SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 23, 2004
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ORION ACQUISITON CORP. II
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20837 13-386326
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation)
401 Wilshire Boulevard, Suite 1020Santa Monica, California 90401
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (310) 526-5000
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On June 23, 2004, Orion Acquisition Corp. II ("Company") entered into an
Agreement and Plan of Merger ("Merger Agreement") with Citadel Media, Inc.
("Citadel") for the merger of Citadel with and into the Company, with the
Company as the surviving corporation under Delaware law. The transaction is
expected to close in several weeks, after certain notices are given to the
stockholders of the Company, and certain conditions to closing are met,
including the completion of a private placement of common stock by the Company
of not less than $2,000,000 and no more than $6,000,000, at $2.00 per share, and
entry into an agreement with American High Growth Retirement Trust limit the
obligation of the Company to issue rights to the holders of the Class B
Warrants.
CITADEL MEDIA, INC.
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Citadel operates a network of affinity content publishers that consists of
websites and affiliated print magazines. Currently, the focus of Citadel is
sports and is marketed under the website theInsiders.com and the publishing
brand of Citadel Publishing. Together these provide in-depth, original content
to the affinity group. An affinity group is any group of individuals who share
an interest in a specific topic, and an affinity content publisher is one that
creates and disseminates articles and other information and advertising related
to a specific topic.
Citadel has created proprietary software and other network related tools to
facilitate network publishing for itself and its affinity partners. The affinity
publishers develop and produce content for their websites that are hosted by
Citadel. In the aggregate, the network produces more than 1,000 team-specific
news reports per day, the majority of which are consumer orientated. Citadel's
online and print network has over 115,000 paid subscriptions. Citadel's website
has approximately 1.77 million monthly unique users and reaches over 20 million
unique users through syndication agreements and has over 800,000 registered
users. This represents a significant audience for the network's advertisements
and is a focused target group to be converted to paid subscribers over time.
Citadel recruits and/or acquires select affiliate print and online
partners, currently operating in the sports publishing industry. The agreement
with recruited affiliates is a revenue sharing structure where they provide
content for subscribers in exchange for Citadel providing website hosting,
marketing, customer service tools and other services. Acquired entities are
folded into the Citadel website, publishing and advertising structure. Citadel
has agreements with various portals to generate exposure and website traffic,
including Foxsports.com, Yahoosports.com, Sportsillustrated.com and
Sportsline.com.
Citadels sources of revenue consist of online subscriptions, magazine
subscriptions, advertising and e-commerce.
CONSIDERATION
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The acquisition will be made by the Company issuing 443,526 shares of Class
B preferred stock, in exchange for all the outstanding equity securities of
Citadel. The Company will reserve an additional 241,474 shares of Class B
preferred stock for issuance on exercise of
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the Citadel options and warrants that it assumes by operation of law and
agreement upon consummation of the merger. The reserved shares will be
distributed from time to time to the former Citadel stockholders to the extent
the options and warrants are not exercised. The aggregate Class B preferred
stock to be issued for the acquisition of Citadel is 685,000 shares.
The Class B preferred stock will be convertible into 10 shares of common
stock for each share of preferred stock. The conversion will take place once the
Company has amended its certificate of incorporation to increase its authorized
equity to not less than 25,000,000 shares of common stock which number will be
sufficient to allow conversion of the Class B preferred stock. The Company will
require a stockholders meeting to approve this amendment, and has committed to
holding the meeting as soon as possible. The Class B preferred stock will vote
on all matters with the common stock, voting as a single class, except where a
class vote is required by law. The Class B preferred stock has certain
preferences and other protections prior to conversion.
REPRESENTATIONS
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The Citadel has made customary representations and warranties to the
Company as to certain facts about it corporate structure and its overall
business. These include those relating to (i) corporate status and authority,
(ii) financial statements, (iii) non-contravention of outstanding contracts and
obligations, laws and regulations affecting the business and arising because of
the transaction, (iv) property of the business, (v) intellectual property used
in the business and owned and licenses granted or held, (vi) employee matters,
(vii) taxes relating to the business, (viii) material contracts, (ix) government
approvals and compliance with applicable laws, (x) operations, including absence
of any material adverse change, (xi) general conduct of the business, and (xii)
various other related matters.
COVENANTS
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After closing, the Company will be obligated to seek stockholder approval
of an amendment to the certificate of incorporation to increase the authorized
common stock for the purpose, among other things, of permitting the conversion
of the Class B preferred stock. In addition, it is anticipated that stockholder
approval will be sought for other corporate actions, including the change of the
name of the Company to reflect its acquisition.
