AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("AGREEMENT") dated as of June 23, 2004, by
and between Citadel Media, Inc., a Washington corporation ("CITADEL"), and Orion
Acquisition Corp. II, a Delaware corporation ("ORION").
W I T N E S S E T H:
WHEREAS, Orion desires to acquire Citadel, and Citadel desires to be
acquired by Orion through the merger of Citadel with and into Orion pursuant to
the terms hereinafter set forth (the "MERGER");
WHEREAS, Orion and Citadel each intend, for Federal income tax purposes,
that the Merger contemplated thereby constitutes a reorganization pursuant to
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("CODE");
WHEREAS, Orion has an authorized capital stock consisting of 10,000,000
shares of common stock, $.01 par value per share (the "ORION COMMON STOCK"), of
which 1,030,907 shares are currently issued and outstanding ("PRE-MERGER ORION
SHARES"), and 1,000,000 shares of preferred stock, $.01 par value per share (the
"ORION PREFERRED STOCK"), of which (i) there are 110 shares are designated Class
A Preferred Stock currently issued or outstanding convertible into 110,000
shares of Orion Common Stock ("ORION CLASS A PREFERRED STOCK") and (ii) of which
there are 685,000 shares designated Orion Class B Preferred Stock convertible
into 6,850,000 shares of Orion Common Stock ("ORION CLASS B PREFERRED STOCK");
WHEREAS, Orion currently also has outstanding common stock purchase
warrants entitling the holders thereof to purchase an aggregate of up to 358,000
shares of the Orion Common Stock, all as further described herein (collectively,
the "ORION WARRANTS ") and certain obligations pursuant to a settlement
agreement to issue rights for additional shares of Orion Common Stock in certain
circumstances ("ORION RIGHTS");
WHEREAS, Citadel has an authorized capital stock consisting of 50,000,000
shares of common stock, no par value per share (the "CITADEL COMMON STOCK"), of
which 12,987,500 shares are currently issued and outstanding; and 50,000,000
shares of Preferred Stock, no par value per share (the "CITADEL PREFERRED
STOCK"), of which 4,001,250 shares are currently issued or outstanding currently
convertible pursuant to the terms thereof into 4,001,250 shares of Citadel
Common Stock and designated as Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock, Class D Preferred Stock and Class E Preferred Stock
(collectively, Citadel Common Stock and Citadel Preferred Stock as "CITADEL
STOCK"); and
WHEREAS, Citadel currently also has outstanding stock warrants and options
entitling the holders thereof to purchase an aggregate of up to 12,949,800
shares of Citadel Stock, all as further described herein (collectively, the
"CITADEL WARRANTS AND CITADEL OPTIONS"); and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
ADOPTION OF AGREEMENT
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2 herein),
in accordance with this Agreement and the relevant provisions of the Washington
Business Corporation Act ("WBCA") and the Delaware General Corporation Law
("DGCL"), Citadel shall be merged with and into Orion, and Orion will be the
surviving corporation to the Merger (the "SURVIVING CORPORATION"), and be deemed
to continue, for all purposes, after the Merger. The existence of Citadel shall
cease at the Effective Time as a consequence of the Merger.
1.2 EFFECTIVE DATE OF THE MERGER. This Agreement shall be submitted to the
stockholders of Citadel as provided in Section 6.4 hereof, for approval as soon
as practicable, after the date of this Agreement. Subject to the terms and
conditions hereof, including, without limitation, Orion's and Citadel's right to
terminate this Agreement without liability in accordance with Article X hereof,
upon the authorization, approval and adoption of this Agreement by the
affirmative vote of the holders of the required outstanding shares of Citadel
Stock pursuant to RCW 23B.11.030 of the WBCA, a copy of the Articles of
Amendment and Merger, substantially in the form annexed hereto as EXHIBIT 1.2(A)
(the "ARTICLES OF AMENDMENT AND MERGER") shall be executed in accordance with
Section 23.11 of the WBCA and delivered to the Secretary of State of the State
of Washington for filing in accordance with RCW 23B.11.050 of the WBCA and a
copy of the Certificate of Merger substantially in the form annexed hereto as
EXHIBIT 1.2(B) (the "CERTIFICATE OF MERGER"), shall be executed in accordance
with Section 251 of the DGCL and delivered to the Secretary of State of the
State of Delaware (the time of such filings being the "EFFECTIVE TIME" and the
date of such filings being the "EFFECTIVE DATE").
1.3 SURVIVING CORPORATION. Following the Merger, Orion shall continue to
exist under, and be governed by, the laws of the State of Delaware and be the
surviving corporation ("SURVIVING CORPORATION").
1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of Orion, as in effect at the Effective Time, shall
continue in full force and effect as the Certificate of Incorporation of the
Surviving Corporation.
1.5 BY-LAWS OF THE SURVIVING CORPORATION. The By-laws of Orion, as in
effect at the Effective Time, shall continue in full force and effect as the
By-laws of the Surviving Corporation.
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ARTICLE II
PLAN OF MERGER.
2.1 CONVERSION PLAN.
(a) PLAN. The method of effecting the Merger and the basis for
exchanging and converting (i) the outstanding Citadel Stock into
authorized but unissued shares of Class B Preferred Stock of Orion with
the rights and preferences set forth in Exhibit 2.2(F)(i) hereto (the
"MERGER STOCK"), and (ii) the outstanding Citadel Warrants and Citadel
Options into warrants and options to purchase shares of Merger Stock, as
the case may be, shall be as provided in this Article.
(b) MERGER CONSIDERATION. The total consideration in shares of Orion
to be issued by Orion pursuant to this Merger shall be 685,000 shares of
Merger Stock, of which, subject to adjustments pursuant to the formula
provided, in Section 2.1(c), (i) 443,526 shares of Merger Stock shall be
issued as provided in Section 2.1(c) and (ii) 241,474 shares of Merger
Stock shall be reserved by Orion pursuant to Section 2.2 hereof for the
benefit of the holder of Citadel Warrants and Citadel Options and, if
lapsed and subject to Section 2.2(e), for the benefit of Participating
Stockholders.
(c) CONVERSION OF CITADEL STOCK. At the Effective Time, each issued
and outstanding share of Citadel Stock shall by virtue of the Merger and
without further action, be deemed canceled and cease to exist. Upon
presentation for surrender of a certificate representing such share by
each stockholder of Citadel participating in the Merger (collectively, the
"PARTICIPATING STOCKHOLDERS"), Citadel Stock shall be converted into an
aggregate of shares of Merger Stock pursuant to the following, two part
mathematical procedure, which is represented below:
(i) DETERMINATION OF THE ADJUSTED SHARE TOTAL: Firstly, each
share of Citadel Stock shall be multiplied by the Adjustment Factor pursuant to
the schedule below to produce an Adjusted Share:
ADJUSTMENT FACTOR
Citadel Stock Adjustment Factor ("AR")
-----------------------------------------------------------
Common Stock 1
Series A Preferred Stock 2
Series B Preferred Stock 2
Series C Preferred Stock 5
Series D Preferred Stock 5
Series E Preferred Stock n/a
-----------------------------------------------------------
(ii) ORION CONVERSION FORMULA. Secondly, (a) the Adjusted
Share shall be divided by the Common Stock Equivalents ("CSE") to produce a
Conversion Factor, and (b) then the Conversion Factor shall be multiplied by
685,000.
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(iii) CITADEL CONVERSION FORMULA. The forgoing conversion
procedure may be represented mathematically pursuant to the following formula:
Share of Merger Stock = [ (CITADEL STOCK X AR) ] X 685,000
-------------------
CSE
Where:
"CSE" means Common Stock Equivalents, as set forth in Schedule
2.2(f)(ii) hereof
"AR" means Adjustment Factor
"Citadel Stock" means a share of Citadel Stock
(d) CITADEL WARRANTS AND OPTIONS. At the Effective Time, each issued
and outstanding Citadel Warrant and Citadel Option shall, by virtue of the
Merger and without further action, be deemed to be assumed by Orion and
modified so that, in lieu of having the right to acquire shares of Citadel
Stock on exercise, the holder will have the right to acquire shares of
Merger Stock on the same basis as Citadel Stock was exchanged into Merger
Stock under Section 2.1(c) at an exercise price adjusted to reflect the
exchange under Section 2.1(c) so as to maintain the relative entitlements
before and after the Merger, and for an exercise period that is the same
as the exercise period of the particular Citadel Warrant and Citadel
Option (collectively, the "CITADEL WARRANTS AND CITADEL OPTIONS").
Notwithstanding the foregoing, upon conversion of the Merger Stock, the Citadel
Warrants and Citadel Options then will represent the right to acquire that
number of shares of Orion Common Stock into which the Merger Stock the Citadel
Warrant and Citadel Option had the right to acquire immediately after the
Effective Date (subject to all contractual adjustments thereafter), at an
exercise price adjusted for the conversion of the Merger Stock. For the purposes
of clarity, if any Citadel Warrant and Citadel Option was exercisable for
Citadel Common Stock and/or Citadel Preferred Stock, upon exercise of the
Citadel Warrant and Citadel Option, the holder will receive only Merger Stock,
as if all Citadel securities had been issued and then converted into Merger
Stock and after the conversion of the Merger Stock into Orion Common Stock, upon
exercise of the Citadel Warrant and Citadel Option, the holder will receive only
Orion Common Stock at the rate provided in the Merger Stock conversion as if the
holder had exercised or converted the Citadel Warrant and Citadel Option for
Merger Stock after the Effective Date. Except as provided herein, all the other
substantive terms of Citadel Warrants and Citadel Options shall continue in full
force and effect.
(e) SCHEDULE OF CITADEL WARRANTS AND CITADEL OPTIONS. Attached
hereto as SCHEDULE 2.1(E) is the list of Citadel Warrants and Citadel
Options, the respective holders thereof and the numbers and classes of
Citadel Stock and Merger Stock for which they may now and after the Merger
be exercised and the price per share of Merger Stock.
2.2 RESERVE OF SHARES FOR CITADEL WARRANTS AND CITADEL OPTIONS. Orion
shall retain and reserve at all times as authorized, but unissued shares of
Merger Stock, and after conversion of the Merger Stock, Orion Common Stock
("RESERVED MERGER STOCK"), which such Reserved Merger Stock shall be used to
satisfy the obligations of the Citadel Warrants and Citadel Options assumed by
Orion pursuant to this Merger Agreement until their respective exercise,
conversion or termination. The Reserved Merger Stock shall be held, maintained
and administered by the Surviving Corporation pursuant to this Agreement for the
benefit of the holder of Citadel Warrants and Citadel Options and, if lapsed and
subject to Section 2.2(e), for the benefit of Participating Stockholders.
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(a) EXERCISES. The Reserved Merger Stock will be used to satisfy the
obligation of the Surviving Corporation under the Citadel Warrants and
Options assumed hereunder.
(b) WARRANTS AND OPTION CONSIDERATION. The exercise price or any
other consideration paid by a holder of a Citadel Warrant and Citadel
Option ("OPTION CONSIDERATION") shall be paid to the Surviving
Corporation, as provided under the terms of the Citadel Warrant and
Citadel Option, or the stock plan or agreement pursuant to which the
Citadel Warrant and Citadel Option was issued. Upon receipt of the
Exercise Consideration by the Surviving Corporation, Surviving Corporation
shall direct the issuance of the Reserved Merger Stock in the amount to
which the holder of the Citadel Warrant and Citadel Option is entitled.
(c) LAPSED CITADEL WARRANTS AND CITADEL OPTIONS. If any Citadel
Warrant and Citadel Option lapses or otherwise terminates without
exercise, in whole or part, the Reserved Merger Stock subject to such
unexercised portion of the Citadel Warrant and Citadel Option ("LAPSED
RESERVED MERGER STOCK") shall be distributed, or subject to distribution,
by the Surviving Corporation as provided Section 2.2(d), subject to
Section 2.2(e) hereof.
(d) DISTRIBUTIONS OF LAPSED RESERVED MERGER STOCK. On each
Determination Date (as hereinafter defined), each Participating
Stockholder shall receive the Participating Stockholder's Pro Rata Share
of the Lapsed Reserved Merger Stock based on the conversion ratio set
forth in Section 2.1(c) hereof. The Surviving Corporation shall endeavor
to distribute all Lapsed Reserved Merger Stock to the Participating
Stockholders as soon as reasonable practical, but not later than 30 days
after a Determination Date.
(e) OTHER CITADEL WARRANTS AND CITADEL OPTIONS. Prior any
Determination Date, the Lapsed Reserved Merger Stock, if any, may be used
by the Surviving Corporation to satisfy, in whole or in part, in good
faith any claim of a Person claiming to be holder of a Citadel Warrant or
Citadel Option not set forth herein.
(f) ADDITIONAL SECTION 2 DEFINITIONS.
(i) "CLASS B PREFERRED STOCK" means the Class B Preferred
Stock of Orion, which shall have the rights and preferences as set forth in
EXHIBIT 2.2(F)(I) hereof.
(ii) "CITADEL STOCK EQUIVALENTS" means (i) aggregate of the
Citadel Stock, as adjusted pursuant to Section 2.1(c)(i) to Adjusted Shares and
(ii) aggregate total of the Citadel Warrants and Citadel Options under Section
2.1(c)(ii), all as adjusted to Adjusted Shares, in the manner provided for
Citadel Stock under Section 2.1(c)(i) hereof. The schedule of Common Stock
Equivalents is attached hereto as SCHEDULE 2.2(F)(II) hereof.
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(iii) "DETERMINATION DATE" shall mean each anniversary of the
Closing Date commencing on the third (3rd) anniversary of the Closing Date until
exercise, conversion and termination of all the Citadel Warrants and Options, at
such other times as determined by the board of directors of the Surviving
Corporation, and the last expiration or termination date of all the Citadel
Warrants and Citadel Options.
(iv) "PRO RATA SHARE" means, with respect to each
Participating Stockholder, the ratio (a) the numerator of which is the number of
shares of Merger Stock receive by the Participating Stockholder at Closing, and
(b) the denominator of which is the total number of shares of Merger Stock
received by all of the Participating Stockholders at Closing.
