<PAGE> 1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OSBORN COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
OSBORN COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Osborn Communications Corporation Common Stock, par value $.01 per share
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
5,413,014
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$15.375 -- cash exchange rate
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$83,225,090.25
------------------------------------------------------------------------
(5) Total fee paid:
$16,645.00
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
OSBORN COMMUNICATIONS CORPORATION
130 MASON STREET
GREENWICH, CONNECTICUT 06830
November 14, 1996
To Our Stockholders:
You are cordially invited to attend the Special Meeting of Stockholders of
Osborn Communications Corporation (the "Company") to be held on December 17,
1996 at 10:00 A.M., Eastern Time at the offices of Paul, Weiss, Rifkind, Wharton
& Garrison, 1285 Avenue of the Americas, 24th Floor, New York, New York. At the
Special Meeting, you will be asked to consider and vote upon a proposal to (i)
approve and adopt an Agreement and Plan of Merger, dated as of July 23, 1996
(the "Merger Agreement"), among the Company, OCC Holding Corporation, a Delaware
corporation (the "Parent"), and OCC Acquisition Company, Inc., a Delaware
corporation and wholly-owned subsidiary of the Parent (the "Subsidiary") and the
transactions contemplated thereby, and (ii) approve the merger of the Subsidiary
with and into the Company (the "Merger"), pursuant to which the Subsidiary will
cease to exist, the Company will survive as a wholly-owned subsidiary of the
Parent, and the holders of the Company's outstanding Common Stock, par value
$.01 per share (the "Shares"), will become entitled to receive $15.375 in cash,
without any interest thereon, for each Share (other than (i) any Share held by
the Parent or the Subsidiary, which will be canceled, (ii) any Share held in the
treasury of the Company, which will be canceled, and (iii) any Dissenting
Shares) held immediately prior to the Effective Time (as defined below) (the
"Merger Proposal").
If the requisite approval of the stockholders of the Company is received
and other conditions to the Merger are satisfied or waived, the Merger will be
consummated by filing a Certificate of Merger with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Delaware law (the date and time of the completion of
such filing being the "Effective Time"). The closing (the "Closing") of the
Merger, subject to the satisfaction or waiver of the conditions to the Merger,
will occur on or before the tenth business day after consent of the Federal
Communications Commission (the "FCC Consent") has become a Final Order, upon
written notice from Subsidiary to the Company of the date on which the Closing
will occur (the "Closing Date"); provided, however, that in no event shall the
Closing occur prior to February 20, 1997 unless otherwise agreed to by both
parties and as permitted by applicable law.
Your Board of Directors has carefully considered the terms and conditions
of the Merger and has approved the Merger Agreement and the transactions
contemplated thereby. In addition, the Board of Directors has received the
written opinion of its financial advisor, Alex. Brown & Sons Incorporated (a
copy of which is included with the accompanying Proxy Statement) that the Merger
is fair from a financial point of view to the stockholders of the Company. YOUR
BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF
OSBORN COMMUNICATIONS CORPORATION AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU
VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER PROPOSAL.
In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Proxy Statement which more fully describes the Merger
and the terms and conditions of the Merger Agreement, and a proxy. Please read
and consider the Proxy Statement carefully.
All stockholders are cordially invited to attend the Special Meeting.
Should you be unable to attend, however, it is important that your Shares be
represented, regardless of the number of Shares you own. ACCORDINGLY, WHETHER OR
NOT YOU PLAN TO ATTEND PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO
<PAGE> 3
POSTAGE IF MAILED IN THE UNITED STATES. If you attend the Special Meeting, you
may vote in person if you wish, even though you have previously submitted your
proxy.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
Frank D. Osborn
President and
Chief Executive Officer
STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, STOCKHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR
EXCHANGING THEIR SHARES FOR CASH.
<PAGE> 4
OSBORN COMMUNICATIONS CORPORATION
130 MASON STREET
GREENWICH, CONNECTICUT 06830
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1996
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Osborn
Communications Corporation (the "Company") will be held at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, 24th Floor, New
York, New York on Tuesday, December 17, 1996 at 10:00 A.M., Eastern Time, for
the following purposes:
a. To consider and vote upon a proposal to (i) approve and adopt an
Agreement and Plan of Merger, dated as of July 23, 1996 (the "Merger
Agreement"), among the Company, OCC Holding Corporation, a Delaware
corporation (the "Parent") and OCC Acquisition Company, Inc., a Delaware
corporation and wholly-owned subsidiary of the Parent (the "Subsidiary")
and the transactions contemplated thereby, and (ii) approve the merger of
the Subsidiary with and into the Company (the "Merger"), pursuant to which
the Subsidiary will cease to exist, the Company will survive as a
wholly-owned subsidiary of the Parent, and the holders of the Company's
outstanding Common Stock, par value $.01 per share (the "Shares"), will
become entitled to receive $15.375 in cash, without any interest thereon,
for each Share (other than (i) any Share held by the Parent or the
Subsidiary, which will be canceled, (ii) any Share held in the treasury of
the Company, which will be canceled, and (iii) any Dissenting Shares) held
immediately prior to the Effective Time (the "Merger Proposal").
b. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The close of business on November 8, 1996 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting or any adjournment or postponement thereof. Only stockholders of
record of Shares at the close of business on November 8, 1996 are entitled to
notice of, and will be entitled to vote at, the Special Meeting or any
adjournment or postponement thereof.
Whether or not you plan to attend the Special Meeting in person, please
sign and date the enclosed proxy and return it in the envelope furnished for
that purpose.
By Order of the Board of Directors
MICHAEL F. MANGAN
Secretary
November 14, 1996
<PAGE> 5
OSBORN COMMUNICATIONS CORPORATION
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 17, 1996
This Proxy Statement is being furnished to the stockholders of Osborn
Communications Corporation, a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by its Board of Directors to be
voted at the Special Meeting of Stockholders to be held on Tuesday, December 17,
1996 at 10:00 A.M., Eastern Time, at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, 24th Floor, New York, New York
and at any adjournment or postponement thereof. This Proxy Statement and
accompanying form of proxy are first being mailed to stockholders on or about
November 14, 1996.
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to (i) approve and adopt an Agreement and Plan
of Merger, dated as of July 23, 1996 (the "Merger Agreement"), among the
Company, OCC Holding Corporation, a Delaware corporation (the "Parent"), and OCC
Acquisition Company, Inc., a Delaware corporation and wholly-owned subsidiary of
the Parent (the "Subsidiary"), and the transactions contemplated thereby, and
(ii) approve the merger of the Subsidiary with and into the Company (the
"Merger"), pursuant to which the Subsidiary will cease to exist, the Company
will survive as a wholly-owned subsidiary of the Parent (the "Surviving
Corporation"), and the holders of the Company's outstanding Common Stock, par
value $.01 per share (the "Shares"), will become entitled to receive $15.375 in
cash, without any interest thereon, for each Share (other than (i) any Share
held by the Parent or the Subsidiary, which will be canceled, (ii) any Share
held in the treasury of the Company, which will be canceled, and (iii) any
Dissenting Shares (as hereinafter defined)) held immediately prior to the
Effective Time (as defined below) (the "Merger Proposal"). See "THE MERGER
AGREEMENT." A copy of the Merger Agreement is attached as Appendix A to this
Proxy Statement and is incorporated herein by reference.
------------------------
The date of this Proxy Statement is November 14, 1996.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY............................................................................... 1
MARKET PRICE DATA..................................................................... 7
SELECTED FINANCIAL DATA............................................................... 8
THE SPECIAL MEETING................................................................... 9
Date, Time and Place of Meeting..................................................... 9
Purpose of the Special Meeting...................................................... 9
Record Date and Outstanding Shares.................................................. 9
Required Vote....................................................................... 9
Voting of Proxies................................................................... 9
Revocability of Proxies............................................................. 10
Abstentions; Broker Non-Votes....................................................... 10
Solicitation of Proxies and Expenses................................................ 10
Board Recommendation................................................................ 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................................................... 11
THE MERGER............................................................................ 13
Background of the Merger............................................................ 13
Reasons for the Merger.............................................................. 16
Opinion of Financial Advisor........................................................ 17
Interests of Certain Persons in the Merger.......................................... 20
Recommendation of the Board of Directors............................................ 21
THE MERGER AGREEMENT.................................................................. 22
Effective Time of the Merger........................................................ 22
The Merger.......................................................................... 22
Articles of Incorporation and Bylaws of the Surviving Corporation................... 22
Officers and Directors of the Surviving Corporation................................. 22
Conversion of the Shares............................................................ 22
Settlement of Options and Warrants.................................................. 23
Exchange of Stock Certificates...................................................... 23
Liquidated Damages; Letter of Credit................................................ 23
Representations and Warranties...................................................... 24
Conduct of Business Pending the Merger.............................................. 24
Environmental Site Assessments...................................................... 26
No Solicitation; Fiduciary Duties................................................... 26
Compliance with Station Licenses.................................................... 27
Covenants of the Subsidiary......................................................... 27
Fund III Equity Funding Commitment.................................................. 27
Mutual Covenants.................................................................... 27
Conditions to the Merger............................................................ 28
</TABLE>
i
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PAGE
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Termination......................................................................... 29
Fees and Expenses................................................................... 30
Amendment of the Merger Agreement................................................... 31
Certain Other Effects of the Merger................................................. 31
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER......................................... 32
ACCOUNTING TREATMENT.................................................................. 32
ANTITRUST MATTERS..................................................................... 32
DISSENTERS' RIGHTS OF APPRAISAL....................................................... 32
LEGAL PROCEEDINGS..................................................................... 35
INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 35
AVAILABLE INFORMATION................................................................. 35
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 35
CERTAIN RECENT EVENTS................................................................. 36
OTHER MATTERS......................................................................... 36
APPENDICES
Agreement and Plan of Merger........................................................ A-1
Opinion of Alex. Brown & Sons Incorporated.......................................... B-1
Appraisal Rights Provisions of the Delaware General Corporation Law................. C-1
</TABLE>
ii
<PAGE> 8
SUMMARY
The following is a summary of certain of the information contained
elsewhere in this Proxy Statement. The summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement, the appendices and the material incorporated
by reference, all of which should be carefully reviewed.
THE PARTIES
OSBORN COMMUNICATIONS CORPORATION
Osborn Communications Corporation (the "Company") is a Delaware corporation
which was organized in 1984 and is a broadcasting company primarily engaged in
the operation of 18 radio stations in medium and small markets throughout the
United States. See "CERTAIN RECENT EVENTS." In conjunction with several of its
radio stations, the Company promotes country music festivals and concerts
through Company-owned entertainment properties. The Company also distributes
programmed music, primarily Muzak, through exclusive franchises in Florida and
Georgia. The principal executive offices of the Company are located at 130 Mason
Street, Greenwich, Connecticut 06830. The Company's telephone number is (203)
629-0905.
HICKS MUSE, OCC HOLDING CORPORATION AND OCC ACQUISITION COMPANY, INC.
OCC Holding Corporation, a Delaware corporation (the "Parent"), and OCC
Acquisition Company, Inc., a Delaware corporation and wholly-owned subsidiary of
the Parent (the "Subsidiary"), were recently organized by Hicks, Muse, Tate &
Furst Incorporated, a Delaware corporation ("Hicks Muse"), for the purpose of
effecting the Merger. Neither the Parent nor the Subsidiary has engaged in any
activities except in connection with the Merger. Hicks Muse is a leading private
investment firm with offices in Dallas, New York, St. Louis and Mexico City.
