with the assets being purchased develop sufficient cash flows and such operations continued to growðÐIn no event, however, will you be released as guarantor prior to the expiration of one year from the date of purchase of the assets provided for herein.ðì/p>

Heiges declined to comment until he could speak with his lawyer, Lile Choate of the Plastiras Law Firm of Little Rock, who Heiges said was on vacation last week.

Stuart said when Heiges agreed to take over those payments in the sale, Freeman moved to operations and Heiges was in charge of all finances; Heiges notified Metropolitan National Bank on Nov. 1 that Gordon Media would now be paying those debts.

Heiges again wrote a letter to the bank June 8 saying he would no longer be making the payments and that both loans and the line of credit were current.

ðou will need to contact M. Stephen Freeman as he is the guarantor on all of these obligations,ðÐthe letter stated.

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