No fractional shares of Merger Stock, Lapsed Reserved Merger
Stock, or the Common Stock into which it is convertible, will be distributed. In
lieu of any fractional share to which a Participating Stockholder would
otherwise be entitled or receive or purchase, Surviving Corporation shall round
down to the next whole share; provided that no rounding shall occur until the
conversion of the Merger Stock to Orion Common Stock. If at the termination of
the rights of all of the Participating Stockholders to the Reserved Merger
Stock, there are any fractional Lapsed Reserved Merger Stock remaining, the
Lapsed Reserved Merger Stock shall be returned to the status of authorized and
unissued shares of capital stock Orion without restrictions.
2.3 ORION NOTE. At the Effective Time, the Promissory Note of Citadel to
Orion dated December 9, 2003 and March 9, 2004 and the Warrant(s) granted
therewith to Orion dated December 9, 2003 and March 9, 2004 (collectively,
"ORION NOTE") shall be extinguished.
2.4 DISSENTING SHAREHOLDERS.
(a) Notwithstanding Section 2.1(b) above, shares of Citadel Stock
that are held by a stockholder of Citadel who has properly preserved and
perfected dissenters' rights with respect to such shares ("CITADEL
DISSENTING STOCKHOLDER") pursuant to RCW 23B.13.200 et seq. of the WBCA
shall not be converted into the right to receive Merger Stock pursuant to
Section 2.1(c) hereof, and instead shall be treated in accordance with
those provisions of the WBCA unless and until the right of such Citadel
Dissenting Stockholder under RCW 23B.13.250 of the WBCA to payment for his
shares shall cease.
(b) If any Citadel Dissenting Stockholder shall effectively withdraw
or lose (through failure to perfect or otherwise) such Citadel Dissenting
Stockholder's right to payment for any of such Citadel Dissenting
Stockholder's shares under RCW 23B.13.200 et seq. of the WBCA, such
Citadel Dissenting Stockholder's shares shall automatically be converted
into the right to receive shares of Merger Stock in accordance with
Section 2.1(c) hereto.
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(c) Each Citadel Dissenting Stockholder who becomes entitled,
pursuant to the provisions of RCW 23B.13.200 et seq. of the WBCA, to
payment of the fair value of any such Citadel Dissenting Stockholder's
shares shall receive payment therefore from the Surviving Corporation
pursuant to Section 23B.13.250 of the WBCA.
2.5 EXCHANGE AND CONVERSION OF SHARES OF CITADEL STOCK. The manner of
exchanging and converting shares of Citadel Stock into shares of Merger Stock in
accordance with Section 2.1(c) above, shall be as follows:
(a) From and after the Effective Time, American Stock Transfer &
Trust Company (the "EXCHANGE AGENT") shall act as exchange agent in
effecting the exchange of certificates representing shares of Citadel
Stock pursuant to Section 2.1(c) hereof. As soon as practicable after the
Effective Time, and after surrender to the Exchange Agent by each
Participating Stockholder of certificates which prior to the Effective
Time represented shares of Citadel Stock, the Surviving Corporation shall
cause to be distributed to such Participating Stockholder in whose name
such stock certificates shall have been registered, or in accordance with
the written instructions transmitted to the Exchange Agent by the
Participating Stockholder, certificates representing shares of Merger
Stock, all in accordance with the provisions of Section 2.1(c) hereof.
Upon the surrender by Participating Stockholders of each certificate
representing shares of Citadel Stock, and the issuance and delivery by the
Exchange Agent of certificates representing shares of Merger Stock, the
certificates which prior to the Effective Time represented outstanding
shares of Citadel Stock shall forthwith be canceled. Until so surrendered
and exchanged, each such certificate representing shares of Citadel Stock
shall be deemed for all purposes to evidence only a right to receive
shares of Merger Stock, and the holders of such certificates after the
Effective Time shall no longer be deemed, for any purpose, to be
stockholders in Citadel.
(b) Participating Stock Holders will, for all purposes (except for
the payment of possible dividends or other distributions by Orion which
will be withheld until the exchange of certificates discussed above), be
deemed to be stockholders of Orion, as of the Effective Time, irrespective
of whether they have received their certificates or agreements
representing shares of Merger Stock.
(c) Immediately prior to the Effective Time, Orion shall provide the
Exchange Agent with certificates representing the number of shares of
Merger Stock as Orion may be required to issue in accordance with Section
2.1(c) hereof.
(d) Promptly after the Effective Time, the Exchange Agent, on behalf
of Citadel and Orion, shall mail to each holder of record of certificates,
which immediately prior to the Effective Time represented shares of
Citadel Stock, a form of letter of transmittal and instructions for use in
surrendering such certificates and receiving certificates representing
shares of Merger Stock.
2.6 NOTICE OF CHANGE IN TERMS OF CITADEL WARRANTS AND CITADEL OPTIONS.
Promptly after the Effective Time, the Surviving Corporation will mail to each
holder of Citadel Warrants and Citadel Options a notice of the terms of their
respective warrants and options as a result of the Merger.
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ARTICLE III
CLOSING
3.1 CLOSING DATE. The closing of the Merger (the "CLOSING") and the other
transactions contemplated by this Agreement (the "RELATED TRANSACTIONS") shall
take place at the offices of Graubard Miller, 600 Third Avenue, New York, New
York 10016, 12:00 noon, New York time, on or before July 31, 2004, or such other
date, time and place as the parties hereto may agree upon (the "CLOSING DATE").
3.2 EXECUTION OF FORMAL MERGER DOCUMENTS. On the Closing Date, Citadel and
Orion shall execute the Certificate of Merger as provided by the DGCL and the
Articles of Amendment and Merger as provided by the WBCA. The Certificate of
Merger and Articles of Amendment and Merger shall be transmitted by the parties
to the appropriate offices for filing and/or recording on the Closing Date, in
order that the Merger contemplated by this Agreement shall become effective at
5:00 p.m., New York time, on the Closing Date.
3.3 POST MERGER OWNERSHIP OF ORION. Pursuant to the Plan and subject to
the rights of the terms of this Agreement and the Orion Rights, at Closing Orion
and Citadel anticipate that, if the Orion Private Placement is fully subscribed,
Orion would be owned materially as follows:
Orion Post-Merger Stock
-----------------------------------------------
As Converted
Orion Shareholders Common Class A Class B to Common Stock
- ------------------------------------ --------------------- ------------ ------------ -------------------------
Participating Stockholders 685,000 6,850,000
Orion Class A Stock 110 110,000
Orion Pre-Merger Stock 1,030,907 1,030,907
Orion Warrants 358,000 358,000
Orion Private Placement 3,000,000 3,000,000
MDB Fee Shares 300,000 300,000
- ------------------------------------ --------------------- ------------ ------------ -------------------------
*
- --------------------------------------------------------------------------------------------------------------
* Excluding shares of common stock potentially issuable on Orion Rights
under Settlement Agreement, as defined herein and shares under Section
6.21 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CITADEL
In order to induce Orion to enter into this Agreement and to consummate
the Merger and Related Transactions, contemplated hereby, Citadel represents and
warrants to Orion the following representations and warranties for itself and
its subsidiaries and affiliates through which it operates in part, and the term
Citadel, in this section, unless the context clearly indicates that it refers
only to Citadel as the parent corporation or specifically a subsidiary or an
affiliate, will be deemed to include the subsidiaries and the affiliates
together with Citadel.
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4.1 DUE INCORPORATION.
(a) Citadel is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington, with all
requisite power and authority to own, lease and operate its properties and
to carry on its business as they are now being owned, leased, operated and
conducted. To the knowledge of Citadel, Citadel is qualified or licensed
to do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of the properties owned, leased or operated
by it and the business transacted by it requires such qualification or
licensing, except where the failure to be so qualified or licensed would
not have a Citadel Material Adverse Effect (as defined in Section 4.6
hereof). The jurisdictions in which Citadel is qualified or licensed to do
business as a foreign corporation are set forth on SCHEDULE 4.1(A). True,
correct and complete copies of the current Certificate of Incorporation
and By-laws, as amended, and minutes of meetings (or written consents in
lieu of meetings) of the Board of Directors (and all committees thereof)
and stockholders of Citadel since inception have been, or prior to the
Closing Date will have been, delivered to Orion.
(b) SCHEDULE 4.1(B) sets forth all the subsidiaries or affiliates,
either wholly or partially owned, of Citadel, and the schedule specifies
the percentage ownership. Citadel does not own any economic, voting or
management interest in any corporation, proprietorship, firm, partnership,
limited partnership, trust, association, individual or other entity (a
"PERSON") except as set forth on SCHEDULE 4.1(B). Each entity listed on
SCHEDULE 4.1(B) is a duly organized, validly existing and in good standing
in under the laws of the jurisdiction of its incorporation or formation
with all requisite power and authority to own, lease and operate its
properties and to carry on its business as they are now being owned,
leased, operated and conducted. Each entity listed on SCHEDULE 4.1(B) is
qualified or licensed to do business and is in good standing as a foreign
corporation or entity in each jurisdiction where the nature of the
properties owned, leased or operated by it and the business transacted by
it requires such qualification or licensing, except where the failure to
be so qualified or licensed would not have an Citadel Material Adverse
Effect. The jurisdictions in which the entities listed on SCHEDULE 4.1(B)
qualified or licensed to do business as a foreign corporation are also set
forth on SCHEDULE 4.1(B).
4.2 DUE AUTHORIZATION. Citadel has full power and authority to enter into
this Agreement, the Certificate of Merger and the Articles of Amendment and
Merger and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Citadel of this Agreement have been, or,
in the case of the Articles of Amendment and Merger and the Certificate of
Merger, prior to the Closing Date will be, duly and validly approved and
authorized by the Board of Directors of Citadel, unless the Board of Directors
is unable pursuant to the WBCA recommend approval, and, subject to obtaining the
necessary approval of the Merger by the stockholders of Citadel, no other
actions or proceedings on the part of Citadel are necessary to authorize this
Agreement, the Articles of Amendment and Merger and the Certificate of Merger
and the transactions contemplated hereby and thereby. Citadel has duly and
validly executed and delivered this Agreement and will duly and validly execute
and deliver the Articles of Amendment and Merger and the Certificate of Merger.
Subject to obtaining the necessary approval of the stockholders of Citadel and
the consents set forth on SCHEDULE 4.3, this Agreement constitutes the legal,
valid and binding obligation of Citadel, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or other laws from
time to time in effect which affect creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
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4.3 CONSENTS AND APPROVALS; NON-CONTRAVENTION.
(a) Except as set forth on SCHEDULE 4.3, for the approval of the
stockholders of Citadel, for the filing of the Articles of Amendment and
Merger with the appropriate authorities pursuant to the WBCA and
Certificate of Merger with the appropriate authorities pursuant to the
DGCL, and for the filing of the Information Statement by Orion on Schedule
14(f) ("SCHEDULE 14(F)") as set forth in Section 6.5, no permit, consent,
authorization or approval of, or filing or registration with, any
Governmental Authority or any other Person not a party to this Agreement
is necessary in connection with the execution, delivery and performance by
Citadel of this Agreement, the Articles of Amendment and Merger the
Certificate of Merger, or the consummation of the transactions
contemplated hereby or thereby, or for the lawful continued operation by
Orion following the Effective Time of the business currently conducted by
Citadel. "GOVERNMENTAL AUTHORITY" shall mean the government of the United
States or any foreign country or any state or political subdivision
thereof or any entity, body or authority exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
(b) Except as set forth on SCHEDULE 4.3 and except as would not
result in a Citadel Material Adverse Effect, the execution, delivery and
performance by Citadel of this Agreement, the Articles of Amendment and
Merger and the Certificate of Merger do not and will not (A) violate any
Law ("LAW" meaning any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority); (B) violate or conflict with, result in a breach
or termination of, constitute a default (or a circumstance which, with or
without notice or lapse of time or both, would constitute a default) or
give any third party any additional right (including a termination right)
under, permit cancellation of, or result in the creation of any mortgage,
lien (except for any lien for taxes not yet due and payable), charge,
restriction, pledge, security interest, option, lease or sublease, claim,
right of any third party, easement, encroachment or encumbrance
(collectively, a "LIEN") upon any of the assets or properties of Citadel
under any contract to which Citadel is a party or by which Citadel or any
of its assets or properties is bound; (C) permit the acceleration of the
maturity of any indebtedness of Citadel or indebtedness secured by
Citadel's assets or properties; or (D) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of Citadel.
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(c) Citadel has obtained and is in compliance with all governmental
permits, licenses, registrations, certificates of occupancy, approvals and
other authorizations (collectively, the "PERMITS") that are required for
the complete operation of the business of Citadel as currently operated,
except for any Permits the absence of which would not result in a Citadel
Material Adverse Effect. All of the Permits are currently valid and in
full force and, to Citadel's knowledge, no revocation, cancellation or
withdrawal thereof has been threatened or noticed to Citadel. Citadel has
filed such timely and complete renewal applications as may be required
with respect to the Permits. Except as set forth on SCHEDULE 4.3, to
Citadel's knowledge, the Permits, in their current state, will allow
Citadel to continue to operate its business following the Effective Time
in substantially the same manner as Citadel's business is currently
operated.
4.4 CAPITALIZATION.
(a) The authorized capital stock of Citadel consists of 50,000,000
shares of Citadel Common Stock and 50,000,000 shares of Citadel Preferred
Stock. On the date hereof, there are issued and outstanding 12,987,500
shares of Citadel Common Stock and 4,001,250 shares of Citadel Preferred
Stock, consisting of 200,000 Shares of Series A Preferred Stock, 176,250
Shares of Series B Preferred Stock, 3,125,000 shares of Series C Preferred
Stock, 500,000 Shares of Series D Preferred Stock and 0 Shares of Series E
Preferred Stock. All of the issued and outstanding shares of Citadel
Common Stock and Citadel Preferred Stock are validly issued, fully paid
and non-assessable and the issuance thereof was not subject to preemptive
rights.