Hicks Muse has completed more than 50 acquisitions since 1989 having an
aggregate value approaching $6 billion. In 1996, Hicks Muse formed Capstar
Broadcasting Partners, Inc., a Delaware corporation ("Capstar") and a
middle-market radio investment entity headed by industry veteran R. Steven
Hicks. On October 16, 1996, Capstar completed its acquisition of Commodore
Media, Inc., a company which owns 30 middle-market radio stations located in
several East Coast markets from Connecticut to Florida. Commodore Media, Inc.
has agreed to purchase one additional station and has an option to purchase
another 3 radio stations. Capstar or an affiliate thereof will hold the
controlling interest in the Parent.
FRANK D. OSBORN
Frank D. Osborn ("Mr. Osborn"), President and Chief Executive Officer of
the Company since the Company's formation in 1984, will continue to work for the
Surviving Corporation following the Merger pursuant to proposed employment
arrangements that provide him with, among other things, options to acquire 4% of
the common stock of the Company (after the Merger) based on performance and
continued employment and, in the event of a firm commitment underwritten public
offering of common equity securities of Parent for cash, the right to exchange
his equity interest in the Company for common equity securities of Parent.
Pursuant to a Subscription Agreement ("Subscription Agreement") between Parent
and Mr. Osborn, Mr. Osborn has the right to acquire, in exchange for a portion
of the Shares held by him, 6% of the common stock of the Parent. The Subsidiary
required that Mr. Osborn's entering into such employment arrangements be a
condition to the Subsidiary's obligation to consummate the Merger. The equity
component of Mr. Osborn's employment arrangements may be revised in order to
provide that Mr. Osborn will receive Capstar shares and options in lieu of the
Parent shares and post-Merger Company options described above. See "THE
MERGER -- Interests of Certain Persons in the Merger" and "THE
MERGER -- Conditions to the Merger."
The executive offices of the Parent and the Subsidiary are at 200 Crescent
Court, Suite 1600, Dallas, Texas 75201. The telephone number at that address is
(214) 740-7300.
<PAGE> 9
THE SPECIAL MEETING OF STOCKHOLDERS
The Special Meeting of the Stockholders of the Company will be held at
10:00 A.M., Eastern Time, on Tuesday, December 17, 1996, at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, 24th Floor, New
York, New York. At the Special Meeting, stockholders of the Company will be
asked to consider and vote upon a proposal to (i) approve and adopt an Agreement
and Plan of Merger, dated as of July 23, 1996 (the "Merger Agreement"), among
the Company, OCC Holding Corporation, a Delaware corporation (the "Parent"), and
OCC Acquisition Company, Inc., a Delaware corporation and wholly-owned
subsidiary of the Parent (the "Subsidiary") and the transactions contemplated
thereby, and (ii) approve the merger of the Subsidiary with and into the Company
(the "Merger"), pursuant to which the Subsidiary will cease to exist, the
Company will survive as a wholly-owned subsidiary of the Parent, and the holders
of the Company's outstanding Common Stock, par value $.01 per share (the
"Shares"), will become entitled to receive $15.375 in cash, without interest,
for each Share (other than (i) any Share held by the Parent or the Subsidiary,
which will be canceled, (ii) any Share held in the treasury of the Company,
which will be canceled, and (iii) any Dissenting Shares) held immediately prior
to the Effective Time (as defined below) (the "Merger Proposal"). Only those
stockholders of record at the close of business on November 8, 1996 (the "Record
Date") are entitled to notice of, and will be entitled to vote at, the Special
Meeting or any adjournment or postponement thereof. A majority of the Company's
outstanding Shares, will constitute a quorum for the transaction of business.
The affirmative vote of a majority of the outstanding Shares entitled to
vote upon the Merger Proposal is required for the approval of the Merger
Proposal. At the close of business on the Record Date, there were 5,413,014
Shares outstanding held by approximately 1,000 stockholders of record. Each
stockholder will be entitled to one vote per Share held of record on the Record
Date and may vote their shares in person or by proxy. See "THE SPECIAL MEETING."
On the Record Date, directors and executive officers of the Company as a
group (nine persons) beneficially owned 1,071,968 Shares, or 18.9% of the total
outstanding Shares. The Company has been advised that all of its directors and
executive officers intend to vote their Shares in favor of the Merger Proposal.
Under the terms of a Voting Agreement entered into in connection with the Merger
Agreement by and among the Subsidiary, the Company and each of the Company's
directors (the "Voting Agreement"), each director of the Company has agreed to
vote, or cause to be voted, each of his Shares in favor of the Merger Proposal.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and "THE
MERGER -- Background of the Merger."
THE MERGER
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors (the "Board of Directors") has unanimously
approved the Merger Agreement and has directed that it be submitted to the
Company's stockholders. The Board of Directors unanimously recommends that the
Company's stockholders approve and adopt the Merger Proposal. See "THE
MERGER -- Reasons for the Merger; Recommendation of the Board of Directors." In
considering the recommendation of the Board of Directors with respect to the
Merger Proposal, stockholders should be aware that certain executive officers of
the Company have direct or indirect interests in recommending the Merger, apart
from their interests as stockholders of the Company, which are not identical to
those of unaffiliated stockholders. See "THE MERGER -- Interests of Certain
Persons in the Merger" and "THE MERGER AGREEMENT -- Certain Other Effects of the
Merger."
OPINION OF FINANCIAL ADVISOR
On July 22, 1996, the Board of Directors received a preliminary verbal
opinion from Alex. Brown & Sons Incorporated ("ABS") to the effect that the
Merger is fair from a financial point of view to the stockholders of the Company
and on July 23, 1996, received a written opinion to such effect. The full text
of ABS's written
2
<PAGE> 10
opinion is attached to this Proxy Statement as Appendix B. See "THE
MERGER -- Background of the Merger; Opinion of Financial Advisor."
EFFECTIVE TIME OF THE MERGER
On the Closing Date (as defined below) the Merger will be consummated by
filing a Certificate of Merger with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the General Corporation Law of the State of Delaware
(the "DGCL") (the date and time of the completion of such filing being the
"Effective Time"). The closing (the "Closing") of the Merger, subject to the
satisfaction or waiver of the conditions to the Merger, shall occur on or before
the tenth business day after the approval of the Federal Communications
Commission ("FCC") for the transfer of control of the Station Licenses (as
defined below) in respect of the Company's radio stations (the "Stations") (the
"FCC Consent") has become a final order ("Final Order"), upon written notice
from the Subsidiary to the Company of the date on which the Closing shall occur
(the "Closing Date"); provided, however, that in no event shall the Closing
occur prior to February 20, 1997 unless otherwise agreed to by both parties and
as permitted by applicable law. See "THE MERGER AGREEMENT -- Effective Time of
the Merger; Conditions to the Merger."
CONVERSION OF SHARES
At the Effective Time, each Share outstanding immediately prior to the
Effective Time (other than (i) any Share held by the Parent or the Subsidiary,
which will be canceled, (ii) any Share held in the treasury of the Company,
which will be canceled, and (iii) any Dissenting Shares (as hereinafter
defined)), will be converted into the right to receive $15.375 in cash, without
any interest thereon, payable to the holder thereof (the "Merger
Consideration"). See "THE MERGER AGREEMENT -- Conversion of the Shares."
SETTLEMENT OF OPTIONS AND WARRANTS
At the Effective Time, each holder of then outstanding options ("Options")
and warrants ("Warrants") to purchase shares ("Option Shares" or "Warrant
Shares," as the case may be) (whether or not then presently exercisable) will be
entitled to receive, and will receive, in settlement of each Option or Warrant,
a cash payment (the "Option Consideration" or the "Warrant Consideration," as
the case may be) from the Surviving Corporation in an amount equal to the
product of (a) $15.375 minus the exercise price per Option Share or Warrant
Share (in such case, where the amount set forth in this clause (a) is positive)
and (b) the number of Option Shares or Warrant Shares (including any fractional
Option Shares or Warrant Shares, as the case may be), covered by said Option or
Warrant, less any applicable withholding taxes. See "THE MERGER
AGREEMENT -- Settlement of Options and Warrants."
EXCHANGE OF STOCK CERTIFICATES
At or prior to the Effective Time, the Subsidiary will deposit, or cause to
be deposited, with a bank or trust company designated by the Subsidiary or, at
the Subsidiary's election, the Surviving Corporation (such bank or trust company
or the Surviving Corporation being referred to as the "Exchange Agent") for the
benefit of former holders of Shares, Options or Warrants, cash in an amount
equal to the Merger Consideration, Option Consideration and Warrant
Consideration. Promptly thereafter, the Exchange Agent will mail to all former
holders of record of the Company's Shares and all holders of Option Shares and
Warrant Shares, a letter of transmittal with instructions for surrendering their
certificates in exchange for the Merger Consideration. STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR SHARE CERTIFICATES FOR EXCHANGE UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE AGENT. See
"THE MERGER AGREEMENT -- Exchange of Stock Certificates."
3
<PAGE> 11
LIQUIDATED DAMAGES; LETTER OF CREDIT
The Subsidiary is obligated to pay $5,000,000 to the Company as liquidated
damages in the event the Company terminates the Merger Agreement as a result of
the breach by the Subsidiary of any representation or warranty, or any material
breach of any covenant or agreement set forth in the Merger Agreement which
breach has remained uncured for twenty (20) days following receipt by the
Subsidiary of written notice of such breach. As security for payment of
liquidated damages, if and when due, the Company, the Subsidiary, Hicks, Muse,
Tate & Furst Equity Fund III, L.P. a Delaware limited partnership and affiliate
of Hicks Muse ("Fund III"), and Citibank, N.A., as escrow agent (the "Escrow
Agent"), have entered into an escrow agreement (the "Escrow Agreement"), as
required by the Merger Agreement, pursuant to which the Subsidiary has deposited
an original, irrevocable letter of credit issued by Bankers Trust Company in
favor of the Company for the sum of $5,000,000 into an escrow account with the
Escrow Agent. If the Subsidiary does not otherwise pay the liquidated damages to
the Company when due, the Escrow Agent will be directed to deliver the Letter of
Credit to the Company enabling the Company to draw thereon. See "THE MERGER
AGREEMENT -- Liquidated Damages; Letter of Credit."
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
The Merger Agreement contains various operational covenants of the Company
concerning the conduct of its business from July 23, 1996 (the date of execution
of the Merger Agreement) to the Effective Time. The Company generally is
required, and is required to cause each of its subsidiaries, to conduct its
business in the ordinary course and consistent with past practice. The Company
is also obligated to refrain from taking certain actions. See "THE MERGER
AGREEMENT -- Conduct of Business Pending the Merger."
ENVIRONMENTAL SITE ASSESSMENTS
If the Subsidiary's lenders or other financing sources request it, the
Company is required, at its sole expense and upon written notice from the
Subsidiary to the Company, to cause to be performed by a nationally recognized
and duly qualified environmental consultant reasonably acceptable to the
Subsidiary, Phase I or Phase II environmental site assessments at each
identified transmission site owned, operated or leased by the Company or its
subsidiaries and at such other identified real properties and facilities owned,
operated or leased by the Company and its subsidiaries. See "THE MERGER
AGREEMENT -- Environmental Site Assessments."
NO SOLICITATION; FIDUCIARY DUTIES
The Merger Agreement restricts the ability of the Company to solicit any
proposal to acquire the Company. Prior to the receipt of the requisite vote or
consent for approval and adoption of the Merger Proposal, the Company may
furnish information to, or enter into discussions or negotiations with, any
person in connection with an unsolicited proposal by such person to acquire the
Company pursuant to (a) a merger, consolidation, share exchange, business
combination or other similar transaction; (b) any sale lease, exchange, transfer
or other disposition (other than a pledge or mortgage) of 50% or more of the
assets of the Company or any of its subsidiaries in a single transaction or
series of related transactions; or (c) its acquisition, as part of any "group"
(as such term is defined under Section 13(d) of the Securities Exchange Act of
1934 and the rules and regulations thereunder (the "Exchange Act"), of
beneficial ownership of 35% or more of the Shares whether by tender offer,
exchange offer or otherwise (in each such case, a "Business Combination
Transaction") received by the Company after July 23, 1996; provided, that (x)
the Company's Board of Directors determines in good faith (based on
consultations with ABS and the opinion of its independent legal counsel) that
such action is required in order for the Board of Directors not to breach its
fiduciary duties to stockholders imposed by applicable law, and (y) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, the Company (i) gives the Subsidiary as promptly as
practicable prior written notice of the Company's intention to furnish such
information or begin such discussions and (ii) receives from such person an
executed confidentiality agreement on terms no less favorable to the Company
than those contained in the Confidentiality Agreement between the Company and
Hicks Muse. See "THE MERGER AGREEMENT -- No Solicitation; Fiduciary Duties."