After the Closing, the Company, will file a registration statement to
permit the former stockholders of Citadel to re-offer and re-sell the common
stock that they obtain from the merger and conversion of the Class B preferred
stock. In addition, the registration statement will include other securities
that have been issued by the Company, including those issued in the private
placement and to MDB Capital Group LLC as their compensation for acting as the
placement agent. It is not certain when this registration statement will be
filed or declared effective.
CONDITIONS TO CLOSING
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There are a number of customary conditions to be satisfied in order to
close. These include the following: (i) the representations and warranties of
the parties must be accurate in all
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material respects at the closing, (ii) there can be no material adverse change
in the business of Citadel, (iii) performance of various covenants, (iv) absence
of any pending litigation which seeks to materially restrain, modify or
invalidate the transaction, (v) receipt of any required consents and (vi)
approval by the board of directors of the transaction and receipt of the vote of
the shareholders of the Citadel approving the agreements and transaction. The
consummation of the transaction also requires the execution and delivery of
certain ancillary agreements.
Also as conditions to closing, the Company (i) must complete simultaneously
with the closing, a private placement of common stock of not less than
$2,000,000 and no more than $6,000,000, (ii) have additional current assets of
not less than $1,150,000, and (iii) must obtain a revision to the settlement
agreement with American High Growth Equities Retirement Trust to limit the
requirement to issue rights to the trust in connection with the conversion of
its Class B Warrants and limit the need to make a comparable offer to the other
holders of the Class B Warrants except in the discretion of the Company.
At the Closing, the board of directors will consist of one continuing
director of the Company, Mr. Christopher A. Marlett, and three persons who were
the directors of Citadel prior to the merger, Messrs. J.C. Heckman, Jr., Brian
Kosar and Patrick Crumb. The Company is distributing a Schedule 14(f) in
connection with the change of directors and control of the Company, which must
be distributed not less than 10 days prior to the effective date of the change,
and therefore it is a condition to the closing.
The Citadel stockholders have dissenters' rights in connection with the
merger. As a condition to the closing, not more than an estimated $100,000 shall
have to be paid to dissenters. The Company does not believe there are any
dissenters.
At the Closing, Orion, Christopher A. Marlett, Brian Kosar, J.C. Heckman,
Jr., Patrick Crumb and several other significant stockholders of the post-merger
company, will enter into a voting agreement whereby they each will agree to vote
any voting securities over which they have voting authority or own in favor of
each other or their designees for a period of three years as directors of the
Company. Mr. Marlett may assign his right of designating a director nominee to
MDB Capital Group LLC.
At the Closing, MDB Capital Group LLC, Christopher A. Marlett and certain
of the former stockholders of Citadel will agree not to sell their shares of
common stock of the Company for a period of one year after the merger. The
lock-up is subject to release if approved by the board of directors of the
Company and the designee director of MDB (which is currently Mr. Marlett), but
only after the conversion of the Class B preferred stock and the effectiveness
of the registration statement for the resale of the shares issued to the former
Citadel stockholders.
TERMINATION
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The Merger Agreement may be terminated in the following circumstances: (i)
by mutual consent, (ii) after a material breach by either party or the
non-compliance with a covenant that must be performed prior to the closing, or
there is a material adverse effect in the representations and warranties of
either party, (iii) after issuance of certain orders enjoining or otherwise
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prohibiting the transaction, (iv) either party enters into a competing
transaction, (v) the Citadel stockholders fail to approve the transaction, (v)
the amount payable to dissenting stockholders of Citadel is estimated to exceed
$100,000, and (iv) if the closing has not occurred by July 31, 2004.
In the event of a termination for breach, the non-breaching party may seek
damages from the breaching party. If the termination occurs because the Company
is in breach or there is a material change in the representations and
warranties, or a material adverse change in the Company, or the Company enters
into a competing transaction, then the loans made to Citadel in December 2003
and March 2004 will be extended to October 15, 2004.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The Company will file the required financial statements at the time it
files a further Form 8-K Current Report relating to the consummation of the
transactions contemplated by the Merger Agreement.
(b) Pro Forma Financial Statements
The Company will file the required pro forma financial statements at the
time it files a further Form 8-K Current Report relating to the consummation of
the transactions contemplated by the Asset Agreement.
(c) Exhibits
EXHIBIT NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger between Orion
Acquisition Corp. II and Citadel Media, Inc.
2.2 Form of Certificate of Designations of Class B
Preferred Stock
99.1 Press release of the Company dated June 28, 2004
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 28, 2004 ORION ACQUISITION CORP. II
(Registrant)
/s/ Dyana Marlett
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Dyana Marlett
Secretary
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger between Orion Acquisition Corp.
II and Citadel Media, Inc.
2.2 Form of Certificate of Designations of Class B Preferred
Stock
99.1 Press release of the Company dated June 28, 2004
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