(b) Except as set forth on SCHEDULE 4.4, there are no shares of
Citadel Stock or other equity securities (whether or not such securities
have voting rights) of Citadel issued or outstanding or any subscriptions,
options, warrants, call rights, convertible securities or other agreements
or commitments of any character obligating Citadel to issue, transfer or
sell any shares of capital stock or other securities (whether or not such
securities have voting rights) of Citadel. Except as set forth on SCHEDULE
4.4, there are no outstanding contractual obligations of Citadel which
relate to the purchase, sale, issuance, repurchase, redemption,
acquisition, transfer, disposition, holding or voting of any shares of
capital stock or other securities of Citadel.
(c) Each outstanding security, agreement or arrangement of Citadel
that gives the holder or contract party right to acquire capital stock of
any class of Citadel, including the Citadel Warrants and Options, on the
Effective Date, automatically with no action by Citadel or the Surviving
Corporation, will become the right to acquire the Merger Stock, and on
conversion of the Merger Stock will become the right to acquire Orion
Common Stock, and each such security, agreement or arrangement will
automatically adjust as to the number of shares of Merger Stock or Orion
Common Stock and as to any amount of consideration payable for Merger
Stock or Orion Common Stock to comply with the amounts of Merger Stock and
Orion Common Stock as set forth in Section 2.1(c) hereof.
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4.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; OTHER DOCUMENTS. For
purposes of this Agreement, "Citadel Financial Statements" shall mean the
unaudited financial statements of Citadel as of December 31, 2003 and for the
period from inception (January 1, 2003) through December 31, 2003 (including all
notes thereto) which have been previously delivered to Orion, consisting of the
balance sheet as at December 31, 2003 and the related statements of operation
and cash flow and stockholders' equity as of December 31, 2003 and for the
period from inception through December 31, 2003. The Citadel Financial
Statements have not been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, but present fairly the
financial position, assets and liabilities of Citadel as at the dates thereof
and the revenues, expenses, results of operations and cash flows of Citadel for
the periods covered then ended (subject, in the case of any unaudited Citadel
Financial Statements, to normal audit adjustments consistent with past practice
and the absence of notes). The Citadel Financial Statements are in accordance
with the books and records of Citadel, do not reflect any transactions which are
not bona fide transactions and do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading. The Citadel Financial Statements make full and adequate disclosure
of, and provision for, all material obligations and liabilities of Citadel as of
the date thereof.
4.6 NO ADVERSE EFFECTS OR CHANGES. Except as listed on SCHEDULE 4.6, or as
disclosed in or reflected in Citadel Financial Statements, or as contemplated by
this Agreement or the Certificate of Merger, since December 31, 2003, Citadel
has not (i) taken any of the actions set forth in Section 6.3 (unless excepted
therein), (ii) suffered any Citadel Material Adverse Effect, (iii) suffered any
damage, destruction or Loss to any of its assets or properties (whether or not
covered by insurance), or (iv) increased the compensation of any executive
officer of Citadel. "LOSS" shall mean material liabilities, losses, costs,
claims, damages (including consequential damages), penalties and expenses
(including attorneys' fees and costs of investigation and litigation). For
purposes of this Agreement, "CITADEL MATERIAL ADVERSE EFFECT" shall mean an
effect on the then business, operations, assets, liabilities, results of
operations, cash flows, prospects or condition (financial or otherwise) of
Citadel that is materially adverse to Citadel.
4.7 TITLE TO PROPERTIES. Except as disclosed on SCHEDULE 4.7, Citadel (i)
has good and marketable title to, and is the lawful owner of, all of the
material tangible and intangible assets, properties, including real property,
and rights reflected as being owned by Citadel in Citadel Financial Statements
(other than assets disposed of in the ordinary course of business since the date
of Citadel Financial Statements), and (ii) at the Effective Time, will have good
and marketable title to, and will be the lawful owner of, all of such tangible
and intangible assets, properties, including real property, and rights, in any
case free and clear of any Lien, except for (x) any Lien for current taxes not
yet due and payable, (y) minor Liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Citadel, (z) Liens on assets held by Orion or on assets acquired by Citadel
in Authorized Acquisitions (and subject to the terms of the Orion Note).
4.8 LIABILITIES. Except to the extent reflected or reserved against on the
balance sheets of Citadel constituting a part of Citadel Financial Statements,
Citadel has no material debts, liabilities or obligations of any nature other
than (i) non-material liabilities incurred subsequent to the date of such
balance sheets in the ordinary course of Citadel's business, (ii) as set forth
on SCHEDULE 4.8 or (iii) arising from a Contract set forth in Section 4.10
hereof.
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4.9 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.9 is a true and complete list of all of the United
States and foreign material patents, patent applications, licenses,
trademarks, trade-names, service marks and rights (collectively, the
"INTELLECTUAL PROPERTY") used by Citadel in the conduct of its business.
Except as disclosed on SCHEDULE 4.9:
(i) all of the Intellectual Property is owned by Citadel or
licensed on a perpetual, exclusive basis with royalties as set forth on SCHEDULE
4.9;
(ii) none of the Intellectual Property is the subject of any
pending or, to the knowledge of Citadel, threatened in writing, litigation or
claim of infringement;
(iii)no license or royalty agreement to which Citadel is a
party is in breach or default by Citadel or, to Citadel's knowledge, any other
party thereto or the subject of any notice of termination given or threatened in
writing;
(iv) to Citadel's knowledge, the products and services being
offered or developed by Citadel do not and currently will not infringe any
trademark, service mark, trade name, copyright, trade secret, patent or
confidential or proprietary rights of another, and Citadel has not received any
notice contesting its right to use any Intellectual Property;
(v) Citadel has not granted any license or agreed to pay or
receive any royalty in respect of any Intellectual Property; and
(vi) Citadel possesses adequate rights as owner or licensee in
and to all Intellectual Property necessary to conduct its business as presently
conducted.
(b) Citadel has no knowledge which, directly or indirectly,
indicates a material infirmity in any United States and foreign
Intellectual Property or any basis for invalidity or unenforceability of
any rights claimed by Citadel in the Intellectual Property.
(c) Citadel has no knowledge which, directly or indirectly,
indicates that the licensor in each license agreement under which Citadel
has been granted rights does not own the entire unencumbered right, title
and interest in and to the Intellectual Property which is the subject of
the license.
(d) Citadel has made available to Orion for inspection and copying a
true copy of each document in Citadel's possession relating directly or
indirectly to each item of Citadel Intellectual Property, including each
license agreement, relating Citadel's present and intended business
activities and has disclosed to Orion each and all facts, test results and
other information known to Citadel which has, or to its knowledge may
have, any negative impact upon the efficacy of any of Citadel Intellectual
Property.
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4.10 CONTRACTS.
(a) SCHEDULE 4.10(A) lists all the Material Contracts and
arrangements of the following types to which Citadel is a party or by
which it is bound, or to which any of its assets or properties is subject,
including but not limited to those categories listed below in this Section
4.10. For the purpose of this Agreement, "CONTRACT" shall mean any
contract, lease, commitment or understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, instrument or license, whether
written or verbal, which is intended or purports to be a binding and
enforceable agreement (other than a Publisher Contract or Officer
Contract), and for the purposes of this Section 4.10, "MATERIAL CONTRACT"
shall mean a Contract under which Citadel remains obligated to pay, or may
receive, either (i) over a twelve-month period or (ii) the balance of the
current term of the Contract (exclusive or without extensions thereof),
the sum of $100,000 or more.
(i) any collective bargaining agreement;
(ii) any Contract or arrangement of any kind with any senior
employee, consultant, officer or director of Citadel;
(iii) any Material Contract with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or promotional
activities, or any Contract to act as one of the foregoing, on behalf of any
Person;
(iv) any Material Contract or arrangement of any nature which
involves the payment or receipt of cash or other property, an unperformed
commitment, or goods or services;
(v) any Contract or arrangement pursuant to which Citadel has
made or will make loans or advances, or has or will have incurred debts or
become a guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business);
(vi) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal property or
agreement for financing;
(vii) any Material Contract or arrangement involving a
partnership, joint venture or other cooperative undertaking;
(viii) any Material Contract or arrangement involving any
restrictions with respect to the geographical area of operations or scope or
type of business of Citadel;
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(ix) any power of attorney or agency agreement or arrangement
with any Person pursuant to which such Person is granted the authority to act
for or on behalf of Citadel, or Citadel is granted the authority to act for or
on behalf of any Person;
(x) any Material Contract relating to any corporate
acquisition or disposition by Citadel, or any acquisition or disposition of any
subsidiary, division, line of business, or real property, during the five(5)
years prior to the date of this Agreement; and
(xi) any Contract not specified above that is otherwise
generally Material or significant to Citadel and which would have Material
Adverse Effect to Citadel.
Citadel has made available to Orion true and complete copies of each
document listed on SCHEDULE 4.10(A) and indicated by written description each
oral arrangement so listed. Except as disclosed on SCHEDULE 4.10(A), the
cancellation of any such Contracts at any time by the other party, would not
have a Citadel Material Adverse Effect.
(b) PUBLISHER CONTRACTS. "PUBLISHER CONTRACT" shall mean any
contract, or agreement, whether written or verbal, which is intended or
purports to be a binding and enforceable agreement by and between Citadel
and a Publisher. "PUBLISHER" shall mean an on-line or print content
provider to Citadel pursuant to a network affiliate agreement, or similar
contractual arrangement between the Publisher and Citadel. A "Material
Publisher Contract" is any Publisher Contract under which the payments to
the Publisher exceed during the year 2003, or that Citadel projects to
exceed during the year 2004 the sum of $125,000. SCHEDULE 4.10(B) lists
all the Material Publisher Contracts. Citadel has made available to Orion
true and complete copies of each document listed on SCHEDULE 4.10(B).
Except as disclosed on SCHEDULE 4.10(B), the cancellation of any such
Publisher Contract at any time by the other party, would not have a
Citadel Material Adverse Effect.
4.11 INSURANCE. SCHEDULE 4.11 contains an accurate and complete list of
all policies of fire, liability, workers' compensation, product liability, title
and other forms of insurance owned or held by Citadel, and Citadel has
heretofore delivered to Orion a true and complete copy of all such policies. All
such policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been, or prior to
the Closing Date, will be, paid, and no notice of cancellation or termination
has been received with respect to any such policy. Except as set forth in
SCHEDULE 4.11, Citadel has not been refused any insurance with respect to its
assets or operations, and its coverage has not been limited by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance, during the last two years. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to the
business of Citadel.
4.12 EMPLOYEE BENEFIT PLANS. Except as provided in SCHEDULE 4.12, Citadel
nor any other member of the Controlled Group (as hereinafter defined) (i) has at
any time maintained, contributed to or participated in, (ii) has or had at any
time any obligation to maintain, contribute to or participate in, or (iii) has
any liability or contingent liability, direct or indirect, with respect to: any
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), oral or written
retirement or deferred compensation plan, incentive compensation plan, stock
plan, unemployment compensation plan, vacation pay plan, severance plan, bonus
plan, stock compensation plan or any other type or form of employee-related
arrangement, program, policy, plan or agreement. For purposes of this Agreement,
the term "CONTROLLED GROUP" shall refer to Citadel and each other corporation or
other entity under common control with Citadel (pursuant to the provisions of
Sections 414(b), (c), (m) or (o) of the Code) at any time during the 60-month
period ending on the Closing Date.
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4.13 EMPLOYEES; LABOR MATTERS.
(a) SCHEDULE 4.13(A) lists all the written employment, consulting
and similar agreements, which are currently in effect to which Citadel is
a party under which Citadel is obligated to pay in salary $100,000
pursuant to the current term (exclusive or without extensions thereof) or
more in any twelve (12) month period. To the knowledge of Citadel, Citadel
has conducted and currently is conducting its business in material
compliance with all Laws relating to employment and employment practices,
terms and conditions of employment, wages and hours and nondiscrimination
in employment. In the opinion of management, the relationship of Citadel
with its employees is good and there is, and during the past two years
there has been, no labor strike, dispute, slow-down, work stoppage or
other material labor difficulty pending or, to Citadel's knowledge,
threatened against or involving Citadel. None of the employees of Citadel
is covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated and no attempt is
currently being made, or during the past two years has been made, to
organize any employees of Citadel to form or enter a labor union or
similar organization.
(b) Except as set forth on SCHEDULE 4.13(B), Citadel has no material
liability for any vacation time, vacation pay, retirement benefits,
disability or other insurance benefits or severance pay attributable to
services rendered prior to the date of each such balance sheet.
4.14 TAX MATTERS.
(a) "TAXES", as used in this Agreement, means any Federal, state,
county, local or foreign taxes, charges, fees, levies, or other
assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp,
custom duties, severance or withholding taxes or charges imposed by any
Governmental Authority, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes and any expenses incurred in
connection with the determination, settlement or litigation of any tax
liability. "TAX RETURN", as used in this Agreement, means a report, return
or other information required to be supplied to a Governmental Authority
with respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities.
(b) Citadel (including its subsidiaries and affiliates) has duly
filed all Tax Returns required to be filed by it under applicable law or
filed appropriate extensions which have not yet expired and will file all
Tax Returns required to be filed by it at or prior to the Effective Time
under applicable law. All Tax Returns were in all material respects (and,
as to Tax Returns not filed as of the execution of this Agreement, will
be) true, complete and correct and filed on a timely basis, or extended as
permitted by law.
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(c) Citadel (and its subsidiaries and affiliates) has, within the
time and in the manner prescribed by law, paid (and until the Effective
Time will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those contested in
good faith and for which adequate reserves have been taken.
(d) There are no material liens for Taxes upon the assets of Citadel
(and its subsidiaries and affiliates) except liens for Taxes not yet due.
(e) Citadel (and its subsidiaries and affiliates) has complied (and
until the Effective Time will comply) in all material respects with the
provisions of the Code relating to the payment and withholding of Taxes
and has, within the time and in the manner prescribed by Law, withheld
from employee wages and paid over to the proper Governmental Authorities
all amounts required.
(f) Except as disclosed on SCHEDULE 4.14, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Citadel (and its subsidiaries and
affiliates).