4
<PAGE> 12
COMPLIANCE WITH STATION LICENSES
The Company is required to cause the Stations to be operated in all
material respects in accordance with the Station Licenses and all applicable
rules and regulations of the FCC and in compliance in all material respects with
all other applicable laws, regulations, rules and orders. The Company is
required, under certain circumstances, to use its commercially reasonable
efforts to otherwise maintain the Station Licenses or other FCC permits, to
contest any FCC proceedings for the suspension, revocation or adverse
modification of the Station Licenses, or, at the Subsidiary's request, to file
FCC applications for new, specifically identified frequencies that may be useful
in connection with the operation of the Stations. See "THE MERGER
AGREEMENT -- Compliance with Station Licenses."
FUND III EQUITY FUNDING COMMITMENT
The Subsidiary has delivered to the Company a binding commitment letter
from Fund III pursuant to which Fund III will provide equity financing in the
amount of $27.2 million to provide the Subsidiary a portion of the funds
required to consummate the transactions contemplated by the Merger Agreement,
including the Merger. See "THE MERGER AGREEMENT -- Fund III Equity Funding
Commitment."
MUTUAL COVENANTS
The Merger Agreement contains certain mutual covenants between the Company
and the Subsidiary including, (i) to file jointly any required applications
requesting the FCC Consent; (ii) to refrain from consummating the Merger prior
to obtaining a Final Order; (iii) to make all necessary governmental filings;
(iv) mutual representations as to the existence of, and fees payable to, brokers
or finders; (v) to use commercially reasonable efforts to do all things
necessary, proper or advisable to consummate the Merger; (vi) entering into a
release irrevocably and unconditionally releasing and discharging the
Subsidiary, the Parent and each of their respective successors, assigns,
employees, agents, stockholders, partners, subsidiaries, parent companies and
other affiliates from any and all claims, demands, causes of action or
liabilities of any kind whatever related to or arising out of the Merger
Agreement (the "Release"); and (vii) to enter into the Escrow Agreement. See
"THE MERGER AGREEMENT -- Mutual Covenants."
CONDITIONS TO THE MERGER
The consummation of the Merger is subject to the satisfaction, at or before
the Effective Time, of certain conditions including, among other things,
approval of the FCC, expiration or termination of the applicable waiting period
under the HSR Act (as defined below), approval by the Company's stockholders of
the Merger Proposal and there being no temporary restraining order, preliminary
or permanent injunction or other order issued by any court which would prevent
the consummation of the Merger. See "THE MERGER AGREEMENT -- Conditions to the
Merger."
TERMINATION
The Merger Agreement may be terminated, either before or after approval by
the Company's stockholders, by the mutual written consent of the Subsidiary and
the Company, or by the Company or the Subsidiary under certain other
circumstances. In the exercise of its good faith judgment as to its fiduciary
duties to its stockholders under applicable law, if the Board of Directors
determines that termination is required by such fiduciary duties by reason of a
proposal that either constitutes a Business Combination Transaction or may
reasonably be expected to lead to a Business Combination Transaction on terms
more favorable to the stockholders of the Company than the Merger and which has
a reasonable prospect of being consummated in accordance with its terms (such
determination being based on consultations with ABS and the opinion of its
independent legal counsel that such termination is required in order for the
Company's Board of Directors not to breach its fiduciary duties to stockholders
imposed by applicable law) (a "Business Combination Transaction Proposal"), the
Company may terminate the Merger Agreement; provided that the Company has
provided the Subsidiary with at least 48 hours prior written notice of its
intent to so terminate the Merger Agreement (together with a summary of the
material terms of such Business Combination Transaction
5
<PAGE> 13
Proposal); and provided, further, that any termination of the Merger Agreement
by the Company will not be effective until the Company has made payment of the
Alternative Proposal Fee (as defined below); See "THE MERGER
AGREEMENT -- Termination."
FEES AND EXPENSES
The Company is required to pay the Subsidiary a termination fee of
$3,750,000 (the "Alternative Proposal Fee") if the Merger Agreement is
terminated under the circumstances described above. See "THE MERGER
AGREEMENT -- Fees and Expenses" and "THE MERGER AGREEMENT -- Termination."
DISSENTERS' RIGHTS OF APPRAISAL
Under the DGCL, stockholders of the Company who file a written objection to
the vote on the Merger Proposal and do not vote in favor of approval and
adoption of the Merger Proposal have the right to demand an appraisal of the
"fair value" of their Shares (the "Dissenting Shares") if the procedures under
Section 262 of the DGCL are followed. Rights of appraisal will be forfeited if
the requirements of Section 262 of the DGCL are not fully and precisely
satisfied. See "DISSENTERS' RIGHTS OF APPRAISAL" and a copy of the text of
Section 262 of the DGCL which is included as Appendix C to this Proxy Statement.
FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash in exchange for Shares pursuant to the Merger or
pursuant to the exercise of dissenters' rights of appraisal under the DGCL will
be a taxable transaction to the Company's stockholders for United States federal
income tax purposes and may also be a taxable transaction for state, local and
foreign tax purposes. Stockholders generally will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
amount of cash received and their adjusted tax basis in their Shares. Such gain
or loss will be a capital gain or loss if such Shares are held as a capital
asset and will be a long term gain or loss if, at the Effective Time, such
Shares were held for more than one year. See "FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER." STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC CONSEQUENCES TO THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
6
<PAGE> 14
MARKET PRICE DATA
The following table sets forth the range of high and low closing sales
prices for the Company's Common Stock as reported on Nasdaq for the calendar
quarters indicated. The Company's Common Stock is traded on the Nasdaq National
Market System ("Nasdaq") under the symbol "OSBN."
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1994
First Quarter*....................................................... $7 1/2 $6 1/2
Second Quarter*...................................................... 7 1/2 6 1/4
Third Quarter*....................................................... 7 3/4 6 1/2
Fourth Quarter....................................................... 7 1/2 6
1995
First Quarter........................................................ 7 1/2 6 3/4
Second Quarter....................................................... 7 6
Third Quarter........................................................ 11 1/8 6 1/4
Fourth Quarter....................................................... 9 5/8 7 1/4
1996
First Quarter........................................................ 11 1/4 7 7/8
Second Quarter....................................................... 12 10
Third Quarter........................................................ 15 10 1/4
Fourth Quarter (through November 12, 1996)........................... 14 7/8 14 1/2
</TABLE>
- ---------------
* Adjusted for 1-for-2 reverse stock split on July 11, 1994.
On July 22, 1996, the last day on which the Company's stock traded prior to
the public announcement of the signing of the Merger Agreement, the high and low
sale prices on the Nasdaq were $12.25 and $12.00, respectively.
7
<PAGE> 15
SELECTED FINANCIAL DATA
The following table presents selected historical consolidated financial
information of the Company for the five years ended December 31, 1995, which
were derived from the audited financial statements, and the nine months ended
September 30, 1996 and 1995, which were derived from the unaudited financial
statements of the Company which, in the opinion of the management of the
Company, have been prepared on the same basis as the audited financial
statements and include all adjustments (consisting of normal and recurring
adjustments and accruals) necessary for a fair presentation of such information.
Results for the nine months ended September 30, 1996 are not necessarily
indicative of results for the entire year. The information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements of the
Company which are incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues........................ $26,504 $28,802 $39,100 $34,582 $27,399 $26,863 $24,860
Operating income (loss)............. 653 1,400 2,215 1,315 398 (877) (4,035)
Income (loss) before extraordinary
items............................. 6,622 (1,065) 6,624 (1,114) (2,173) (4,507) (9,028)
Net income (loss)................... 6,622 (4,986) 2,703 (1,550) (2,173) (4,507) (9,028)
INCOME (LOSS) PER COMMON SHARE(2):
Primary earnings per common share:
Income (loss) before extraordinary
items........................... 1.17 (0.20) 1.23 (0.21) (0.50) (1.29) (2.59)
Net income (loss)................. 1.17 (0.95) 0.50 (0.29) (0.50) (1.29) (2.59)
Fully diluted earnings per common
share:
Income (loss) before extraordinary
items........................... 1.14 (0.20) 1.22 (0.21) (0.50) (1.29) (2.59)
Net income (loss)................. 1.14 (0.95) 0.50 (0.29) (0.50) (1.29) (2.59)
Dividends........................... -- -- -- -- -- -- --
BALANCE SHEET AND OTHER DATA:
Total assets........................ 61,724 67,789 77,634 79,166 47,498 50,376 55,335
Long-term debt and other long-term
obligations....................... 23,525 44,781 44,915 48,577 22,655 27,844 30,727
Total stockholders' equity.......... 29,256 13,808 21,497 19,282 19,158 13,735 18,242
Operating cash flow(3)(5)........... 5,718 6,992 9,703 9,076 6,152 5,192 3,477
EBITDA(4)(5)........................ 4,326 5,716 7,997 6,600 4,654 3,701 827
</TABLE>
- ---------------
(1) Reflects the acquisitions and dispositions described in Note 3 to the
consolidated financial statements included in the financial statements
incorporated herein by reference, as well as acquisitions and dispositions
occurring in previous years.
(2) Per share data adjusted to reflect the 1-for-2 reverse stock split on July
11, 1994.
(3) Operating cash flow is defined as operating income before depreciation,
amortization and corporate expenses.
(4) EBITDA is defined as operating income before depreciation and amortization.
(5) Operating cash flow and EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles ("GAAP"), or as a measure of the
Company's profitability or liquidity.
8
<PAGE> 16
THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Special Meeting of Stockholders of the Company will be held at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, 24th Floor, New York, New York at 10:00 A.M., Eastern Time, on
Tuesday, December 17, 1996.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the Company's stockholders will be asked to
consider and vote upon a proposal to (i) approve and adopt an Agreement and Plan
of Merger, dated as of July 23, 1996 (the "Merger Agreement"), among the
Company, OCC Holding Corporation, a Delaware corporation (the "Parent"), and OCC
Acquisition Company, Inc., a Delaware corporation and wholly-owned subsidiary of
the Parent (the "Subsidiary"), and (ii) approve the merger of the Subsidiary
with and into the Company (the "Merger"), pursuant to which the Subsidiary will
cease to exist, the Company will survive as a wholly-owned subsidiary of the
Parent, and the holders of the Company's outstanding Common Stock, par value
$.01 per share (the "Shares"), will become entitled to receive $15.375 in cash,
without interest, for each Share (other than (i) any Share held by the Parent or
the Subsidiary, which will be canceled, (ii) any Share held in the treasury of
the Company, which will be canceled, and (iii) any Dissenting Shares) held
immediately prior to the Effective Time (the "Merger Proposal"). Shares, if any,
owned by the Parent or the Subsidiary, held in treasury by the Company or owned
by any subsidiary of the Company immediately prior to the Effective Time will be
cancelled and will cease to exist from and after the Effective Time. As of the
date of this Proxy Statement, neither the Parent nor any subsidiary of the
Parent (including the Subsidiary) owns any of the Company's Shares.