(g) Except as disclosed on SCHEDULE 4.14, Citadel (and its
subsidiaries and affiliates) has not received any Tax Rulings (as defined
below) or entered into any Closing Agreements (as defined below) with any
taxing authority that would have a continuing adverse effect after the
Effective Time. "TAX RULING", as used in this Agreement, shall mean a
written ruling of a taxing authority relating to Taxes. "CLOSING
AGREEMENT", as used in this Agreement, shall mean a written and legally
binding agreement with a taxing authority relating to Taxes.
4.15 ENVIRONMENTAL REGULATIONS. To knowledge of Citadel, Citadel is in
compliance in all material respects with all applicable federal, state and local
laws and regulations governing the environment, public health and safety and
employee health and safety (including all provisions of the Occupational Safety
and Health Act ("OSHA")) and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand or notice has been filed or commenced
against Citadel and, to the knowledge of Citadel, no such charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand or notice is
pending or threatened in writing.
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4.16 LITIGATION.
(a) Except as disclosed in SCHEDULE 4.16, there are no actions,
suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to Citadel's
knowledge, threatened in writing against Citadel or any of Citadel's
officers or directors in their capacity as such, or any of their
respective properties or businesses, and Citadel is not aware of any facts
or circumstances which may reasonably be likely to give rise to any of the
foregoing. Except as set forth on SCHEDULE 4.16, all of the proceedings
pending against Citadel are covered and being defended by insurers
(subject to such deductibles as are set forth in such Schedule). Except as
disclosed on SCHEDULE 4.16, Citadel is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any court or
other Governmental Authority. Citadel has not entered into any agreement
to settle or compromise any proceeding pending or threatened in writing
against it which has involved any obligation for which Citadel has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings, or
investigations pending or, to Citadel's knowledge, threatened in writing
by or against Citadel with respect to this Agreement or the Articles of
Amendment and Merger, or in connection with the transactions contemplated
hereby or thereby, and Citadel has no reason to believe there is a valid
basis for any such claim, action, suit, proceeding or investigation.
4.17 NO CONFLICT OF INTERESTS. Except as disclosed on Schedule 4.17 or as
a holder of capital stock of Citadel and Citadel Warrants and Options, to
Citadel's knowledge, no Person affiliated with Citadel has or claims to have any
direct or indirect interest in any tangible or intangible property used in the
business of Citadel or has a conflict of interest as defined in Item 404 of
Regulation S-B under the Securities Exchange Act of 1934, as amended.
4.18 BANK ACCOUNTS. SCHEDULE 4.18 sets forth the names and locations of
each bank or other financial institution at which Citadel has either an account
(giving the account numbers) or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and the names of all Persons,
if any, now holding powers of attorney or comparable delegation of authority
from Citadel and a summary statement thereof.
4.19 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.19, Citadel
is not subject to and is not in default of any order of any court, Governmental
Authority or other agency or arbitration board or tribunal to which Citadel is
or was subject within the past two years and is not in violation of any laws,
ordinances, governmental rules or regulations (including, but not limited to,
those relating to environmental, safety, building, product safety or health
standards or labor or employment matters) to which Citadel is or was subject
within the past two years, except to the extent failure to comply would not have
a Citadel Material Adverse Effect. To knowledge of Citadel, the business of
Citadel is being, and at the Closing Date will be, conducted in material
compliance with all applicable laws, ordinances, rules and regulations
applicable to it (including, but not limited to, those relating to
environmental, safety, building, product safety or health standards or labor or
employment matters, except to the extent failure to comply would not have a
Citadel Material Adverse Effect).
4.20 BROKER'S/FEES SHARES. Citadel has not used any broker or finder in
connection with the transactions contemplated by this Agreement, and Orion has
not and shall not have any liability or otherwise suffer or incur any loss as a
result of or in connection with any brokerage or finder's fee or other
commission payable as a result of any actions taken by Citadel with respect to
any broker or finder in connection with the Merger contemplated by this
Agreement.
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4.21 BOARD RECOMMENDATION. The Board of Directors of Citadel, at a meeting
of such board held on May 13, 2004 determined that it should make no
recommendation with respect this Agreement, the Merger and the other
transactions contemplated hereby, but has forwarded this Agreement and the
Merger to the stockholders of Citadel to approve this Agreement and Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ORION
In order to induce Citadel to enter into this Agreement and to consummate
the Merger and Related Transactions contemplated hereby, Orion represents and
warrants to Citadel the following representations and warranties.
5.1 DUE INCORPORATION. Orion is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as they are now being owned, leased, operated and
conducted. To the knowledge of Orion, Orion is not required to qualify as a
foreign corporation in any jurisdiction and is not qualified to do business in
any jurisdiction other than its jurisdiction of incorporation. True, correct and
complete copies of the current Certificate of Incorporation and By-laws, as
amended or restated, and minutes of meetings (or written consents in lieu of
meetings) of the Board of Directors (and all committees thereof) and
stockholders of Orion since January 1, 1999 have been, or prior to the Closing
Date will have been, delivered to Citadel. Orion does not own any economic,
voting or management interest in any other Person.
5.2 DUE AUTHORIZATION. Orion has full power and authority to enter into
this Agreement, the Articles of Amendment and Merger, and the Certificate of
Merger and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Orion of this Agreement have been, or, in
the case of the Articles of Amendment and Merger and Certificate of Merger,
prior to the Closing Date will be, duly and validly approved and authorized by
the Board of Directors of Orion, and, no other actions or proceedings on the
part of Orion are necessary to authorize this Agreement, the Articles of
Amendment and Merger, the Certificate of Merger and the transactions
contemplated hereby and thereby. Orion has duly and validly executed and
delivered this Agreement and will duly and validly execute and deliver the
Articles of Amendment and Merger and Certificate of Merger. This Agreement
constitutes the legal, valid and binding obligation of Orion, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and the
requirement to obtain approval of the security holders of Orion to increase the
number of authorized shares of Common Stock to permit the conversion of the
Class B Preferred Stock. Upon the authorized increase of the authorized shares
of Orion Common Stock to at least 13,000,000, the Merger Stock will be
automatically convertible in accordance with the terms of the Merger Stock into
duly authorized, validly issued, fully paid and nonassessable Orion Common
Stock.
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5.3 CONSENTS AND APPROVALS; NON-CONTRAVENTION.
(a) Except as set forth on Schedule 5.2, for the filing the Articles
of Amendment and Merger and of the Certificate of Merger with the
appropriate authorities pursuant to the WBCA and the DGCL, respectively,
the requirement to increase the number of authorized shares of Common
Stock to at least 13,000,000, and the filing of the Schedule 14(f) and
waiting the requisite waiting periods for notice (as set forth in Section
6.5), no permit, consent, authorization or approval of, or filing or
registration with, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution,
delivery and performance by Orion of this Agreement, the Articles of
Amendment and Merger or the Certificate of Merger, or the consummation of
the transactions contemplated hereby or thereby, or for the lawful
continued operation of the business currently conducted by Orion and
Citadel by Orion following the Effective Time.
(b) Except as would not result in an Orion Material Adverse Effect,
the execution, delivery and performance by Orion of this Agreement, the
Certificate of Amendment and Merger, and the Certificate of Merger do not
and will not (A) violate any Law, (B) violate or conflict with, result in
a breach or termination of, constitute a default (or a circumstance which,
with or without notice or lapse of time or both, would constitute a
default) or give any third party any additional right (including a
termination right) under, permit cancellation of, or result in the
creation of any Lien (except for any Lien for taxes not yet due and
payable) upon any of the assets or properties of Orion under any contract
to which Orion is a party or by which Orion or any of its assets or
properties is bound; (C) permit the acceleration of the maturity of any
indebtedness of Orion or indebtedness secured by Orion's assets or
properties; or (D) violate or conflict with any provision of the
Certificate of Incorporation or By-laws of Orion.
(c) Orion has obtained and is in compliance with all Permits that
are required for the complete operation of the business of Orion as
currently operated, except for any Permits the absence of which would not
result in an Orion Material Adverse Effect. All of the Permits are
currently valid and in full force and, to the knowledge of Orion, no
revocation, cancellation or withdrawal thereof has been threatened. Orion
has filed such timely and complete renewal applications as may be required
with respect to the Permits. Except as set forth on SCHEDULE 5.3, to
Orion's knowledge, the Permits, in their current state, will allow Orion
to continue to operate its business following the Effective Time in
substantially the same manner as the business of Orion is currently
operated.
5.4 CAPITALIZATION.
(a) The authorized capital stock of Orion consists of 10,000,000
shares of Orion Common Stock and 1,000,000 shares of Preferred Stock. On
the date hereof, there are issued and outstanding 1,030,907 shares of
Orion Common Stock and 110 shares of Class A Preferred Stock and there are
685,000 authorized, but unissued shares of Class B Preferred Stock, which
will be convertible (subject to adjustment) into 6,850,000 shares of Orion
Common Stock pursuant to the terms set forth in the Certificate of
Designation for the Class B Preferred Stock and subject to an increase in
the authorized number of shares of Orion Common Stock and which shall be
reserved for issuance in connection with the Merger pursuant to this
Agreement. All of the issued and outstanding shares of Orion Common Stock
and Class A Preferred Stock are validly issued, fully paid and
non-assessable and the issuance thereof was not subject to preemptive
rights and upon issuance in accordance with the terms of this Agreement or
the terms of the Citadel Warrants and Options, the Merger Stock, when
issued, will be validly issued, fully paid and non-assessable and the
issuance thereof will not be subject to pre-emptive rights.
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(b) Except as set forth on SCHEDULE 5.4 and, except for the Class B
Warrants for the purchase of an aggregate of 358,000 shares of Orion
Common Stock, the 110,000 shares of Orion Common Stock issuable on
conversion of the 110 shares of outstanding Orion Preferred Stock, the
shares that may be issued on outstanding rights and rights that may be
issued in connection with any exchange offer to the holders of the Class B
Warrants pursuant to the terms of a settlement agreement dated January 21,
2000, as modified ("SETTLEMENT AGREEMENT"), with American High Growth
Equities Retirement Trust ("ORION RIGHTS"), and up to 3,300,000 shares of
Common Stock that may be issued to investors and MDB Capital Group LLC
pursuant to a private offering by Orion, there are no shares of Orion
Common Stock or other equity securities (whether or not such securities
have voting rights) of Orion issued or outstanding or any subscriptions,
options, warrants, call rights, convertible securities or other agreements
or commitments of any character obligating Orion to issue, transfer or
sell any shares of capital stock or other securities (whether or not such
securities have voting rights) of Orion. Except as set forth in this
Section or on SCHEDULE 5.4, there are no outstanding contractual
obligations of Orion which relate to the purchase, sale, issuance,
repurchase, redemption, acquisition, transfer, disposition, holding or
voting of any shares of capital stock or other securities of Orion.
(c) Orion shall not, in any event, be required to issue more than a
maximum of 671,250 shares of Orion Common Stock pursuant to the Orion
Rights currently required by the Settlement Agreement or any amendment or
modification thereof.
5.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; OTHER DOCUMENTS. For
purposes of this Agreement, "ORION FINANCIAL STATEMENTS" shall mean the audited
financial statements of Orion included in the SEC Filings (as hereinafter
defined) as at December 31, 2003 and for the period from inception (October 15,
1995) through December 31, 2003 and the unaudited financial statements of Orion
as at March 31, 2004 (including all notes thereto) which have been previously
delivered or were available to Citadel, consisting of the balance sheets at such
dates and, with respect to the audited Orion Financial Statements, the related
statements of income and cash flow for each of the twelve-month periods ended
December 31, 2002 and December 31, 2003, and the period October 15, 1995 through
December 31, 2003, and with respect to the unaudited Orion Financial Statements,
the related statements of income and cash flow for the three-month period ended
March 31, 2004 and the period from October 15, 1995 through March 31, 2004. The
Orion Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position, assets and
liabilities of Orion as at the dates thereof and the revenues, expenses, results
of operations and cash flows of Orion for the periods covered then ended
(subject, in the case of the unaudited interim Orion Financial Statements to
normal year-end audit adjustments consistent with past practice). The Orion
Financial Statements are in accordance with the books and records of Orion, do
not reflect any transactions which are not bona fide transactions and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading. The Orion Financial
Statements make full and adequate disclosure of, and provision for, all
obligations and liabilities of Orion as of the date thereof. The Orion Financial
Statements when filed with the Securities and Exchange Commission, complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the Securities and Exchange Commission with
respect thereto.
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5.6 NO ADVERSE EFFECTS OR CHANGES. Except as disclosed in or reflected in
the Orion Financial Statements, or as contemplated by this Agreement or the
Certificate of Merger, since March 30, 2004, other than lending $750,000 to
Citadel pursuant to a secured, convertible promissory note, Orion has not (i)
taken any of the actions set forth in Section 5.3, (ii) suffered any Orion
Material Adverse Effect, (iii) suffered any damage, destruction or Loss to any
of its assets or properties (whether or not covered by insurance), or (iv)
increased the compensation of any executive officer of Orion. For purposes of
this Agreement, "ORION MATERIAL ADVERSE EFFECT" shall mean an effect on the
business, operations, assets, liabilities, results of operations, cash flows, or
condition (financial or otherwise) of Orion which is materially adverse to
Orion, excluding the default and obligations pursuant to the Settlement
Agreement.
5.7 TITLE TO PROPERTIES. Orion (i) has good and marketable title to, and
is the lawful owner of, all of the tangible and intangible assets, properties,
including real property, and rights reflected in the Orion Financial Statements
(other than assets disposed of in the ordinary course of business since the date
of the Orion Financial Statements), and (ii) at the Effective Time will have
good and marketable title to, and will be the lawful owner of, all of such
tangible and intangible assets, properties and rights, in any case free and
clear of any Liens, except for (x) any Lien for current taxes not yet due and
payable, and (y) minor Liens that have arisen in the ordinary course of business
and that do not (in any case or in the aggregate) materially detract from the
value of the assets subject thereto or materially impair the operations of
Orion.
5.8 LIABILITIES. Except to the extent reflected or reserved against on the
balance sheets of Orion constituting a part of the Orion Financial Statements,
Orion has no debts, liabilities or obligations of any nature other (i) than
non-material liabilities incurred subsequent to the date of such balance sheets
in the ordinary course of Orion's business, and (ii) as set forth on SCHEDULE
5.8.