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors has fixed the close of business on November 8, 1996
as the record date (the "Record Date") for the determination of holders of
Shares entitled to notice of, and to vote at, the Special Meeting or any
adjournment or postponement thereof. Only stockholders of record of Shares at
the close of business on November 8, 1996 are entitled to notice of, and will be
entitled to vote at, the Special Meeting or any adjournment or postponement
thereof. On the Record Date, there were 5,413,014 Shares issued and outstanding
held by approximately 1,000 stockholders of record.
REQUIRED VOTE
One-third of the outstanding Shares entitled to vote at the Special Meeting
must be present, either in person or by proxy, to constitute a quorum for the
transaction of business at the Special Meeting. Each stockholder will be
entitled to one vote per Share held of record on the Record Date. If there are
insufficient Shares present to constitute a quorum or insufficient affirmative
votes to approve any matter presented for approval, the Special Meeting may be
postponed or adjourned one or more times to permit further solicitation of
proxies. The affirmative vote of a majority of the outstanding Shares is
required for the approval of the Merger Proposal. As of the Record Date,
directors and executive officers of the Company as a group (nine persons)
beneficially owned 1,071,968 Shares, or 18.9% of the total outstanding Shares
entitled to vote at the Special Meeting. The Company has been advised that all
of its directors and executive officers intend to vote their Shares in favor of
the Merger Proposal. Under the terms of the Voting Agreement, each director of
the Company has agreed to vote, or cause to be voted, each of his Shares in
favor of the Merger Proposal. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" and "THE MERGER -- Background of the Merger."
VOTING OF PROXIES
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors for use at the Special Meeting and at any adjournment or
postponement thereof. Stockholders are requested to
9
<PAGE> 17
complete, date and sign the accompanying proxy and promptly return it in the
accompanying envelope which requires no postage if mailed in the United States.
All proxies that are properly executed and returned, and that are not revoked,
will be voted at the Special Meeting in accordance with the instructions
indicated on the proxies or, if no direction is indicated, to approve the Merger
Proposal submitted to the Company's stockholders, each as unanimously
recommended by the Board of Directors, as indicated herein. The Board of
Directors is not currently aware of any business to be brought before the
Special Meeting other than the specific proposals referred to in this Proxy
Statement and specified in the accompanying notice of the Special Meeting. As to
any other business that may properly come before the Special Meeting, however,
it is intended that proxies, in the form enclosed, will be voted in respect
thereof in accordance with the judgment of the persons voting such proxies.
REVOCABILITY OF PROXIES
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Special Meeting, by (i) delivering to the Secretary of the
Company by mail at 130 Mason Street, Greenwich, Connecticut 06830 or by
facsimile at (203) 629-1749, a written notice, bearing a date later than the
date of the proxy, stating that the proxy is revoked, (ii) signing and so
delivering a proxy relating to the same Shares and bearing a later date prior to
the vote at the Special Meeting or (iii) attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not, by
itself, revoke a proxy).
ABSTENTIONS; BROKER NON-VOTES
Brokers holding Shares in street name may not give a proxy to vote without
instructions from beneficial owners when the matter to be voted upon involves a
merger or consolidation. Abstentions and broker non-votes will each be included
in determining whether a quorum is present. Abstentions will have the same
effect as a vote against a proposal. Broker non-votes will not be counted for
any purpose in determining whether any proposal has been approved.
SOLICITATION OF PROXIES AND EXPENSES
The expenses incurred in connection with the printing and mailing of this
Proxy Statement and soliciting proxies will be borne by the Company. Following
the original mailing of proxy soliciting material, regular employees of the
Company, for no additional compensation, may solicit proxies by mail, telephone,
telegraph and personal interview. In addition, the Company has retained Beacon
Hill Partners, Inc., at an estimated cost of $2,500, plus reimbursement of
expenses, to assist in the Company's solicitation of proxies from brokers,
nominees, institutions and individuals. The Company will also request banks,
brokers and other intermediaries holding Shares beneficially owned by others to
send this Proxy Statement to and obtain proxies from such beneficial owners and
will reimburse such holders for their reasonable expenses in so doing.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER PROPOSAL.
STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXIES.
A LETTER OF TRANSMITTAL WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK
CERTIFICATES WILL BE MAILED AS SOON AS PRACTICABLE AFTER THE EFFECTIVE TIME OF
THE MERGER.
10
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of November 8, 1996, certain information
with respect to each person known to the Company to own beneficially -- as such
term is used in Rule 13d-3 under the Exchange Act -- more than five percent of
its Common Stock. In accordance with the rules promulgated by the Securities and
Exchange Commission, such ownership includes Shares currently owned as well as
Shares which the named persons have the right to acquire within 60 days,
including, but not limited to, Shares which the named persons have the right to
acquire through the exercise of any option, warrant or right, or through the
conversion of a security.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------- ------------- --------
<S> <C> <C>
KeyCorp(1)............................................................... 1,220,029 22.5%
45 Rockefeller Plaza
New York, NY 10111
Frank D. Osborn.......................................................... 516,775(2) 9.3%
130 Mason Street
Greenwich, CT 06830
</TABLE>
- ---------------
(1) KeyCorp is the parent company of Spears, Benzak, Salomon & Farrell, Inc., a
registered investment advisor ("Spears, Benzak"), and has publicly reported
that such Shares are held for the benefit of various clients of Spears,
Benzak, that Spears, Benzak has revocable shared voting and dispositive
power with such clients, but that in each case the client has the ultimate
power to vote and dispose of such Shares.
(2) Includes 174,167 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996. Also, includes 34,455 Shares held in
custodial accounts for the benefit of Mr. Osborn's children.
11
<PAGE> 19
The following table sets forth beneficial ownership of the Company's Shares
as of November 8, 1996 with respect to (i) each director of the Company, (ii)
each executive officer and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF BENEFICIAL PERCENT
NAME BENEFICIAL OWNER OWNERSHIP OF CLASS
- ----------------------------------------------------------------------- ------------- --------
<S> <C> <C>
Frank D. Osborn........................................................ 516,775(1) 9.3%
Brownlee O. Currey, Jr................................................. 182,015(2) 3.4%
</TABLE>
<TABLE>
<S> <C> <C>
H. Anthony Ittleson.................................................... 37,497(3) *
Edward G. Nelson....................................................... 51,485(4) *
William G. Spears...................................................... 34,680(5) *
Robert K. Zelle........................................................ 153,300 2.8%
Thomas S. Douglas...................................................... 52,333(6) *
Michael F. Mangan...................................................... 13,383(7) *
W. Charles Hillebrand.................................................. 30,500(8) *
Directors and Executive Officers as a Group (9 Persons)................ 1,071,968(9) 18.9%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 174,167 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996. Also, includes 34,455 Shares held in
custodial accounts for the benefit of Mr. Osborn's children.
(2) Includes 32,015 Shares held in a trust, beneficial ownership of which Shares
he disclaims.
(3) Includes 35,997 Shares held in trusts and 1,500 Shares held by Mr.
Ittleson's wife, beneficial ownership of which Shares he disclaims.
(4) Includes 49,704 Shares held by affiliates of Mr. Nelson. Also includes 281
Shares held by Mr. Nelson's wife, and 1,500 Shares held in trust for Mr.
Nelson's nephew, beneficial ownership of which Shares he disclaims.
(5) Includes 7,937 Shares held by Mr. Spears' wife, beneficial ownership of
which Shares he disclaims. Mr. Spears is Chairman of Spears, Benzak which
holds approximately 22.5% of the Company's Common Stock.
(6) Includes 38,333 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996. Also includes 4,500 Shares held by
Mr. Douglas' wife, beneficial ownership of which Shares he disclaims.
(7) Includes 13,333 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996.
(8) Consists of 30,500 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996.
(9) Includes 256,333 Shares subject to stock options exercisable within the 60
day period beginning November 8, 1996.
12
<PAGE> 20
THE MERGER
BACKGROUND OF THE MERGER
Prior to its regularly scheduled meeting of the Board of Directors on
November 15, 1994, the Board of Directors had come to the opinion, based on
discussions with Company management ("Management") and reviews of financial and
other information, that there existed a gap between the value of the Company as
reflected by the price of its publicly traded Shares and the intrinsic value of
the Company. The Board of Directors concluded that this gap was primarily a
result of the fact that a relatively large portion of the Company's assets were
in a Hidden Values (as defined below) category. Such assets include broadcasting
and other assets that were valuable but did not contribute, minimally
contributed or negatively contributed to cash flow such as (i) stations
operating under local marketing agreements in Raleigh, North Carolina and
Dayton, Ohio, (ii) certain underperforming radio stations (iii) fees due to the
Company for its role as part owner and manager of Fairmont Communications
Corporation ("Fairmont") and Northstar Television Group, Inc. ("Northstar") and
(iv) certain other assets. At the November meeting, the Board of Directors
agreed to a plan that would segregate the Company's assets into "A" Group
assets, which could be more readily valued by traditional methods and were
therefore more saleable ("A Group Properties") and "B" Group assets, for which
the Company could develop value over time (the "B Group Properties"). Management
believed that such segregation would achieve higher value than would considering
the A Group Properties and the B Group Properties as a single unit. The A Group
Properties included radio properties with a positive cash flow and the Company's
Muzak franchises, and the B Group Properties included the Company's
underperforming assets and certain other assets. Prior to the November Board of
Directors meeting, Management had requested that ABS undertake a valuation of
the A Group Properties and ABS had delivered a valuation report for the A Group
Properties to Management. Management provided to the Board of Directors a range
of valuations of the Company consisting of the aggregate of A Group Properties
valuations delivered by ABS and Management's estimate of the value of the B
Group Properties. The Company's value to an investor was estimated to range
between $9.20 and $12.50 per Share.
Following extensive discussions, the Board of Directors agreed to engage
ABS to market the A Group Properties to interested parties and instructed ABS to
pursue all credible indications of interest. Pursuant to the terms of an
engagement letter signed on November 21, 1994 (the "Engagement Letter"), ABS
agreed to, among other things, (i) distribute offering materials principally
describing the A Group Properties, which had been reviewed and approved by the
Company, (ii) identify, evaluate and contact selected qualified acquirors, (iii)
assist the Company in responding to inquiries and proposals and (iv) deliver an
opinion to the Board of Directors as to the fairness, from a financial point of
view, of the consideration to be paid for any proposed acquisition.
In January 1995, ABS prepared a confidential Descriptive Memorandum
describing the A Group Properties, began contacting potential buyers to
determine their interest in the A Group Properties and distributed the first
round of Descriptive Memoranda. Based upon preliminary indications of interest,
the Company signed confidentiality agreements with entities that expressed an
interest in the Company's A Group Properties. During January through April 1995,
ABS contacted 54 companies with the prior approval of Management, and
distributed Descriptive Memorandums to 47 of such companies (including 9 for the
Muzak franchises only) all of which (including Hicks Muse) had signed a
Confidentiality Agreement. From February through July 1995, ABS received three
preliminary indications of interest (subject to satisfactory completion of due
diligence, ability to obtain adequate financing and certain other conditions) to
acquire all of the Company's Shares, none of which (including a $9 per Share
preliminary indication of interest from Hicks Muse) was above $10 per Share.
These indications of interest were not pursued because the price per Share was
too low. Over that same period, the Company and ABS also had discussions and
meetings with various parties regarding the A Group Properties, primarily to
respond to due diligence inquiries and to attempt to ascertain each party's
respective level of interest in the Company or the A Group Properties. Two
preliminary proposals were received for the A Group Properties only. However,
neither offer assured adequate value to the Company. Although ABS's engagement
was to market the A Group Properties in its entirety, ABS also received
indications of interest in various specific A Group Properties.
13
<PAGE> 21
During the course of discussions with potential acquirors, ABS updated its
earlier valuation of the A Group Properties and, combined with Management's
updated B Group valuation, provided its estimates of the range of values for the
Company's Shares from approximately $12.30 to $13.80 per Share. The Company did
not consider the written and oral proposals that had been received by it to be
in the best interests of its stockholders, particularly with respect to price,
complexity, which rendered the ultimate value of any such proposal uncertain,
and each potential acquiror's ability to close the transaction.
The Board of Directors and Management decided to selectively pursue
strategic acquisitions and dispositions to improve the Company's stockholder
value and operating results by capitalizing on its position in those markets in
which the Company had a strong presence and by disposing of several of those
radio broadcasting assets which were either (i) not contributing significantly
to cash flow or (ii) did not present a good long term strategic opportunity to
increase stockholder value. The Company sold radio stations in Daytona Beach and
Jacksonville, Florida, Syracuse, New York, Raleigh, North Carolina and Atlantic
City, New Jersey, and sold an option to a purchaser to acquire its television
station in Anniston, Alabama. The Company acquired radio stations in Fort
Myers/Port Charlotte, Florida, Wheeling, West Virginia and Fresno, California.
Proceeds from the dispositions were used to acquire the additional radio
stations and to reduce the indebtedness of the Company. Management's view was
that several of the dispositions represented a realization of a portion of the
Hidden Value of the Company.
At a regularly scheduled board meeting held in November 1995, the Board of
Directors, as part of the ordinary business of the meeting, considered (i) the
status of the individual acquisitions and dispositions and (ii) the impact such
acquisitions and dispositions would have on stockholder value. Management made a
presentation to the Board of Directors in which the Company's Shares were valued
at approximately $13.30 per Share. The Board of Directors again discussed
strategic alternatives for the Company.
The Telecommunications Act of 1996 (the "Telecommunications Act") enacted
into law on February 8, 1996, resulted in changes in (i) the manner in which
broadcast properties were valued and (ii) the strategy and dynamics radio
broadcasters would use to operate in their markets. The passage of the
Telecommunications Act broadened the market for ownership of broadcast
properties and expanded broadcast opportunities generally. In January 1996, in
anticipation of the enactment of the Telecommunications Act, the Board of
Directors and Management determined that the A Group/B Group strategy should no
longer be pursued and, on January 17, 1996, in accordance with the Engagement
Letter, the Company notified ABS that it no longer wished to actively market the
A Group Properties.
During 1996 through the signing of the Merger Agreement, Management, with
the knowledge of the Board of Directors, engaged in discussions relating to the
acquisition of the Company by and/or the Merger of the Company with a number of
parties including financial and strategic acquirors. None of these discussions
developed into a credible proposal.
At its Annual Meeting, held on May 22, 1996, in addition to its regularly
scheduled agenda, the Company presented to its stockholders a historical review
of Company results, including results for year end 1995 and the first quarter of
1996, and presented an analysis of Management's valuation of the Company at
approximately $15.00 per Share.
At the regularly scheduled Board of Directors meeting held immediately
following the Annual Meeting, the Board of Directors considered various
strategic plans for maximizing stockholder value and the impact of such plans on
the operations of the Company. These included the potential impact if the
Company were to (i) purchase radio stations which had $2 million operating cash
flow per year over the successive five year period, (ii) repurchase 1.5 million
Shares in year one and purchase radio stations which had $2 million operating
cash flow per year in years two through five, (iii) acquire radio stations with
operating cash flow of $10 million, or (iv) acquire radio stations with
operating cash flow of $5 million. After extensive discussion of each strategic
alternative, the Board of Directors determined that Management should explore
the various acquisition alternatives. In addition, the Board of Directors
authorized the repurchase of up to $12 million in value of Shares and directed
Management to seek consent from the Company's lender to do so. Such consent was
obtained, but the Share repurchase plan was never implemented and remained an
option for the Company.
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In early May 1996, a representative of Hicks Muse contacted Mr. Osborn, and
expressed a renewed interest on behalf of Hicks Muse in considering an
acquisition of the Company. Mr. Osborn advised the Board of Directors at its May
22, 1996 meeting that he had received such renewed expression of interest from
representatives of Hicks Muse. Hicks Muse signed a new Confidentiality Agreement
on May 30, 1996 with the Company in respect of its active interest in acquiring
the Company. Preliminary information about the Company, including information
that had been presented to the Company's stockholders at its May 22nd Annual
Meeting, was subsequently provided to Hicks Muse. Various conversations ensued
between Management and Hicks Muse during which Hicks Muse expressed its interest
in potentially acquiring all or a substantial portion of the Shares of the
Company. Representatives of Hicks Muse conducted due diligence, visited the
Company and reviewed information presented by the Management. Counsel for Hicks
Muse produced a draft Merger Agreement and forwarded it to the Company and
Company counsel.
During late June and extending through July 23, 1996 (the date of the
Merger Agreement), representatives of the Company, counsel for the Company,
representatives of Hicks Muse and counsel for Hicks Muse discussed the terms of
the offer and intensely negotiated the changes proposed by the Company to the
draft Merger Agreement and related ancillary documents. Hicks Muse indicated
that it was willing to pay $15.00 per Share for the Company. This amount was
negotiated by the Company to $15.25.
Hicks Muse's offer also sought to impose a break-up fee of $3,000,000 and
reimbursement of expenses if the Merger was not consummated or, in the
alternative, a flat break-up fee of $4,000,000. Hicks Muse also initially
offered liquidated damages of $3,000,000 to protect stockholder value in the
event Hicks Muse failed to consummate the transaction. The Company requested
liquidated damages of $5,000,000. A draft Merger Agreement incorporating certain
terms agreed to by both sides, was delivered to the Company's Directors on July
20, 1996, but with these unresolved issues. Subsequently, Hicks Muse agreed to a
$5,000,000 amount for liquidated damages and the purchase price was raised to
$15.375 to accommodate Hicks Muse's desire to consummate the Merger at a date
subsequent to the Closing Date previously contemplated by the parties to the
Merger Agreement.
In July 1996, Management contacted ABS, as its financial advisor, with
respect to the proposed acquisition of the Company by Hicks Muse, in part
because of ABS's familiarity with the Company, and requested that ABS review the
terms of the proposed acquisition with a view to ABS rendering an opinion on the
fairness, from a financial point of view, of the proposed transaction.
On July 22, 1996, the Company's Board of Directors held a special meeting
to review the revised draft Merger Agreement with counsel and its financial
advisor. Counsel reviewed directors' fiduciary duties under Delaware law and
representatives of ABS reviewed historical discussions with potential acquirors
and the principal factors that had been considered in the Company's review of
strategic alternatives: fair price, ability to consummate the proposed
transaction and protection of the Company's ongoing business. ABS also reviewed
its analysis of the proposed transaction. The Board of Directors was also made
aware of Hicks Muse's proposed arrangements with Osborn following the Merger,
pursuant to which Osborn would remain President and Chief Executive Officer of
the Surviving Corporation, and be granted options to acquire 4% of the common
stock of the Company (after the Merger) based on performance and continued
employment and, in the event of a firm commitment underwritten public offering
of common equity securities of Parent for cash, be granted the right to exchange
his equity interest in the Company for common equity securities of Parent.
Pursuant to a Subscription Agreement between Parent and Mr. Osborn, Mr. Osborn
has the right to acquire, in exchange for a portion of the Shares held by him,
6% of the common stock of the Parent. The Board of Directors questioned
Management, ABS and Company counsel regarding the proposed Merger Agreement and
counsel described the unresolved break-up fee issue to the Board of Directors,
explaining the options available. ABS rendered a preliminary verbal opinion that
the consideration to be paid in the proposed merger represents a fair value to
the stockholders, from a financial point of view, and confirmed that ABS would
be prepared to deliver a formal written fairness opinion with respect to the
Hicks Muse offer.
The Board of Directors agreed on a flat break-up fee of $3,750,000. The
Board of Directors then approved the Merger Agreement, agreed to recommend the
Hicks Muse offer to stockholders, agreed to vote their shares in favor of the
Merger and authorized Company counsel to work out the few remaining issues. On
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July 23, 1996, outstanding issues with respect to the terms of the Merger were
resolved; Hicks Muse accepted the Directors' proposed flat break-up fee of
$3,750,000; the language in the Merger Agreement was agreed upon; and
counterpart signature pages were signed.
In late June 1996, a party contacted the Company and expressed a desire to
discuss potential mutual interest in a possible transaction with the Company.
The party signed a confidentiality letter on June 27, 1996 and was provided
certain preliminary information regarding the Company's properties. In late July
1996, following the public announcement by the Company that it had entered into
the Merger Agreement, the party indicated that it might be interested in making
an offer for the Company. In mid-August, after determining that such party was
credible, the Board of Directors determined that the party should be given
access to additional information about the Company so it could determine whether
it wished to make a formal competing offer. Such information was provided by the
Company a few days later. In mid-September 1996, the party notified the Company
that it did not intend to make an offer for the Company.
REASONS FOR THE MERGER
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER PROPOSAL.
The determination of the Board of Directors to approve the Merger Agreement
was based upon the consideration of a number of factors, including the
following:
(1) the $15.375 per Share Merger Consideration represents a
substantial premium over the Nasdaq closing price of $12.25 on July 19,
1996, the last trading day prior to the meeting of the Board of Directors
on July 22, 1996 ($12.25 was the highest price at which the Company's
Shares have traded over the past four years prior to the July 22nd Board
meeting);
(2) the $15.375 per Share offer received from Hicks Muse, is
substantially in excess of any prior proposal and higher than any per Share
price in the range of valuations earlier made;
(3) an active and extensive process of determining value for, and
offering and negotiation of, the A Group Properties and the Company had
been conducted, and various strategies for maximizing stockholder value had
been considered, beginning late 1994 and continuing through July 1996;
(4) the independent view of the Board of Directors as to the value of
the Company derived from various analyses, including, among others, its
analyses of valuations presented by ABS and the Board of Directors'
considered opinion that the $15.375 per Share Merger Consideration provides
fair value for all of the Shares and all of the Company's assets including
its Hidden Values;
(5) the uncertainty that the Company would be able to successfully
execute any of the strategic acquisition alternatives discussed at prior
Board meetings due to the highly competitive market for quality radio
broadcasting properties, the Company's relative size and the fact that
other broadcasting companies are larger and have greater financial
resources;
(6) ABS delivered its preliminary verbal opinion to the Board of
Directors on July 22, 1996, which was confirmed by a written opinion dated
July 23, 1996, that the Hicks Muse price represents a fair value to the
stockholders of the Company, from a financial point of view;
(7) Hicks Muse's reputation and its historic success in raising
financing to complete acquisitions, coupled with the availability of
liquidated damages if Hicks Muse fails to consummate the Merger; and
(8) the Merger Agreement continues to permit the Board of Directors,
in the exercise of its fiduciary duties, to consider and accept an
unsolicited proposal to acquire the Company which the Board of Directors
believes is more favorable to the Company and its stockholders than the
Merger Proposal.
The Board of Directors recognizes that if the Merger is consummated the
Company's stockholders will not have the opportunity to continue their equity
interest in any future growth of the Company. See "THE MERGER
AGREEMENT -- Certain Other Effects of the Merger."
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The foregoing discussion of the factors considered by the Board of
Directors is not meant to be exhaustive but is believed to include the material
factors considered by the Board of Directors in its deliberations. The Board of
Directors did not quantify or attach any specific weight to the various factors
they considered in reaching their determination that the Merger Agreement and
the transactions contemplated thereby, including the Merger, are in the best
interests of the Company and its stockholders. In reaching its determination,
the Board of Directors took the various factors into account collectively.
OPINION OF FINANCIAL ADVISOR
ABS has delivered its opinion to the Board of Directors to the effect that,
as of July 22, 1996, the consideration to be paid by the Subsidiary in the
Merger represents a fair value, from a financial point of view, to the
stockholders of the Company (the "ABS Opinion").