5.9 INTELLECTUAL PROPERTY. SCHEDULE 5.9 is a true and complete list of all
Intellectual Property used by Orion in the conduct of its business. Except as
disclosed on SCHEDULE 5.9:
(a) all of the Intellectual Property is licensed or owned by Orion
free and clear of all Liens;
(b) none of the Intellectual Property has been or is the subject of
any pending or, to the knowledge of Orion, threatened in writing,
litigation or claim of infringement;
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(c) no license or royalty agreement to which Orion is a party is in
breach or default by Orion or, to Orion's knowledge, any other party
thereto or the subject of any notice of termination given or threatened in
writing.
(d) Orion has not granted any license or agreed to pay or receive
any royalty in respect of any Intellectual Property; and
(e) Orion owns or possesses adequate rights in and to all
Intellectual Property necessary to conduct its business as presently
conducted.
5.10 CONTRACTS. SCHEDULE 5.10 lists all the material Contracts and
arrangements of the following types to which Orion is a party or by which it is
bound, or to which any of its assets or properties is subject, including but not
limited to:
(a) any collective bargaining agreement;
(b) any Contract or arrangement of any kind with any employee,
consultant, advisor, officer or director of Orion;
(c) any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or
promotional activities, or any Contract to act as one of the foregoing, on
behalf of any Person;
(d) any Contract or arrangement of any nature which involves the
payment or receipt of cash or other property, an unperformed commitment,
or goods or services, having a value in excess of $10,000;
(e) any Contract or arrangement pursuant to which Orion has made or
will make loans or advances, or has or will have incurred debts or become
a guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business);
(f) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property or personal property or
agreement for financing;
(g) any Contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of
business of Orion;
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(i) any power of attorney or agency agreement or arrangement with
any Person pursuant to which such Person is granted the authority to act
for or on behalf of Orion, or Orion is granted the authority to act for or
on behalf of any Person;
(j) any Contract relating to any corporate acquisition or
disposition of Orion, or any acquisition or disposition of any subsidiary,
division, line of business, or real property, during the five years prior
to the date of this Agreement; and
(k) any Contract not specified above that is material to Orion.
Orion has made available to Citadel true and complete copies of each
document listed on SCHEDULE 5.10, and a written description of each oral
arrangement so listed. The cancellation of any such Contracts at any time by the
other party would not have an Orion Material Adverse Effect.
5.11 INSURANCE. SCHEDULE 5.11 contains an accurate and complete list of
all policies of fire, liability, workers' compensation, product liability,
professional malpractice, title and other forms of insurance owned or held by
Orion, and Orion has heretofore delivered to Citadel a true and complete copy of
all such policies. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the Closing Date
have been, or prior to the Closing Date, will be, paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Except as set forth in SCHEDULE 5.11, Orion has not been refused any insurance
with respect to its assets or operations, and its coverage has not been limited
by any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance, during the last two years. Such insurance
policies provide types and amounts of insurance customarily obtained by
businesses similar to the business of Orion.
5.12 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 5.12, Orion
has no employee benefit plans.
5.13 TAX MATTERS.
(a) Orion has duly filed all Tax Returns required to be filed by it
under applicable law or filed appropriate extensions which have not yet
expired and will file all Tax Returns required to be filed by it at or
prior to the Effective Time under applicable law. All Tax Returns were in
all material respects (and, as to Tax Returns not filed as of the date
hereof, will be) true, complete and correct and filed on a timely basis or
extended as permitted by law.
(b) Orion has, within the time and in the manner prescribed by law,
paid (and until the Effective Time will pay within the time and in the
manner prescribed by law) all Taxes that are currently due and payable
except for those contested in good faith and for which adequate reserves
have been taken.
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(c) There are no material liens for taxes upon the assets of Orion
except liens for Taxes not yet due.
(d) Orion has complied (and until the Effective Time will comply) in
all respects with the provisions of the Code relating to the payment and
withholding of Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401 through
3606, 6041 and 6049, as well as similar provisions under any other Laws,
and has, within the time and in the manner prescribed by Law, withheld
from employee wages and paid over to the proper Governmental Authorities
all amounts required.
(e) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns
of Orion.
(f) Orion has not received any Tax Rulings or entered into any
Closing Agreements with any taxing authority that would have a continuing
adverse effect after the Effective Time.
(g) Orion has made and after the date of this Agreement will make
available to Citadel complete and accurate copies of (i) all Tax Returns,
and any amendments thereto, filed by Orion, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by
Orion and (iii) any Closing Agreements entered into by Orion with any
taxing authority.
(h) The United States government (with respect to United States
Federal income taxes) and Delaware and California (with respect to state
income and franchise taxes) are the only states, territories and
jurisdictions (whether foreign or domestic) to which any Taxes are
properly payable by Orion.
5.14 ENVIRONMENTAL REGULATIONS. Orion is in compliance in all material
respects with all applicable federal, state and local laws and regulations
governing the environment, public health and safety and employee health and
safety (including all provisions of OSHA) and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand or notice has been filed
or commenced against Orion and, to the knowledge of Orion, no such charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand or
notice is pending or threatened in writing.
5.15 LITIGATION. Except as set forth on SCHEDULE 5.15 or in connection
with the Settlement Agreement (a) there are no actions, suits, arbitrations,
regulatory proceedings or other litigation, proceedings or governmental
investigations pending or, to Orion's knowledge, threatened in writing against
Orion or any of the officers or directors of Orion in their capacity as such, or
any of their respective properties or businesses, and (b) Orion is not aware of
any facts or circumstances which may give rise to any of the foregoing. Orion is
not subject to any order, judgment, decree, injunction, stipulation or consent
order of or with any court or other Governmental Authority, except in respect of
the Settlement Agreement; Orion has not entered into any agreement to settle or
compromise any proceeding pending or threatened in writing against it, which has
involved any obligation for which Orion has any continuing obligation (i) other
than in connection with the Settlement Agreement or (ii) has been disclosed in
the SEC Filings, copies of which have been provided to Citadel, and listed on
SCHEDULE 5.15(B); and (b) there are no claims, actions, suits, proceedings, or
investigations pending or, to Orion's knowledge, threatened in writing by or
against Orion with respect to this Agreement or the Articles of Amendment and
Merger, or in connection with the transactions contemplated hereby or thereby,
and Orion has no reason to believe there is a valid basis for any such claim,
action, suit, proceeding or investigation.
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5.16 NO CONFLICT OF INTEREST. Except as disclosed on SCHEDULE 5.16 and as
a holder of shares of Orion Common Stock, Preferred Stock, Class B Warrants and
potentially pursuant to the Settlement Agreement, including thereunder certain
Orion Rights that may be offered, to Orion's knowledge, no Person affiliated
with Orion has claims to have any direct or indirect interest in any tangible or
intangible property used in the business of Orion.
5.17 BANK ACCOUNTS. SCHEDULE 5.17 sets forth the names and locations of
each bank or other financial institution at which Orion has either an account
(giving the account numbers) or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and the names of all Persons,
if any, now holding powers of attorney or comparable delegation of authority
from Orion and a summary statement thereof.
5.18 COMPLIANCE WITH LAWS. Orion is not in default under any order of any
court, Governmental Authority or other agency or arbitration board or tribunal
to which Orion is or was subject within the past two years or in violation of
any laws, ordinances, governmental rules or regulations (including, but not
limited to, those relating to environmental, safety, building, product safety or
health standards or labor or employment matters) to which Orion is or was
subject within the past two years, except to the extent failure to comply would
not have an Orion Material Adverse Effect. The business of Orion is being, and
at the Closing will be, conducted in compliance with all applicable laws,
ordinances, rules and regulations applicable to it (including, but not limited
to, those relating to environmental, safety, building, product safety or health
standards or labor or employment matters), except to the extent failure to
comply would not have an Orion Material Adverse Effect.
5.19 BROKER'S/FINDER'S FEES. Except for the employment of MDB Capital, LLC
("MDB"), of which the current members of the Board of Directors of Orion are
also members, Orion has not used any broker or finder in connection with the
transactions contemplated by this Agreement, and except as aforementioned after
the transaction contemplated by this Agreement, Citadel has not and shall not
have any liability or otherwise suffer or incur any loss as a result of or in
connection with any brokerage or finder's or other commission payable as a
result of any actions taken by Orion with respect to any broker or finder in
connection with the Merger contemplated by this Agreement.
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5.20 BOARD APPROVAL. The Board of Directors of Orion, at a meeting of the
Board of Directors held on June 22, 2004, approved this Agreement, the Merger
and the other transactions contemplated hereby on the terms and conditions set
forth herein.
5.21 EMPLOYEE MATTERS. Orion is not a party to any employment agreement or
consulting or similar agreement for the present or future provision of services
to Orion. Orion has conducted and currently is conducting its business in
material compliance with all Laws relating to employment and employment
practices, terms and conditions of employment, wages and hours and
nondiscrimination in employment. Orion has no liability for any vacation pay,
vacation time, retirement benefits, health, disability or other insurance
benefits or severance pay, other than those incurred in the ordinary course of
business.
5.22 SEC FILINGS. Orion's most recent Form 10-KSB, as amended, for the
fiscal year ended December 31, 2003 and all subsequent Form 8-K's, Form
10-QSB's, proxy statements and other documents together with all exhibits
thereto, as filed with the Securities and Exchange Commission ("SEC") by Orion
have been delivered or otherwise available to Citadel (the "SEC FILINGS"). The
SEC Filings were timely filed with the SEC and as of their respective filing
dates did not contain a misstatement of a material fact or an omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading as of the time such documents were filed. There is no
other document or report required to be filed by Orion with the SEC that has not
been filed and, with the exception of the execution of this Agreement and
consummation of the Merger, no event or transaction has occurred or is
contemplated which will hereafter be required to be disclosed by the Company in
a Form 10-KSB, Form 10-QSB, Form 8-K or similar filing with the SEC. Orion shall
cause to be filed all periodic and current reports required to be filed with the
SEC for all periods after execution of their Agreement through the Closing Date.
ARTICLE VI
COVENANTS
6.1 IMPLEMENTING AGREEMENT. Subject to the terms and conditions hereof,
each party hereto shall use its commercially reasonable efforts to take all
action required of it to fulfill its obligations under the terms of this
Agreement, the Certificate of Merger and the Articles of Amendment and Merger
and to facilitate the consummation of the transactions contemplated hereby and
thereby.
6.2 ACCESS TO INFORMATION AND FACILITIES.
(a) From and after the date of this Agreement, Citadel shall allow
Orion and its representatives access during normal business hours to all
of the facilities, properties, books, Contracts, commitments and records
of Citadel and shall make the officers and employees of Citadel available
to Orion and its representatives as Orion or its representatives shall
from time to time reasonably request. Orion and its representatives will
be furnished with any and all information concerning Citadel, which Orion
or its representatives reasonably request.
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(b) From and after the date of this Agreement, Orion shall give
Citadel and its representatives access during normal business hours to all
of the facilities, properties, books, Contracts, commitments and records
of Orion (and its subsidiaries and affiliates) and shall make the officers
and employees of Orion (and its subsidiaries and affiliates) available to
Citadel and its representatives as Citadel or its representatives shall
from time to time reasonably request. Citadel and its representatives will
be furnished with any and all information concerning Orion, which Citadel
or its representatives reasonably request.
6.3 PRESERVATION OF BUSINESS. Subject to the terms of this Agreement, from
the date of this Agreement until the Closing Date, each of Citadel and Orion
(which for the purposes of their covenant includes its subsidiaries and
affiliates), as the case may be, shall operate only in the ordinary and usual
course of business consistent with past practice, and shall use reasonable
commercial efforts to (a) preserve intact the present business organization of
Citadel and Orion, as the case may be, (b) preserve the good will and
advantageous relationships of Citadel and Orion, as the case may be, with
employees and other Persons material to the operation of their respective
businesses, and (c) not permit any action or omission within its control which
would cause any of the representations or warranties of Citadel and Orion, as
the case may be, contained herein to become inaccurate in any material respect
or any of the covenants of Citadel and Orion, as the case may be, to be breached
in any material respect. Without limiting the generality of the foregoing, (i)
with respect to Citadel, except as set forth on SCHEDULE 4.6, and for Publisher
Contracts (including acquisitions of specialty-sports, on-line or print,
publishing businesses) for a gross consideration of less than $150,000 or
approved by Orion ("APPROVED ACQUISITIONS")), and (ii) with respect to Orion,
except as set forth on SCHEDULE 5.6 and the Orion Private Placement as provided
in Section 6.19, prior to the Closing, neither Citadel nor Orion will, without
having obtained the prior written consent of the other:
(a) except in connection with professional expenses and fees related
to the Merger, incur any obligation or enter into any Contract which
either (x) requires a payment in excess of, or a series of payments which
in the aggregate exceeds $100,000, in the case of Citadel and $10,000, in
the case of Orion, or provides for the delivery of goods or performance of
services, or any combination thereof, having a value in excess of $100,000
in the case of Citadel and $10,000, in the case of Orion, or (y) has a
term of, or requires the performance of any obligations over time by
Citadel or Orion, in excess of one year;
(b) take any action, or enter into or authorize any Contract or
transaction other than in the ordinary course of business and consistent
with past practice;
(c) as applicable, sell, transfer, convey, assign or otherwise
dispose of any of its assets or properties, except in the ordinary course
of business;
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(d) waive, release or cancel any claims against third parties or
debts owing to it, or any rights which have any value in an amount greater
than $50,000, other than actions taken that are consistent with normal
past business practices;
(e) make any material changes in its accounting systems, policies,
principles or practices, except as required by Citadel to be able to
comply with generally accepted accounting practices to be consistently
applied and to be able to prepare and provide auditable books and records
for the purpose of filing with the SEC audited and interim financial
statements pursuant to applicable securities laws and to the rules and
regulations of the SEC;
(f) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise) any shares of its capital
stock or any other securities, or amend any of the terms of any such
securities;
(g) split, combine, or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities;
(h) other than in the ordinary course of business or consistent with
prior business practices, make any borrowings, incur any debt (other than
trade payables in the ordinary course of business or equipment leases
entered into in the ordinary course of business), or assume, guarantee,
endorse or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person other than a
subsidiary, or make any unscheduled payment or repayment of principal in
respect of any Short Term Debt or Long Term Debt. "LONG TERM DEBT" shall
mean the aggregate original principal amount (less any cash repayments of
principal previously made) of, and any and all accrued interest on, all
indebtedness with respect to borrowed money and all other obligations (or
series of related obligations) to pay money with respect to extensions of
credit, including capitalized lease and deferred compensation obligations,
except indebtedness or obligations for which all installments are payable
within six months from the date of the advancement of funds or extension
of credit. The term "SHORT TERM DEBT" shall include any amount listed or
to be listed as a current liability on financial statements which reflects
the current portion or final installments of obligations originally
reflected as non-current liabilities;
(i) make any new loans advances to any other Person other than in
the ordinary course of business or consistent with prior business
practices.
(j) make any capital contributions to or new investments to any
other person, other than to a subsidiary;
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(k) except as contemplated by this Agreement, enter into, adopt,
amend or terminate any bonus, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted stock, performance
unit, pension, retirement, deferred compensation, employment, severance or
other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer or
employee, or increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
existing plan and arrangement or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing other than actions
taken in the ordinary course of business consistent with prior business
practices;
(l) acquire, lease or encumber any assets outside the ordinary
course of business or which are assets material to its operations, other
than in connection Approved Acquisitions ;
(m) authorize or make any capital expenditures which individually or
in the aggregate are in excess of $50,000;
(n) make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability, or waive or extend the
statute of limitations in respect of any such Taxes;
(o) pay or agree to pay any amount in settlement or compromise of
any suits or claims of liability against it or its directors, officers,
employees or agents in an amount more than $50,000; or
(p) terminate, modify, amend or otherwise alter or change any of the
terms or provisions of any Contract other than in accordance with ordinary
business practices, or pay any amount not required by Law or by any
Contract in an amount more than $50,000.
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6.4 CITADEL STOCKHOLDERS' MEETING. Reasonably promptly following the
execution of this Agreement, Citadel shall call a special meeting of
stockholders (the "CITADEL STOCKHOLDERS' MEETING") to be held as promptly as
practicable following the execution of this Agreement for the purpose, among
others, of voting on the Merger contemplated herein. In connection with Citadel
Stockholders' Meeting, Citadel shall promptly prepare and distribute a proxy
statement/information statement (the "PROXY STATEMENT/INFORMATION STATEMENT")
for dissemination to each holder of shares of Citadel Stock and other securities
of Citadel, sufficient for them to make a decision to approve the Merger and
acquire the Orion Common Stock and Orion Warrants or Orion Options on
consummation of the Merger on the basis of an exemption from the registration
provisions of Securities Act of 1933, as amended ("SECURITIES ACT"). Orion shall
as promptly as practical provide to Citadel copies of its SEC Filings and such
other public information as may be necessary in connection with the provision of
the Proxy Statement/Information Statement.
6.5 SCHEDULE 14(F) OF ORION.
(a) As promptly as practicable after the execution of this
Agreement, Orion shall file with the SEC and distribute the Schedule 14(f)
for the purpose of notifying the holders of the Orion Common Stock prior
to the Merger of the change of control and change of the Board of
Directors of Orion upon consummation of the Merger.
(b) Citadel shall cooperate and use its commercially reasonable
efforts to supply Orion with all requisite information necessary to
complete the Schedule 14(f).
(c) The information as being supplied by Orion for inclusion in the
Schedule 14(f) shall not, at the time the Schedule 14(f) is filed with the
SEC or distributed to the holders of Orion Common Stock prior to the
Merger and on the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, not
misleading.
(d) The information specifically designated as being supplied by
Citadel for inclusion in the Schedule 14(f) shall not, at the time the
Schedule 14(f) is filed with the SEC or distributed to the holders of
Orion Common Stock prior to the Merger and on the Effective Date, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, not misleading.
(e) If, at any time prior to the Effective Date, any event or
circumstance relating to Orion or its officers or directors should be
discovered by Orion which should be set forth in an amendment to the
Schedule 14(f), Orion shall promptly inform Citadel and Orion shall
promptly file and distribute such amendment to the Schedule 14(f).
(f) If, at any time prior to the Effective Date, any event or
circumstance relating to Citadel or its officers or directors should be
discovered by Citadel which should be set forth in am amendment to the
Schedule 14(f), Citadel shall promptly inform Orion of the same, and Orion
shall promptly file and distribute such amendment to the Schedule 14(f).
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(g) All documents that Orion is responsible for filing with the SEC
in connection with the transactions contemplated herein will comply as to
form and substance in all material respects with the applicable
requirements of the Act and the rules and regulations thereunder and the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
rules and regulations thereunder.
6.6 BLUE SKY COMPLIANCE. Orion shall use its commercially reasonable
efforts to avail itself of any exemptions or to qualify the shares of Merger
Stock to be issued pursuant to the Merger under the securities or "blue sky"
laws of every jurisdiction of the United States in which a Citadel stockholder
has an address on the records of Citadel, on the record date for determining
Citadel stockholders entitled to notice of and to vote on the Merger, except any
such jurisdiction with respect to which counsel for Orion has determined that
such qualification is not required under the securities or "blue sky" laws of
such jurisdiction.
6.7 AGREEMENT TO VOTE. Citadel will use its commercially reasonable
efforts to obtain the agreements of all holders of five percent (5%) or more of
Citadel Stock and all the officers and directors of Citadel, to vote any Citadel
Stock held of record or over which they have the authority to vote in favor of
approval of this Agreement and the Merger and the Related Transactions.
6.8 POST-MERGER BOARD AND BOARD ACTIONS.
(a) POST MERGER BOARD OF DIRECTORS. Immediately after the Effective
Date, the Board of Directors of the Surviving Corporation will take such
action to appoint the following persons to the Board of Directors, in
accordance with the statements of the Schedule 14(f):
(i) Christopher A. Marlett ("MARLETT");
(ii) James C. Heckman ("HECKMAN");
(iii) Brian Kosar ("KOSAR"); and
(iv) Patrick Crumb ("CRUMB").
(collectively "AGREED DIRECTORS").
(b) VOTING AGREEMENT. For the period of three (3) years after the
Effective Date, the Surviving Corporation will use its best efforts,
without limitation, to cause the Agreed Directors to be nominated as
directors for election by the Surviving Corporation. In connection with
the nomination of the Agreed Directors, each of Marlett, Heckman, and
Kosar shall enter into the form of agreement attached hereto as EXHIBIT
6.8 hereto ("VOTING AGREEMENT"), which provides for their respective
agreement to vote any shares of common stock or other voting securities of
the Surviving Corporation that they own, are the beneficial owner of or
over which they have voting control, pursuant to a voting agreement or
otherwise (i) in favor of the Agreed Directors as the directors, (ii)
their agreement not to vote to remove any one of them other than for
cause, and to (iii) to vote for an amendment to the Articles of
Incorporation to increase the shares of Orion Common Stock to not less
than 25,000,000 shares.
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6.9 MERGER STOCK REGISTRATION RIGHTS.
(a) The Surviving Corporation shall (simultaneously and on the same
terms and conditions provided to the holders of any of the Orion Common
Stock acquired in the Orion Private Placement which is a condition to the
Merger) (a) include on any registration statement filed with the SEC, for
re-offer and re-sale, the Merger Stock and any Orion Common Stock into
which the Merger Stock may be converted or which may be acquired upon
exercise or conversion of any Citadel Warrants and Options (collectively
such Merger Stock or Orion Common Stock is referred to in this section as
the "Registrable Securities") and (b) the Company will "blue sky" the
reoffer and resale of the Registrable Securities in such state
jurisdictions where the sale of Orion Common Stock is approved for reoffer
and resale. All costs associated with the registration of the Registrable
Securities, other than brokerage commissions and counsel costs incurred by
the holders in connection with resales of the Registrable Securities which
shall be the responsibility of the holders, shall be borne by the
Surviving Corporation. The Surviving Corporation is not obligated to file
the registration statement set forth in this provision or any other
registration statement in respect of the Registrable Securities until the
Surviving Corporation is current in its SEC filings by filing the required
financial statements reflecting the Merger on Form 8-K.
(b) The Surviving Corporation shall use its reasonable commercial
efforts to register and keep the registration statement which registers
the Registrable Securities pursuant hereto effective and the related
prospectus current until the earlier of the date by which all of the
Registrable Securities have been sold or the date that Registrable
Securities may be sold pursuant to Rule 144 promulgated under the
Securities Act (even through at such date all the Registrable Securities
may not be eligible for public sale under Rule 144).
(c) The Company will notify each holder of such Registrable
Securities as expeditiously as possible following the effectiveness of the
registration statement on which the Registrable Securities are registered,
and/or of any request by the Commission for the amending or supplementing
of such registration statement or prospectus; provided that if the
prospectus is amended to comply with the requirements of the Securities
Act, the holders, if requested by the Company, will immediately cease
making offers of the Registrable Securities and return all prospectuses to
the Company, and the Company will promptly provide the holders with
revised prospectuses to enable the holders to resume making offers of the
Registrable Securities. The Company will promptly notify the holders, if
after delivery of a prospectus to the holders, that, in the judgment of
the Company, it is advisable to suspend use of the prospectus delivered to
the holders due to pending material developments or other events that have
not yet been publicly disclosed and as to which the Company believes
public disclosure would be detrimental to the Company. Upon receipt of
such notice, each such holder will immediately discontinue any sales of
Registrable Securities pursuant to such registration statement until such
holder has received copies of a supplemented or amended prospectus or
until such holder is advised in writing by the Company that the then
current prospectus may be used and has received copies of any additional
or supplemental filings that are incorporated or deemed incorporated by
reference in such prospectus. Notwithstanding anything to the contrary
herein, the Company will not exercise its rights under this subsection to
suspend sales of Registrable Securities for a period in excess of 60 days
in any 365-day period.
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6.10 CONSENTS AND APPROVALS.
(a) Citadel shall use commercially reasonable efforts to obtain all
consents, approvals, certificates and other documents required in
connection with the performance by it of this Agreement and the
consummation of the transactions contemplated hereby, including all such
consents and approvals by each party to any of the Contracts referred to
on SCHEDULE 4.3. Citadel shall make all filings, applications, statements
and reports to all Governmental Authorities and other Persons that are
required to be made prior to the Closing Date by or on behalf of Citadel
pursuant to any applicable Law or Contract in connection with this
Agreement and the transactions contemplated hereby.
(b) Orion shall use commercially reasonable efforts to obtain all
consents, approvals, certificates and other documents required in
connection with the performance by it of this Agreement and the
consummation of the transactions contemplated hereby, including, but not
limited to all such consents and approvals by each party to any of the
Contracts referred to on SCHEDULE 5.3. Orion shall make all filings,
applications, statements and reports to all Governmental Authorities and
other Persons that are required to be made prior to the Closing Date by or
on behalf of Orion pursuant to any applicable Law or Contract in
connection with this Agreement and the transactions contemplated hereby.
6.11 MAINTENANCE OF INSURANCE. Citadel and Orion shall continue to carry
their respective existing insurance, and shall not allow any breach, default,
termination or cancellation of such insurance policies or agreements to occur or
exist.
6.12 NO OTHER NEGOTIATIONS.
(a) Until the earlier of (i) the Closing, (ii) the termination of
this Agreement, or (iii) twenty-five (25) days prior to the Maturity Date
of the Orion Note, neither Orion nor Citadel (except with respect to Fox
Entertainment Group) their respective affiliates, subsidiaries, agents or
representatives will (x) solicit, encourage, directly or indirectly, any
inquiries, discussions or proposals for, (y) continue, propose or enter
into any negotiations or discussions looking toward, (z) enter into any
agreement or understanding providing for any acquisition of any capital
stock of the respective corporation or any part of the assets or the
businesses of the respective corporation, other than as contemplated or
authorized hereby; or borrow or raise funds some or all of the proceeds of
which shall be used to repay the Orion Note. In addition, neither Orion
nor Citadel and their respective affiliates, subsidiaries, agents or
representatives will provide any information to any Person (other than as
contemplated by this Agreement) for the purpose of evaluating or
determining whether to make or pursue any such inquiries or proposals with
respect to any such acquisition of capital stock, assets or business. Each
of Orion on the one hand and Citadel on the other hand will notify the
other immediately of any such inquiries or proposals or requests for
information.
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(b) Notwithstanding Section 6.12(a), in the event that there is an
unsolicited proposal to enter into a merger, business combination,
purchase of substantially all the assets or similar transaction of or with
Orion or Citadel, as the case may be, such party at its discretion, may
furnish to and communicate with the party or parties public and non-public
information requested by them and such party may negotiate with these
parties, if (i) the board of directors of the party determines in good
faith, based upon the advice of its financial advisors, that such business
combination proposal would, if consummated, result in a transaction that
is more favorable to the corporation's stockholders from a financial point
of view, than the transaction contemplated by this Agreement, and based on
the advice of its outside counsel, that, as a result, such action is
necessary for the board of directors to act in a manner consistent with
its fiduciary duties under applicable law, and (ii) prior to furnishing
such information to or entering into negotiations with such third party,
Orion or Citadel, as the case may be, (x) provides prompt notice to the
other party hereto to the effect that it is furnishing information to or
entering into discussions or negotiations with such third party and (y)
receives from such third party an executed confidentiality agreement, and
(B) Orion may comply with Rule 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer and/or Citadel may proceed with
the proposal. Each of Orion and Citadel shall notify the other orally and
in writing of any such inquiries, offers or proposals (including the terms
and conditions of any such proposal and the identity of the Person making
it) within 48 hours of the receipt thereof, shall keep the such other
party informed of the status and details of any such inquiry, offer or
proposal, and shall give such other party five (5) days' advance notice of
any agreement to be entered into with or any information to be supplied to
any Person making such inquiry, offer or proposal.
6.13 RULE 145 AFFILIATES. As soon as practicable after the date of this
Agreement, but in no event later than the Closing Date, Citadel shall identify
in a letter to Orion all Persons who might, at the Effective Time, be deemed to
be "affiliates" of Citadel for the purposes of Rule 145 under the Securities
Act.