A COPY OF THE ABS OPINION DATED JULY 23, 1996 WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN AND PROCEDURES FOLLOWED BY ABS IN RENDERING ITS OPINION IS ATTACHED
HERETO AS APPENDIX B, AND IS INCORPORATED HEREIN BY REFERENCE. THE COMPANY'S
STOCKHOLDERS ARE URGED TO READ THE ABS OPINION IN ITS ENTIRETY. THE SUMMARY OF
THE ABS OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION LETTER. ABS HAS CONSENTED TO THE
INCLUSION OF ITS OPINION LETTER IN THIS PROXY STATEMENT.
The ABS Opinion is directed only to the fairness from a financial point of
view of the Merger Consideration in the Merger. ABS was not asked to consider,
nor did it express any opinion with respect to, the fairness of any other
transaction. The ABS Opinion does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Special Meeting.
It should be understood that, although subsequent developments may affect
the ABS Opinion, ABS does not have any obligation to update, revise or reaffirm
its opinion and the Company's obligation to consummate the Merger is not
conditioned upon an update of the ABS Opinion.
The following briefly summarizes the procedures followed by ABS in reaching
its opinion and the basis for and methods of arriving at such opinion. No
limitations were imposed by the Board of Directors with respect to the
investigations made or procedures followed.
ABS was selected and retained by the Company to render its opinion to the
Board of Directors and will
receive a fee for its services. ABS was selected on the basis of expertise,
historical relationship with the Company (specifically ABS's participation since
1994 in the identification and analysis of the Company's strategic
alternatives), knowledge of the radio broadcasting business and its reputation.
As part of its advisory and investment banking business, ABS is regularly
engaged in the valuation of businesses and their securities for corporate,
estate and other purposes.
In connection with the ABS Opinion, ABS reviewed and analyzed, among other
things, (i) certain publicly available information concerning the Company
including the annual reports on Form 10-K of the Company for each of the fiscal
years in the five-year period ended December 31, 1995; (ii) the quarterly report
on Form 10-Q of the Company for the quarter ended March 31, 1996; (iii) certain
other internal
information, primarily financial in nature, including unaudited pro forma
estimated financial data for the year ended December 31, 1996 prepared by
Management concerning the business and operations of the Company; (iv) certain
publicly available information concerning the trading of, and the trading for,
the Shares; (v) the Merger Agreement; (vi) certain information concerning
preliminary indications of interest in acquiring the company and/or a
substantial portion of the company over the last eighteen months; (vii) publicly
available information with respect to certain other publicly traded radio
broadcasting companies; and (viii) publicly available information concerning the
nature and terms of other transactions that ABS considered relevant to its
inquiry. In addition, representatives of ABS discussed with certain officers and
employees of the Company the past and current business operations, financial
condition and future prospects of the Company and considered such other matters
that they reasonably believed to be relevant to their inquiry.
The ABS Opinion states that, in the course of its review and analysis and
in arriving at said opinion, ABS assumed and relied upon the accuracy and
completeness of all the financial and other information
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<PAGE> 25
provided to ABS or publicly available, and did not independently verify any such
information. In the course of ABS's review, nothing came to ABS's attention
which led ABS to believe that it would not be reasonable to rely upon and
utilize such information for the purposes of expressing ABS's opinion. ABS did
not make or obtain any independent evaluation or appraisals of any of the
properties or facilities of the Company.
In conducting its analysis and arriving at its opinion, ABS considered such
financial and other factors as they deemed appropriate under the circumstances
including, among others, (i) the historical, current and projected financial
position and results of operations of the Company; (ii) the business prospects
of the Company; (iii) the process which had previously occurred in connection
with the indications of interest in acquiring the Company or a substantial
portion of the Company; (iv) the historical and current (through the date of its
opinion) market performance of the Shares; (v) the terms and conditions of the
Merger; and (vi) financial and other publicly available information concerning
other publicly traded companies in the radio broadcasting industry. ABS also
took into account its assessment of general economic, market and financial
conditions as well as its experience in connection with similar transactions and
securities valuation generally. The ABS Opinion is necessarily based upon
conditions as they existed and could be evaluated on the date it was rendered.
In accordance with recognized professional standards as generally practiced
in the valuation industry, the fee for ABS's services is not contingent upon
ABS's conclusions. ABS determined, to the best of its knowledge and in good
faith, that neither it nor any of its agents or employees has a material
financial interest in the Company.
General. ABS placed significance on the fact that while the Company's
principal business is radio broadcasting, the Company also is engaged in other
businesses, such as operating Muzak franchises and the promotion of live country
music festivals and shows through its entertainment business. In addition, a
portion of the value of the Company is represented by non-cash-flow-producing
Stations and other assets ("Hidden Values"). Therefore, valuing the Company
requires certain reasonable assumptions with respect to the various components
of the Company's cash flow and its non-cash-flow-producing assets.
Discounted Cash Flow Analysis. ABS estimated the present value of the
Company by discounting the projected operating cash flow over a five-year
period. ABS utilized the Company's estimate of pro forma operating cash flow for
1996, and prepared its own estimate for operating cash flow for the years
1997-2000.
Total enterprise value was calculated by adding the figure for the present
value on the terminal value to the present value of the free cash flows. ABS
subtracted its estimate of net debt from the total enterprise value and divided
that figure by the fully diluted number of Shares outstanding in order to arrive
at an equity value per Share for the Company which ranged from a low of $7.29 to
a high of $13.18 per Share.
Comparable Company and Transaction Analysis.
Comparable Company Analysis. ABS analyzed the operating data and ratios of
the Company as well as ten additional publicly owned radio broadcasting
companies, including American Radio Systems, Clear Channel Communications, Emmis
Broadcasting, Evergreen Media, EZ Communications, Heftel Broadcasting, Infinity
Broadcasting, Jacor Communications, Saga Communications and SFX Broadcasting.
For each of its analyses, ABS used the closing share prices as of July 19th,
1996. Each of the selected companies is significantly larger and more
exclusively focused on the radio broadcast business than the Company.
The comparisons of analysis of the data and ratios of the Company and the
selected companies included: (i) the total market capitalization of common stock
plus estimated net debt (ABS "Adjusted Market Value") to the (a) estimated pro
forma revenue and broadcast cash flow for calendar 1996; and (b) estimated pro
forma broadcast cash flow for calendar 1997; (ii) the common stock price to the
estimated pro forma calendar 1996 after-tax cash flow per share; (iii) the net
indebtedness to the estimated pro forma calendar 1996 broadcast cash flow; (iv)
the one year revenue and broadcast cash flow growth rates; (v) the three year
compounded annual revenue growth rate; and (vi) the annual broadcast cash flow
margins for the years 1993, 1994 and 1995.
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Comparable Radio Merger and Acquisition Transactions. ABS analyzed a large
number of radio station and radio group acquisitions in markets ranked 1 to 243
and which were announced and/or completed during the period from January 1, 1994
through May 1, 1996 in terms of the acquisition price and the multiple of
broadcast cash flow. The minimum multiple for all markets was 5.9X, the average
multiple was 9.9X and the maximum multiple was 18.1X. In addition, ABS
calculated the average multiple for large, medium and small market acquisitions
to be 13.5X, 12.0X and 10.0X for 1996. In comparing such data, ABS placed
significant weight on the fact that a material portion of the Company's cash
flow is derived from its Muzak and entertainment businesses.
Business Segment Analysis. In making company and acquisition transaction
comparisons to the Company and the Merger, ABS took into account the fact that
the Muzak and entertainment businesses and Hidden Values are a significant part
of the Company and therefore realistic comparisons required ABS to segregate the
Muzak and entertainment businesses and Hidden Values from the rest of the
Company. ABS analyzed the multiple for the broadcast cash flow of the Company's
radio properties taking into consideration the lower range of multiples for the
Company's Muzak and entertainment businesses as well as a range of values for
the Company's Hidden Values. The analysis implied multiples of radio broadcast
cash flow of 8.4X to 14.0X the Company's estimate of its 1996 pro forma
broadcast cash flow.
Stock Trading History. On the day prior to the July 22, 1996 meeting of
the Board of Directors, the share price closed at $12.25. The Merger
Consideration represents a 25.5% premium. The Merger Consideration compared to
the 52-week high and low represented a premium of 25.5% and 119.6%,
respectively, on that date. ABS also examined the premiums versus the high and
low share prices at conventional interval periods prior to the public
announcement of the transaction Merger Proposal. As of June 7, 1996 the premium
was 50% versus the closing price on that date, and 25.5% and 53.8% versus the
30-day high and low as of that date. As of April 26, 1996 the premium was 46.4%
versus the closing price on that date, and 25.5% and 53.8% versus the 30-day
high and low as of that date. As of February 2, 1996 the premium was 80.9%
versus the closing price on that date, and 25.5% and 80.9% versus the 30-day
high and low as of that date. As of November 10, 1995 the premium was 92.2%
versus the closing price on that date, and 25.5% and 98.4% versus the 30-day
high and low as of that date.
Other factors. ABS also considered the marketing process which had
previously occurred in connection with the Company's retention of ABS to solicit
offers to acquire the A Group Properties. ABS contacted 54 prospective investors
including other broadcasting companies, companies with an interest in
broadcasting and financial buyers. Approximately 47 parties executed
confidentiality letters and received copies of the ABS information memorandum.
As a result, three offers were received to acquire the entire company, none were
above $10.00 per share, and two were received for the A Group Properties,
neither of which were considered adequate. All offers were subject to various
contingencies with respect to due diligence and financing.
The summary set forth above is not a complete description of the analyses
performed by ABS. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Therefore, such an opinion is not susceptible to summary description.
No single analytical methodology used by ABS was critical to its overall
conclusion, as each analytical technique has its inherent strengths and
weaknesses. The nature of available information may further affect the value of
any particular methodology of technique. ABS's conclusion was based upon all of
the analyses and factors that it considered taken as a whole and also on the
application of ABS's experience and judgment. Its conclusion involved
significant elements of subjective judgment and qualitative analyses.
Accordingly, ABS believes that its analyses must be considered as a whole and
that to focus upon specific portions of such analyses and factors would create
an incomplete and misleading view of the process underlying the preparation of
the ABS Opinion. ABS's analyses and opinion were based upon the forecasts and
projections of future results which are not necessarily indicative of actual
future results.
ABS's Fee Arrangement. ABS will receive a fee of $825,000 in connection
with its financial advisory relationship with the Company including the
rendering of its opinion and will be reimbursed for all reasonable out-of-pocket
expenses it incurred in connection therewith. The terms of the fee arrangement
with ABS,
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which are customary in transactions of this nature, were negotiated at arms'
length between the Company and ABS and, at the time it received the ABS Opinion,
the Board of Directors was aware of such fee arrangement.
In connection with the retention of ABS by the Company, the Company has
agreed to indemnify ABS and its directors, officers, employees, agents and
stockholders against certain claims and potential liabilities to which it may be
subject arising out of the performance of its services under the retention
agreement between ABS and the Board.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In early 1995, the Company began ongoing discussions with Mr. Osborn, to
execute an incentive amendment to Mr. Osborn's existing Employment Agreement to
provide for some form of compensation bonus in connection with the sale or other
transfer of ownership of the Company. At a meeting of the Compensation Committee
of the Company's Board of Directors held on May 22, 1996, the Compensation
Committee approved an amendment to Mr. Osborn's Employment Agreement providing
for a compensation bonus computed as follows: upon the occurrence of a
Triggering Event (as hereinafter defined) prior to the end of the term of Mr.
Osborn's existing Employment Agreement, Mr. Osborn would be entitled to receive
an amount equal to one year's base salary ($375,000) ("Base Salary") on the date
of such occurrence (the "Scheduled Payment Date"). If the Triggering Event
yielded a price per share of $10.00 to holders of Shares, Mr. Osborn would be
entitled to receive an additional amount equal to one year's Base Salary. For
each 12.5% of a dollar above a per share price of $10.00, up to and including a
per share price of $12.00, Mr. Osborn would also be entitled to receive an
additional amount equal to 12.5% of Base Salary. Mr. Osborn would, in addition,
be entitled to receive an amount equal to 25% of Base Salary for each 12.5% of a
dollar above the per share price of $12.00 up to and including a per share price
of $14.00. If the per share price were above $14.00, Mr. Osborn would be
entitled to receive an additional amount equal to 50% of Base Salary for each
12.5% of a point above the per share price of $14.00. A "Triggering Event" means
a merger or consolidation, tender offer, recapitalization, spin-off,
extraordinary dividend or similar transaction in which the public stockholders
of the Company receive proceeds in the form of cash or marketable securities.
In connection with the Merger, on July 22, 1996 the Company's Board of
Directors approved, and Mr. Osborn and the Company agreed to, a modification of
the Employment Agreement to provide for a Triggering Event Payment in connection
with the Merger in an aggregate amount which is less than the aggregate
Triggering Event Payment amount contemplated by Amendment No. 1 as follows: If
the Merger is consummated, Mr. Osborn will be entitled to receive an amount
equal to one year's Base Salary ($375,000) on the date on which the Merger is
consummated plus a bonus equal to $2,545,000.
Following the consummation of the Merger, Mr. Osborn will remain the
President and Chief Executive Officer of the Surviving Corporation pursuant to a
new employment agreement. Mr. Osborn's proposed employment arrangements in
respect of the Surviving Corporation will provide him with (i) a signing bonus
of $300,000 and (ii) options to acquire 4% of the common stock of the Company
(after the Merger) at the Per Share Common Stock Price based on performance and
continued employment. Pursuant to a Subscription Agreement, Mr. Osborn has the
right to acquire approximately 6% of the common stock of the Parent at the same
per share price to be paid by the investors in Parent (the "Per Share Common
Stock Price") in exchange for a portion of the Shares held by him valued at the
Merger Consideration. The equity component of Mr. Osborn's employment
arrangements may be revised in order to provide that Mr. Osborn will receive
Capstar shares and options in lieu of the Parent shares and post-Merger Company
options described above. In addition, Mr. Osborn will receive a guaranteed bonus
equal to $25,000 on the first day of each calendar month for a period of 60
months following the execution of a definitive employment agreement between Mr.
Osborn and the Surviving Corporation. The Subsidiary required that Mr. Osborn's
entering into the foregoing employment arrangements be a condition to the
Subsidiary's obligation to consummate the Merger.
On January 17, 1995, the Company separately entered into termination
protection agreements (the "Employee Severance Agreements") with 2 senior
corporate executives (the "Executives") and certain key corporate employees (the
"Key Employees", and together with the Executives, the "Protected Employees") to
encourage the Protected Employees to remain with the Company during periods of
uncertainty with respect
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to the Company's ownership and to enhance their abilities to act in the best
interests of the Company and its stockholders with respect to any offer for the
Company, without being influenced by any uncertainties surrounding their
respective situations with the Company. The Employee Severance Agreements are
also intended to further assure the continued employment of (i) in the case of
the Executives, for the period from the date of the Employee Severance
Agreements up to the time of a Triggering Event by the Company and (ii) in
respect of the Protected Employees, for at least a period of twelve months by
the Company's successor in interest following the occurrence of a Triggering
Event. The Employee Severance Agreements provide the Protected Employees with
the benefits described below. The consummation of the transactions contemplated
by the Merger Agreement will constitute a Triggering Event with respect to the
Protected Employees.
The following benefits are provided under the Employee Severance
Agreements: (i) in respect of the Executives, a bonus payment equal to six times
the sum of the current monthly salary at the time of a Triggering Event to be
paid on or before the consummation of the transactions constituting a Triggering
Event and (ii) in respect of the Protected Employees (A) a severance payment
equal to six times the Protected Employees' current monthly salary if the
Protected Employee is not employed in his current position and at his current
rate of pay for a period of twelve months by the successor in interest to the
Company following a Triggering Event and (B) at the Protected Employees' option,
the Protected Employee may join the Company's existing health plan for eighteen
months, the first six months to be paid for by the Company and the remaining
twelve months to be paid for by the Protected Employee.
The Employee Severance Agreements further provide that in the event the
Company announces a Triggering Event and prior to the consummation of the
transactions constituting such Triggering Event, in such intervening period, no
Protected Employee may be terminated other than for Cause (as defined herein).
The following constitutes, but is not a limitation on, grounds for Cause: (a) a
violation of a lawful order or directive whether orally or in writing; (b) a
failure to devote full time and attention to employment obligations; and (c)
malfeasance or misfeasance which results in harm to the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has determined that the Merger Agreement and the
transactions contemplated thereby, including the Merger are advisable and in the
best interests of the Company and its stockholders and has approved the Merger
Agreement. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER PROPOSAL.
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THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MERGER AGREEMENT. THIS SUMMARY
DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY
STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. WHILE THE COMPANY BELIEVES
THAT THIS DESCRIPTION COVERS THE MATERIAL TERMS OF THE MERGER AGREEMENT, ALL
STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
EFFECTIVE TIME OF THE MERGER
The Merger will be consummated by filing a Certificate of Merger with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of the DGCL (the date and
time of the completion of such filing being the "Effective Time"). The
Certificate of Merger will be filed as soon as practicable after the Special
Meeting subject to the satisfaction or waiver, where permissible, of the
conditions contained in the Merger Agreement, on or before the tenth business
day after the FCC Consent has become a Final Order, upon five business days'
prior written notice (given within the first five business days after the FCC
Consent has become a Final Order) from the Subsidiary to the Company, of the
Closing Date; provided, however, that in no event will the Effective Time occur
prior to February 20, 1997. Assuming all conditions to the consummation of the
Merger have been satisfied or waived, the Effective Time is expected to occur on
or about February 20, 1997.
THE MERGER
The Merger Agreement provides that, subject to the approval and adoption of
the Merger Agreement by the Company's stockholders and compliance with certain
other conditions, the Subsidiary will be merged with and into the Company, the
separate corporate existence of the Subsidiary will cease, and the Company will
continue as the Surviving Corporation of the Merger. Following consummation of
the Merger, the Company, as the Surviving Corporation, will be a wholly-owned
subsidiary of the Parent. The name of the Surviving Corporation will be "Osborn
Communications Corporation."
ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Certificate of Incorporation of the Company, as
in effect immediately prior to the Effective Time, will be amended and restated
as of the Effective Time by operation of the Merger Agreement and by virtue of
the Merger without any further action by the stockholders or directors of the
Surviving Corporation. At the Effective Time, the Bylaws of the Company, as in
effect immediately prior to the Effective Time, will be the Bylaws of the
Surviving Corporation. Thereafter, the Surviving Corporation's certificate of
incorporation and bylaws may be amended in accordance with their terms and as
provided in the DGCL.
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
The directors of the Subsidiary immediately prior to the Effective Time
will be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of the Subsidiary immediately prior to the
Effective Time will be the officers of the Surviving Corporation at the
Effective Time, except that the president and chief executive officer of the
Company immediately prior to the Effective Time shall be the president and chief
executive officer of the Surviving Corporation at the Effective Time, in each
case until their respective successors are duly elected or appointed and
qualified.
CONVERSION OF THE SHARES
At the Effective Time, each Share outstanding immediately prior to the
Effective Time (other than (i) any Share held by the Parent or the Subsidiary,
which will be canceled, (ii) any Share held in the treasury
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of the Company, which will be canceled, and (iii) any Dissenting Shares), will
be converted into the right to receive $15.375 in cash, without any interest
thereon, payable to the holder thereof.
SETTLEMENT OF OPTIONS AND WARRANTS
At the Effective Time, each holder of then outstanding Options to purchase
Option Shares granted by the Company pursuant to the Osborn Communications
Corporation Incentive Stock Plan, as amended, (whether or not then presently
exercisable) shall be entitled to receive, and shall receive, in settlement of
each Option, the Option Consideration from the Surviving Corporation in an
amount equal to the product of (a) $15.375 minus the exercise price per Option
Share and (b) the number of Option Shares (including any fractional Option
Shares) covered by such Option, less any applicable withholding taxes.
Immediately prior to the Effective Time, each holder of then outstanding
Warrants to purchase Warrant Shares granted by the Company (whether or not then
presently exercisable) shall be entitled to receive, and shall receive, in
settlement of each Warrant, where the amount set forth in clause (i) below is
positive, the Warrant Consideration from the Company in an amount equal to the
product of (i) $15.375 minus the exercise price per share of the Warrant and
(ii) the number of Warrant Shares (including any fractional shares) covered by
such Warrant, less any applicable withholding taxes.
EXCHANGE OF STOCK CERTIFICATES
At or prior to the Effective Time, the Subsidiary will deposit, or cause to
be deposited, with a bank or trust company designated by the Subsidiary or, at
the Subsidiary's election, the Surviving Corporation (such bank or trust company
or the Surviving Corporation being referred to as the "Exchange Agent") for the
benefit of former holders of Shares, Options or Warrants, cash in an amount
equal to all the Merger Consideration, Option Consideration and Warrant
Consideration. Promptly thereafter, the Exchange Agent will mail to all former
holders of record of the Company's Shares and all holders of Option Shares and
Warrant Shares, a letter of transmittal with instructions for surrendering their
certificates in exchange for the Merger Consideration. STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR SHARE CERTIFICATES FOR EXCHANGE UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
In the event payment of any Merger Consideration is to be made to a person
other than a person in whose name the certificate surrendered is registered, it
will be a condition of payment that the certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment will pay any transfer or other taxes required by reason
of the issuance of the Merger Consideration in a name other than that of the
registered holder of the stock certificates surrendered, or shall establish to
the satisfaction of the Subsidiary that such tax has been paid or is not
applicable.
Any funds remaining with the Exchange Agent six months after the Closing
Date will be delivered to the Surviving Corporation (if the Surviving
Corporation is not the Exchange Agent) and the Exchange Agent's duties will
terminate. Thereafter, any holders of certificates formerly representing Shares
may surrender such certificate to the Surviving Corporation and receive in
exchange therefor the Merger Consideration, without any interest thereon.
LIQUIDATED DAMAGES; LETTER OF CREDIT
The Subsidiary is obligated to pay $5,000,000 to the Company as liquidated
damages in the event the Company terminates the Merger Agreement as a result of
the breach by the Subsidiary of any representation or warranty, or any material
breach of any covenant or agreement set forth in the Merger Agreement which
breach shall have remained uncured for twenty (20) days following receipt by the
Subsidiary of written notice of such breach. The right to receive the payment of
$5,000,000 as liquidated damages will be the Company's sole and exclusive remedy
if the Closing does not occur due to the Subsidiary's breach as described
herein. As a condition to and upon payment to, and receipt by, the Company of
liquidated damages, the Company is required to deliver a Release irrevocably and
unconditionally releasing and discharging the Subsidiary, Parent and each of
their respective successors, assigns, employees, agents, stockholders, partners,
subsidiaries, parent
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<PAGE> 31
companies and other affiliates from any and all claims, demands, causes of
action or liabilities of any kind whatsoever related to or arising out of the
Merger Agreement. As security for payment of liquidated damages, if and when
due, the Company, the Subsidiary, Fund III and the Escrow Agent, have entered
into an Escrow Agreement, as required by the Merger Agreement, pursuant to which
the Subsidiary has deposited an original, irrevocable letter of credit issued by
Bankers Trust Company in favor of the Company for the sum of $5,000,000 into an
escrow account with the Escrow Agent. If the Subsidiary does not otherwise pay
the liquidated damages to the Company when due, the Escrow Agent will be
directed to deliver the Letter of Credit to the Company enabling the Company to
draw thereon.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations, warranties and
agreements of the Company including representations and warranties regarding:
(i) its due organization, valid existence and authority to enter into the Merger
Agreement; (ii) subsidiaries; (iii) capital structure; (iv) financial statements
and reports; (v) FCC matters; (vi) insurance; (vii) real estate; (viii) personal
property; (ix) liens and encumbrances; (x) affiliate relationships; (xi) vote
required; (xii) compliance with all applicable laws, judgments, orders, decrees,
rules and regulations; (xiii) the enforceability of the Merger Agreement; (xiv)
notices or approvals and consents required for execution and delivery of the
Merger Agreement; (xv) the ABS Opinion and the fees payable in connection
therewith; (xvi) conduct of business and absence of material changes in their
business since March 31, 1996; (xvii) pending and threatened litigation; (xviii)
tax matters; (xix) benefit plans; (xx) labor matters; (xxi) environmental
matters; (xxii) intellectual property; (xxiii) title to assets; and (xxiv)
certain material agreements.