6.14 ACCREDITED INVESTOR QUESTIONNAIRE. Citadel will obtain from each of
the holders of Citadel Stock and Citadel Warrants and Citadel Options, an
investor questionnaire, in form acceptable to Orion. Except as provided in
SCHEDULE 6.14 and subject to Section 6.14, each holder of Citadel Stock shall
certify that such Person is an "accredited investor" as defined in Regulation D
under the Securities Act, promulgated by the SEC ("ACCREDITED INVESTOR"), that
in connection with the Merger, they have obtained all information that they deem
necessary to evaluate the Merger and the acquisition of the securities of Orion
upon consummation of the Merger that they understand they will be receiving
"restricted securities" of Orion as a consequence of the Merger, with a new
holding period and that the securities they will receive from Orion as a
consequence of the Merger will bear restrictive legends.
35
6.15 SCHEDULES. Citadel on the one hand and Orion on the other hand have
made a good faith effort to provide information for which they are responsible
on each Schedule to this Agreement and appropriate to the representation and
warranty of the related schedule; however, to the extent information is provided
on one Schedule which should also have been presented on another schedule,
disclosure on the one Schedule will be deemed disclosure on the other schedules
where appropriate.
6.16 SUPPLEMENTAL INFORMATION. From time to time prior to the Closing,
Citadel, on the one hand, and Orion, on the other hand, will promptly disclose
in writing to the other any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement would have been required to be
disclosed to the other parties hereto or which would render inaccurate any of
the representations, warranties or statements set forth in Article IV and
Article V, respectively, hereof.
6.17 TAX OPINION. Orion shall seek from Graubard Miller, tax counsel to
Orion, an opinion to the effect that the Merger should qualify as a
reorganization under Section 368(a)(1)A of the Code substantially in the form
attached hereto as EXHIBIT 6.17.
6.18 LOCKUP AGREEMENTS.
(a) Each of the Persons set forth in SCHEDULE 6.18(A) will enter
into Lock-Up Agreements in the form attached hereto as EXHIBIT 6.18
("LOCK-UP AGREEMENT"). The Lock-Up Agreement shall provide that, except as
specifically provided in the Lock-Up Agreements and subject to Section
6.18(b) and 6.18(c), such persons will not sell Orion Common Stock and
derivatives thereof or securities convertible into Orion Common Stock of
which they are the beneficial owner or over which they have dispositive
control, for a period of twelve (12) months after the Effective Time,
except pursuant to the terms of the Lock-Up Agreement.
(b) The Surviving Corporation agrees that it will not release any
Person from the terms of the Lock-Up Agreement without the specific
approval of the designee of MDB ("MDB DESIGNEE"), on the one hand, and the
approval of the Board of Directors of the Surviving Corporation, on the
other hand; provided that any releases from the terms of the Lock-Up
Agreement by the Surviving Corporation shall be applied equally to all of
the Lock-up Agreements, other that the shares subject to Section 6.18(c).
Without limiting the foregoing and for clarity purposes, if the Surviving
Corporation at any time releases, in whole or in part, any person from a
Lock-up Agreement, subject to Section 6.18(c), the Surviving Corporation
shall have also released all Lock-up Agreements pursuant to the same terms
and conditions and in the same proportions.
(c) Notwithstanding Section 6.18(a) and 6.18(b), the Lock-Up
Agreement for (i) MDB, with respect to the Fee Shares and any shares of
Orion Common Stock owned by MDB as of the Effective Date, and (ii)
Marlett, shall each provide that the shares of Orion Common Stock and
derivatives thereof or securities convertible into Orion Common Stock of
which they are the beneficial owner or over which they have dispositive
control shall not be sold until and unless the Merger Stock has been
converted to Orion Common Stock pursuant to the terms of the Merger Stock
and registered as provided in Section 6.9 hereof. For clarity purposes,
the Lock-up agreement of MDB shall not apply to any shares of Orion Common
Stock or derivatives thereof acquired after the Effective Time.
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6.19 ORION PRIVATE PLACEMENT.
(a) PRIVATE PLACEMENT. Orion shall offer in a private offering
pursuant to Regulation D at $2.00 per share of Orion Common Stock, not
less than 1,000,000 shares of Orion Common Stock ("ORION PRIVATE PLACEMENT
Minimum") and not more than 3,000,000 shares of Orion Common Stock before
the Effective Time ("ORION PRIVATE PLACEMENT"), subject to the terms and
conditions of Section 6.19(b) hereof.
(b) ORION PRIVATE PLACEMENT CONDITIONS. The Orion Private Placement
shall be subject to the following:
(i) the sale of the Orion Common Stock in the Orion Private
Placement will be subject to the Closing of the Merger;
(ii) Citadel shall have the right to approve the terms and
conditions of the Orion Private Placement, which it has done with respect to the
Private Placement Memorandum and which it has extended to July 31, 2004; and
(iii)Although Orion may accept all subscriptions for Orion
Common Stock pursuant to the Orion Private Placement up to the Orion Collection
Requirement, as defined below, at the written request of Citadel at any time
before Closing, Orion agrees that it shall reject or otherwise refuse to accept
(in whole or in part, as requested by Citadel), subscriptions for Orion Common
Stock pursuant to the Orion Private Placement, if the subscribed funds exceed
the Orion Collection Requirement ("ORION RETURN REQUIREMENT").
(c) ORION COLLECTION REQUIREMENT. Orion shall have collected into
escrow, or otherwise received, on or before the earlier of (i) Closing
Date or (ii) June 28, 2004 the minimum sum of $2,000,000 from the Orion
Private Placement pursuant to executed and acceptable subscription
agreements issued by Orion in the Orion Private Placement ("ORION
COLLECTION REQUIREMENT").
6.20 AUDIT. Citadel shall use its good faith best effort to obtain from
the independent auditors of Citadel, BDO Seidman, LLP, within sixty (60) days of
the Effective Time an audit report of Citadel and its subsidiaries and
affiliates, on a consolidated basis, of the balance sheets for the fiscal year
ending at December 31, 2003 and related statements of operation and cash flow
and stockholders' equity for the three years ending as of December 31, 2003 and
for any quarterly interim periods since December 31, 2003 and the period from
inception to the appropriate fiscal year or interim period date. Such audit
report will be in form and substance consistent with SEC audit practice.
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6.21 Kosar Note Conversion. Reasonably immediately after Closing, Orion
shall in a private placement pursuant to a subscription agreement and such
documents as Orion shall prepare issue 50,000 shares of Orion Common Stock to
Kosar Investments, LLC as full payment of the $100,000 loan from Kosar
Investments, LLC, which such shares of Orion Common Stock shall have all of the
same rights and preferences as Orion Common Stock issued Orion Private
Placement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF ORION
The obligations of Orion under this Agreement are subject to the
satisfaction by Citadel or waiver by Orion of the following conditions precedent
on or before the Closing Date:
7.1 REPRESENTATIONS AND WARRANTIES. Without supplementation after the date
of this Agreement, the representations and warranties of Citadel contained in
this Agreement shall be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all respects, as of
the Closing Date, and with respect to all other representations and warranties,
true and correct in all material respects, as of the Closing Date, with the same
force and effect as if made as of the Closing Date.
7.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Citadel shall have performed
and complied with all of its covenants, obligations and agreements contained in
this Agreement to be performed and complied with by it on or prior to the
Closing Date.
7.3 CONSENTS AND APPROVALS. Citadel, shall have received written evidence
satisfactory to Orion that all consents and approvals required for the
consummation of the transactions contemplated hereby have been obtained, and all
required filings have been made, including (without limitation) those set forth
on Schedule 4.3 hereto.
7.4 DOCUMENTS. Orion shall have received all of the agreements, documents
and items specified in Section 9.1 below.
7.5 NO MATERIAL ADVERSE CHANGE. At the Closing Date, there shall have been
no material adverse change in the assets, liabilities, prospects, financial
condition or business of Citadel (together with its subsidiaries and affiliates)
since December 31, 2003 ("CITADEL MATERIAL ADVERSE CHANGE"). Between the date of
this Agreement and the Closing Date, there shall not have occurred an event that
would reasonably be expected to constitute a Citadel Material Adverse Effect.
7.6 ACTIONS OR PROCEEDINGS. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a) is
likely to have a Citadel Material Adverse Effect, or (b) could enjoin, restrain
or prohibit, or could result in substantial damages in respect of, any provision
of this Agreement or the consummation of the transactions contemplated hereby.
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7.7 CITADEL DISSENTING STOCKHOLDERS. The good faith estimate determined
jointly by Orion and Citadel that the aggregate amount to be paid as the fair
value of the shares held by Citadel Dissenting Stockholders at the Effective
Time will not exceed $100,000 ("DISSENTER PAYMENT THRESHOLD").
7.8 OPINION OF COUNSEL FOR CITADEL. Orion shall have received the opinion
of Peterson, Russell Kelly PLLC, counsel for Citadel, substantially in the form
annexed hereto as EXHIBIT 7.8.
7.9 APPROVAL OF MERGER. The stockholders of Citadel shall have approved
this Agreement and the Merger contemplated hereby in accordance with its
certificate of incorporation and by-laws and the WBCA.
7.10 SCHEDULE 14(F). The Schedule 14(f) shall have been distributed by
Orion not less than 10 days prior to the Closing Date to all the holders of the
Orion Common Stock as of the date of distribution which will be a day prior to
the Closing Date in accordance with the Act and the rules and regulations
promulgated by the SEC.
7.11 RESOLUTION ABOUT LOCK-UP AGREEMENTS. The Board of Directors of Orion
shall have passed a resolution to the effect that the Lock-Up Agreements may
only be terminated, amended, modified or waived by the Board of Directors of the
Surviving Corporation consistent with their fiduciary duties.
7.12 Fees of MDB as Finder.
(a) MDB shall receive as compensation pursuant to the terms of the
Finders Fee Agreement, dated as of April 5, 2004 ("Finders Agreement") an
amount equal to ten percent (10%) of the shares of Orion Common Stock sold
by MDB in the Orion Private Placement. ("FEE SHARES").
(b) Except as provided in this Section 7.12(a), no compensation is
due MDB, or its officers or affiliates from Orion related to the Merger,
Orion Private Placement, the Orion Note, or other services performed for
or on behalf of Orion.
7.13 MARLETT OPTION. Orion will issue to Marlett an option to purchase
100,000 shares of Common Stock at $2.00 per Share, pursuant to an option
agreement in the form attached as Exhibit 7.13 hereof.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CITADEL
The obligations of Citadel under this Agreement are subject to the
satisfaction by Orion or waiver by Citadel of the following conditions precedent
on or before the Closing Date:
8.1 REPRESENTATIONS AND WARRANTIES. Without supplementation after the date
of this Agreement, the representations and warranties of Orion contained in this
Agreement shall be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all respects, as of
the Closing Date, and with respect to all other representations and warranties,
true and correct in all material respects, as of the Closing Date, with the same
force and effect as if made as of the Closing Date.
8.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Orion shall have performed
and complied with all of its covenants, obligations and agreements contained in
this Agreement to be performed and complied with by it on or prior to the
Closing Date.
8.3 CONSENTS AND APPROVALS. Orion shall have received written evidence
satisfactory to Citadel that all consents and approvals required for the
consummation of the transactions contemplated hereby have been obtained, and all
required filings have been made, including (without limitation) those set forth
on SCHEDULE 5.2 hereto.
8.4 DOCUMENTS. Citadel shall have received all of the agreements,
documents and items specified in Section 9.2 hereof.
8.5 NO MATERIAL ADVERSE CHANGE. At the Closing Date, other than as
relating to the Settlement Agreement, there shall have been no material adverse
change in the assets, liabilities, financial condition or business of Orion
since December 31, 2003 ("ORION MATERIAL ADVERSE CHANGE"). Between the date of
this Agreement and the Closing Date, there shall not have occurred an event that
would reasonably be expected to constitute an Orion Material Adverse Effect.
8.6 ACTIONS OR PROCEEDINGS. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a) is
likely to have an Orion Material Adverse Effect, or (b) could enjoin, restrain
or prohibit, or could result in substantial damages in respect of, any provision
of this Agreement or the consummation of the transactions contemplated hereby.
8.7 CITADEL DISSENTING STOCKHOLDERS. The good faith estimate determined
jointly by Orion and Citadel that the aggregate amount to be paid as the fair
value of the shares held by Citadel Dissenting Stockholders at the Effective
Time will not exceed the Dissenter Payment Threshold.
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8.8 OPINIONS OF COUNSEL FOR ORION. Citadel shall have received the opinion
of Graubard Miller, counsel for Orion, substantially in the form annexed hereto
as EXHIBIT 6.17 as provided in Section 6.17 and as to other matters.
8.9 APPROVAL OF MERGER AND OTHER PROVISIONS. The Board of Directors of
Orion shall have approved this Agreement and the Merger contemplated hereby in
accordance with its certificate of incorporation and by-laws.
8.10 SURVIVING CORPORATION DIRECTORS. The directors specified in Section
6.8(a) shall have been appointed to be the directors of the Surviving
Corporation of the Effective Time and the Schedule 14(f) will have been
distributed to the security holders of Orion pursuant to the rules of the SEC.
8.11 ORION SETTLEMENT AGREEMENT. Orion shall have resolved to the
reasonable satisfaction of Citadel any material litigation set forth in Section
5.15 and the litigation or dispute related to the Settlement Agreement, one of
terms of which shall be that in no event shall Orion be required to issue more
than 248,624 shares of Orion Common Stock pursuant to the Orion Rights.
8.12 ORION ASSETS. Orion shall certify that it has at Closing current
assets, after accrual or reduction for any and all accounts payable and accrued
expenses up and through the Closing (including all legal, accounting and other
expenses of Orion related to or occurred as a result of this Merger due and
owing) of not less than $1,150,000 ("ORION LIQUIDITY REQUIREMENT").
8.13 ORION PRIVATE PLACEMENT. Orion shall have met the Orion Private
Placement Minimum and also the Orion Collection Requirement, as further set
forth in Section 6.19 hereof.
8.14 D&O INSURANCE. At or before the Effective Time, pursuant to the
exclusive effort of Citadel, Orion shall have obtained directors and officers
insurance ("D&O" insurance) from an insurance company that is acceptable to
Citadel in its sole discretion.
ARTICLE IX
DELIVERIES AT CLOSING
9.1 DELIVERIES BY CITADEL. At the Closing, in addition to any other
documents or agreements required under this Agreement, Citadel shall deliver to
Orion the following:
(a) Evidence, in form reasonably satisfactory to Orion, that all
filings, approvals and other matters set forth on Schedule 4.3 have been
obtained; (b) a certificate, dated the Closing Date, of an officer of
Citadel, certifying as to the compliance by it with Sections 7.1 and 7.2
hereof and (c) a certificate of the estimated amount payable to Citadel
Dissenting Stockholders at the Effective Time;
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(b) A certificate of the secretary or equivalent (a "SECRETARY") of
Citadel certifying resolutions of the Board of Directors and stockholders
of Citadel approving and authorizing the execution, delivery and
performance of this Agreement the consummation of the transactions
contemplated hereby and thereby, including the Merger (together with an
incumbency and signature certificate regarding the officer(s) signing on
behalf of Citadel);
(c) The Certificate of Incorporation of Citadel, certified by the
Secretary of State of Washington, and the by-laws of Citadel, certified by
the Secretary of Citadel;
(d) Certificates of Good Standing for Citadel from the State of
Washington and all the other jurisdictions set forth on Schedule 3.1
hereof;
(e) The opinion referenced in Section 7.8 above;
(f) The accredited investor questionnaires referenced in Section
6.14 above;
(g) The Lock-Up Agreements of the stockholders of Citadel referenced
in Section 6.18 above;
(h) The Voting Agreements referenced in Section 6.8 above;
(i) The executed Certificate of Merger and Articles of Amendment and
Merger; and
(j) All other instruments and documents that Orion or its counsel,
in the reasonable exercise of their reasonable discretion, shall deem to
be necessary (i) to fulfill any obligation required to be fulfilled by
Citadel on the Closing Date, and (ii) to evidence satisfaction of any
conditions to Closing.
9.2 DELIVERIES BY ORION. At the Closing, in addition to any other
documents or agreements required under this Agreement, Orion shall deliver to
Citadel the following:
(a) Evidence, in form satisfactory to Citadel, that all filings,
approvals and other matters contemplated in Section 5.2 have been
obtained;
(b) A certificate, dated the Closing Date, of an officer of Orion,
certifying as to compliance by Orion with Sections 8.1 and 8.2 hereof;
(c) A certificate of the Secretary of Orion certifying resolutions
of the Board of Directors approving and authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby, including the Merger
(together with an incumbency and signature certificate regarding the
officer(s) signing on behalf of Orion), and, as of the Effective Time, the
election of the directors set forth on Section 6.8 hereof;
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(d) The Certificate of Incorporation of Orion, certified by the
Secretary of State of Delaware, and the by-laws of Orion, certified by the
Secretary of Orion;
(e) The Lock-Up Agreements of MDB and Marlett referenced in Section
6.18 above;
(f) Certificates of Good Standing for Orion from the State of
Delaware;
(g) The opinions referenced in Sections 8.8 and 6.17 above;
(h) The executed Certificate of Merger and Articles of Amendment and
Merger;
(i) Certificate required under Section 8.12 hereof;
(j) Written evidence, in form reasonably satisfactory to Citadel,
that Orion has delivered authorization to the Exchange Agent to issue the
Merger Stock to the holders of Citadel Stock in the Merger upon due
presentation and provided to the Exchange Agent the instruction letters to
be sent to the holders of Citadel Common Stock for the exchange of their
certificates; and
(k) All other instruments and documents that Citadel or its counsel,
in the reasonable exercise of their reasonable discretion, shall deem to
be necessary (i) to fulfill any obligation required to be fulfilled by
Orion on the Closing Date, and (ii) to evidence satisfaction of any
conditions to Closing.
ARTICLE X
TERMINATION
10.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
hereby may be abandoned at any time prior to the Closing Date, as follows:
(a) by mutual written agreement of Orion and Citadel;
(b) by Orion (if Orion is not then in material breach of its
obligations under this Agreement) if (i) a material default or breach
shall be made by Citadel with respect to the due and timely performance of
any of its covenants and agreements contained herein and such default is
not cured within thirty days, or (ii) if Citadel makes an amendment or
supplement to any Schedule hereto and such amendment or supplement
reflects a Citadel Material Adverse Effect after the date of this
Agreement, or (iii) a Citadel Material Adverse Change shall have occurred
after the date of this Agreement, or (iv) Citadel or Orion enters into any
agreement to effect any transaction described in Section 6.12(b) of this
Agreement, or (v) the board of directors of Citadel withdraws its
recommendation of the Merger, if given, or recommends to Citadel
stockholders the approval of any transaction other than the Merger or (vi)
the amount payable to Dissenting Stockholders exceeds the Dissenter
Payment Threshold;
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(c) by Citadel (if Citadel and its subsidiaries and affiliates are
not then in material breach of its obligations under this Agreement) if
(i) a material default or breach shall be made by Orion with respect to
the due and timely performance of any of its covenants and agreements
contained herein and such default is not cured within thirty days, or (ii)
if Orion makes an amendment or supplement to any Schedule hereto and such
amendment or supplement reflects an Orion Material Adverse Effect after
the date of this Agreement, or (iii) an Orion Material Adverse Change
shall have occurred after the date of this Agreement, or (iv) Orion or
Citadel enters into any agreement to effect any transaction described in
Section 6.12(b) of this Agreement, or (v) stockholders of Citadel fail to
approve this Agreement as provided in this Agreement or (vi) the amount
payable to Dissenting Stockholders exceeds the Dissenter Payment
Threshold;
(d) by Orion on the one hand and by Citadel on the other hand if the
Effective Time has not occurred for any reason by July 31, 2004 unless the
Parties agree to an extension in writing, provided that the right to
terminate this Agreement under this Section 10.1(d) shall not be available
to a party that is in breach of any representation, warranty or covenant
in this Agreement, which breach would entitle any other party to terminate
this Agreement, unless both Parties are in breach of any representation,
warranty or covenant in this Agreement, in which case, either party may
terminate this Agreement; and
(e) by Orion, on the one hand and by Citadel on the other hand if
prior to the Effective Time a third party successfully brings an action
resulting in a permanent injunction preventing the consummation of the
Merger pursuant to this Agreement.
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10.2 EFFECT OF TERMINATION. In the event of termination authorized
pursuant to Section 10.1 hereof, written notice thereof shall be given to the
other parties and all obligations of the parties shall terminate and no party
shall have any right against any other party hereto for any Damages (as
hereinafter defined), subject to Section 10.3 hereof. "DAMAGES" means the dollar
amount of any loss, damage, expense (including out-of-pocket expenses) or
liability, including, without limitation, reasonable attorneys' fees and
disbursements arising out of the preparation and execution of this Agreement,
fulfilling in whole in part its obligations under this Agreement or otherwise
incurred by a party in any action or proceeding between such party and the other
party hereto or between such party and a third party, which is determined to
have been sustained, suffered or incurred by a party and to have arisen from or
in connection with an event or state of facts which is subject to claim under
this Agreement.
10.3 ORION NOTE EXTENSION. If Citadel terminates this Agreement pursuant
to Section 10.1(c)(i) through (iv) (including, without limitation failure of
Orion to comply with Section 8.13) then, without limiting the rights of Citadel,
Orion agrees that the Maturity Date of the Orion Note, as defined thereunder,
shall be extended to October 15, 2004.
ARTICLE XI
MISCELLANEOUS
11.1 EXPENSES. Each party hereto shall bear its own expenses with respect
to the transactions contemplated hereby.
11.2 AMENDMENT. This Agreement may be amended, modified or supplemented
but only in writing signed by the parties hereto.
11.3 CONFIDENTIALITY AND RETURN OF INFORMATION TO CITADEL.
(a) On and after the date of this Agreement, Orion will keep secret
and confidential (i) all information heretofore or hereafter acquired by
it and deemed to be confidential by Citadel, and (ii) all other
information provided by Citadel to Orion relating to the business,
operations, employees, customers and distributors of Citadel, including,
but not limited to, any customer or distributor lists, documentation
regarding Intellectual Property, marketing arrangements, business plans,
sales plans, promotional sales materials, pricing information, manuals,
correspondence, notes, financial data or employee information (all such
information described in clauses (i) and (ii) above is hereinafter
collectively referred to as "CITADEL CONFIDENTIAL INFORMATION").
(b) Upon any termination of this Agreement pursuant to Article IX
hereof, Orion shall return to Citadel all documents and copies of
documents in its possession relating to any Citadel Confidential
Information, and no director, officer, employee or representative of Orion
shall make or retain any copy or extract of any of the foregoing.
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11.4 CONFIDENTIALITY AND RETURN OF INFORMATION TO ORION.
(a) On and after the date of this Agreement, Citadel will keep
secret and confidential (i) all information heretofore or hereafter
acquired by it and deemed to be confidential by Orion, and (ii) all other
information provided by Orion to Citadel relating to the business,
operations, and employees of Orion, including, but not limited to, any
documentation regarding Intellectual Property, marketing arrangements,
business plans, sales plans, promotional sales materials, pricing
information, manuals, correspondence, notes, financial data or employee
information (all such information described in clauses (i) and (ii) above
is hereinafter collectively referred to as "ORION CONFIDENTIAL
INFORMATION").
(b) Upon any termination of this Agreement pursuant to Article IX
hereof, Citadel shall return to Orion all documents and copies of
documents in its possession relating to any Orion Confidential
Information, and no director, officer, employee or representative of
Citadel shall make or retain any copy or extract of any of the foregoing.
11.5 PRESS RELEASE: PUBLIC ANNOUNCEMENTS. Reasonably promptly after
execution of this Agreement and the filing by Orion of a Current Report on Form
8-K disclosing this Agreement, Citadel and Orion may issue press releases in the
form attached hereto as EXHIBIT 11.5. The parties shall not make any other
public announcements in respect of this Agreement or the transactions
contemplated herein without prior consultation and written approval by the other
party as to the form and content thereof, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, any party may make any
disclosure which its counsel advises is required by applicable law or
regulation, in which case the other party shall be given such reasonable advance
notice as is practicable in the circumstances and the parties shall use their
best efforts to cause a mutually agreeable release or announcement to be issued.
11.6 NOTICES. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given (a) when received if given in person, (b) on the date of
transmission if sent by telex, facsimile or other wire transmission or (c) three
business days after being deposited in the U.S. mail, certified or registered
mail, postage prepaid:
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(a) If to Citadel:
2125 Western Avenue, Suite 200
Seattle, Washington 98121
Attention: Patrick Crumb, Esq.
Facsimile No.: (206) 728-7744
Email: pcrumb@citadelmedia.net
with a copy to:
Peterson Russell Kelly PLLC
10900 NE 4th Street, Suite 1850
Seattle, Washington 98004-5873
Attention: Patrick Moran, Esq.
Facsimile No.: (425) 990-4008
and:
If to Orion:
401 Wilshire Boulevard, Suite 1020
Santa Monica, California 90401
Facsimile No.: (310) 526-5000
with a copy to:
Graubard Miller
600 Third Avenue, 32nd Floor
New York, NY 10016
Attention: Andrew D. Hudders, Esq.
Facsimile No.: (212) 818-8881
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.7 WAIVERS. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
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11.8 INTERPRETATION. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively.
11.9 APPLICABLE LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Washington,
without giving effect to the principles of conflicts of law thereof.
11.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that no assignment of any rights or obligations shall be made
by any party without the prior written consent of all the other parties hereto.
11.11 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective directors, officers, employees, agents and representatives, and
except for the finders fee acknowledgement owing to MDB under Section
7.12(without any limitation resulting from the fact that principals of MDB are
officers and directors of Orion), no provision of this Agreement shall be deemed
to confer upon other third parties any remedy, claim, liability, reimbursement,
cause of action or other right.
11.12 FURTHER ASSURANCES. Upon the request of the parties hereto, the
other parties hereto will, on and after the Closing Date, execute and deliver
such other documents, releases, assignments and other instruments as may be
required to effectuate completely the transactions contemplated by this
Agreement.
11.13 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.14 REMEDIES CUMULATIVE. The remedies provided in this Agreement shall
be cumulative and shall not preclude the assertion or exercise of any other
rights or remedies available by law, in equity or otherwise.
11.15 ENTIRE UNDERSTANDING. This Agreement (including the Schedules and
Exhibits) and the Articles of Amendment and Merger set forth the entire
agreement and understanding of the parties hereto and supersede all prior
agreements, arrangements and understandings between the parties.
11.16 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Facsimile transmissions of any signed original
document, or transmission of any signed facsimile document, shall be the same as
delivery of an executed original. At the request of any of the parties, the
parties will confirm facsimile transmission signatures by signing and delivering
an original document
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11.17 RESOLUTION OF DISPUTES. In the event that there is a dispute in
connection with this Agreement, if the controversy cannot be resolved by Citadel
and Orion within 10 days of the notification in writing by Citadel to Orion,
then the controversy initially shall be submitted for resolution by mediation by
JAMS/Endispute in Seattle, Washington or its successor, and if the matter is not
resolved through such mediation process within the first to occur of (i) the
expiration of 30 days from such submission to mediation, or (ii) the holding of
two meetings of Citadel and Orion within such mediation, then such controversy
shall be submitted to final and binding arbitration by the American Arbitration
Association (AAA), which shall have jurisdiction of the matter pursuant to its
rules of commercial arbitration sitting in Seattle, Washington, with one
arbitrator to be mutually appointed by Orion and Citadel, or in the absence of
such appointment, to be appointed by the AAA.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
ORION ACQUISITION CORP. II
-------------------------------------
Name: Christopher A. Marlett
Title: Chief Executive Officer
CITADEL MEDIA, INC.
-------------------------------------
Name: James C. Heckman, Jr.
Title: Chief Executive Officer
50