The Merger Agreement contains certain representations, warranties and
agreements of the Subsidiary including representations and warranties regarding:
(i) its due organization, valid existence and authority to enter into the Merger
Agreement; (ii) pending or threatened litigation; (iii) FCC matters; and (iv)
owned or leased real estate.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed that it will
conduct the business of the Company and its subsidiaries prior to the Effective
Time in the ordinary and usual course of business and consistent with past
practice. The Merger Agreement also restricts the ability of the Company and its
subsidiaries to:
(1) conduct its business in any material respect except in the
ordinary course consistent with past practice; or
(2) if it would cause a Material Adverse Effect, fail to use its
commercially reasonable efforts to preserve intact the Company's present
business organization and to keep available the services of its present
officers, station managerial personnel (including the General Manager,
Station Manager, General Sales Manager, Local Sales Manager, National Sales
Manager, Programming Director and Business Manager, or persons performing
comparable duties, of each Station (collectively, the "Station
Management")) and over-the-air employees or independent contractors and
preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
will not be materially impaired at the Closing Date; or
(3) other than as previously disclosed in writing to the Subsidiary,
fail to use its commercially reasonable efforts to maintain the present
format of the Stations and with programming consistent with past practices;
or
(4) split, combine, divide, distribute or reclassify any shares of its
capital stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock, or directly or indirectly,
redeem, purchase or otherwise acquire any shares of its capital stock or
other securities; provided, however, that nothing prevents any of its
subsidiaries from paying dividends or making other distributions to the
Company; or
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<PAGE> 32
(5) issue, sell, pledge, dispose of, encumber or deliver (whether
through the issuance or granting of any options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or
any securities convertible into or exercisable or exchangeable for shares
of stock of any class (other than the issuance of certificates in
replacement of lost certificates); or
(6) change or amend its charter documents or bylaws; or
(7) except for amendments, terminations (without payment of penalty or
damages), renewals or failures to renew (without payment of penalty or
damages) of employment agreements with over-the-air personnel in the
ordinary course of business and consistent with past practice (subject to
prior consultation with the Subsidiary reasonably in advance thereof),
enter into, materially amend, terminate, or fail to use its commercially
reasonable efforts to renew any material contract (provided that neither
the Company nor its subsidiaries will be required to renew any material
contract on terms that are less favorable to the Company or its
subsidiaries) or default in any material respect (or take or omit to take
any action that, with or without the giving notice or passage of time,
would constitute a material default) under any material contract or enter
into any new material contract; or
(8) merge or consolidate with or into any other legal entity, dissolve
or liquidate; or
(9) incur or assume any long-term debt (including obligations in
respect of capital leases and for interest), assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person (other than endorsements
of checks in the ordinary course) or make any loans, advances or capital
contributions to, or investments in, any person (other than advances to
employees in the ordinary course of business); or
(10) adopt or amend any employee benefit plan or collective bargaining
agreement, or increase in any manner the compensation or fringe benefits of
any director, officer or employee or other station and broadcast personnel
(whether employees or independent contractors) or pay any benefit not by
any existing agreement, except in the ordinary course of business and
consistent with past practices and as required by law, provided that,
before entering into any employment agreement or increasing or agreeing to
increase the compensation, bonuses or other benefits of any station
management or over-the-air talent in the ordinary course of business and as
required by law, the Company shall first have consulted in good faith with
the Subsidiary with respect to the terms of any such employment agreement
or increase or change in compensation, bonuses or other benefits; or
(11) except as set forth on a schedule to the Merger Agreement,
acquire (including, without limitation, by merger, consolidation or the
acquisition of any equity interest or assets) or sell (whether by merger,
consolidation or the sale of any equity interest or assets), lease or
dispose of any assets except in the ordinary course of business and
consistent with past practice or, even if in the ordinary course of
business and consistent with past practices (other than sales of surplus or
obsolete equipment), whether in one or more transactions, in no event
having a fair market value in excess of $75,000; or
(12) mortgage, pledge or subject to any material lien any of its
properties or assets, tangible or intangible, other than in the ordinary
course of business consistent with past practice; or
(13) except as required by GAAP, applicable law or circumstances which
did not exist as of March 31, 1996, change any of the material accounting
principles or practices used by it; or
(14) make any settlement of or compromise any tax liability, change
any tax election or tax method of accounting or make any new tax election
or adopt any new tax method of accounting which settlement, compromise,
method or election is material to the Company and its subsidiaries, taken
as a whole; or
(15) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business consistent with
past practice, or fail to pay or otherwise satisfy (except if being
contested in good faith) any material accounts payable, claims, liabilities
or obligations on a basis, and within the time, consistent with past
practice; or
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<PAGE> 33
(16) change in any material respect its existing practices and
procedures with respect to the collection of accounts receivable of the
Stations and, except with respect to good faith attempts consistent with
past practice to obtain payment of a past due receivable, or except in
accordance with existing practices, a contested receivable, offer to
discount the amount of any outstanding receivable or extend any other
incentive (whether to the account debtor or any employee or third party
responsible for the collection of receivables) to accelerate the collection
thereof, or change any Company radio station's advertising rates or
policies, procedures or methods in connection with the sale of advertising
time in a manner primarily intended to accelerate the receipt of cash
payments or fail to incur annual advertising and promotional department
expenses in cash and trade below 90% of that budgeted for 1996 (as such
budget previously has been delivered to the Subsidiary); or
(17) except as contemplated by that certain Option Agreement dated as
of July 8, 1996, by and between Wheeling Radio Company and Mountain Radio
Corporation, enter into, or enter into negotiations or discussions with any
person other than the Subsidiary with respect to, any local marketing
agreement, time brokerage agreement, joint sales agreement or any other
similar agreement; or
(18) agree to or make any commitment, orally or in writing, to take
any actions prohibited by the Merger Agreement.
The Merger Agreement also requires that the Company use commercially
reasonable efforts to ensure that the difference, if negative, between the value
of time owed under barter agreements to which any of its Stations is a party or
by which any of them is bound and the value of the goods and services to be
received under such agreements, taken as a whole, does not exceed $75,000.
ENVIRONMENTAL SITE ASSESSMENTS
If the Subsidiary or its lenders or other financing sources require Phase I
or Phase II environmental site assessments ("ESAs"), the Company is required, at
its sole expense and upon written notice from the Subsidiary to the Company
identifying the locations at which such ESAs are required, to cause to be
performed by a nationally recognized and duly qualified environmental consultant
reasonably acceptable to the Subsidiary and the Company an ESA at each
identified transmission site owned, operated or leased by the Company or its
subsidiaries and at such other identified real properties and facilities owned,
operated or leased by the Company or its subsidiaries. The Company must submit
final copies of the Phase I ESA reports (and, if applicable, Phase II ESA
reports) to the Subsidiary no later than 45 days following the date on which the
Company receives the notice referred to above.
NO SOLICITATION; FIDUCIARY DUTIES
The Merger Agreement provides that the Company will not and will not permit
any of its subsidiaries or any officer, director, employee, attorney,
accountant, financial advisor, investment banker or other agent of the Company
or any of its subsidiaries to initiate, solicit, negotiate, encourage or provide
information to facilitate the submission of any proposal or offer from any
person relating to a Business Combination Transaction Proposal. However, in
response to an unsolicited written proposal with respect to a Business
Combination Transaction Proposal prior to the receipt of the requisite vote or
consent for approval and adoption by the Company's stockholders of the Merger
Proposal, the Company may furnish information concerning the Company to or enter
into discussions or negotiations with any person ("Potential Acquiror") if based
upon consultation with ABS and the opinion of its outside legal counsel the
Board of Directors determines in good faith that the failure to provide such
information to or enter into discussions or negotiate with such Potential
Acquiror would constitute a breach of its fiduciary duties to the Company's
stockholders imposed by applicable laws. The Company must (i) prior to providing
such information to, or entering into discussions or negotiations with, such
person, promptly inform the Subsidiary that confidential information is to be
provided, that discussions or negotiations are to take place, (ii) obtain from
such Potential Acquiror a confidentiality agreement on terms no less favorable
to the Company than those contained in the Confidentiality Agreement between the
Company and Hicks Muse and (iii) furnish to the Subsidiary the identity of the
Potential Acquiror and the material terms of any offer received. The term
"Business Combination Transaction
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<PAGE> 34
Proposal" as used in the Merger Agreement means any proposal or offer to acquire
all or any substantial part of the business and properties of the Company or any
capital stock of the Company, whether by merger, consolidation, purchase of
assets, exchange offer, tender offer or otherwise, and whether for cash,
securities or any other consideration or combination thereof. See "THE MERGER
AGREEMENT -- Fees and Expenses."
COMPLIANCE WITH STATION LICENSES
The Company is required to cause the Stations to be operated in all
material respects in accordance with the licenses granted by the FCC (the
"Station Licenses") and all applicable rules and regulations of the FCC and in
compliance in all material respects with all other applicable laws, regulations,
rules and orders. The Company must use its commercially reasonable efforts not
to cause or permit any of the Station Licenses to expire or be surrendered,
adversely modified or terminated. The Company must also file or cause to be
filed with the FCC all applications (including license renewals) or other
documents required to be filed in connection with the operation of the Stations.
In addition, if requested by the Subsidiary at the Subsidiary's expense, the
Company must file or cause to be filed with the FCC applications for new,
specifically identified frequencies that may be useful in connection with the
operation of the Stations. Should the FCC institute any proceedings for the
suspension, revocation or adverse modification of any of the Station Licenses,
the Company will use its commercially reasonable efforts to promptly contest
such proceedings and to seek to have such proceedings terminated in a manner
that is favorable to the Stations. The Company will use its commercially
reasonable efforts to maintain the FCC construction permits (if any) in effect
until the applicable construction projects are complete and to diligently
prosecute all pending FCC applications. If the Company (or its FCC counsel)
receives an administrative or other order or notification relating to any
violation or claim violation of the rules and regulations of the FCC, or of any
other governmental entity, that could affect the Company's ability to consummate
the transactions contemplated hereby, or should the Company (or its FCC counsel)
become aware of any fact relating to the qualifications of the Company that
reasonably could be expected to cause the FCC to withhold its consent to the
transfer of control of the Station Licenses, the Company must promptly notify
the Subsidiary in writing and use its commercially reasonable efforts to take
such steps as may be necessary to remove any such impediment to the transactions
contemplated by the Merger Agreement.
COVENANTS OF THE SUBSIDIARY
The Subsidiary is required to promptly notify the Company of, and use its
commercially reasonable efforts to take such steps necessary to remove, any
FCC-related impediments to the transactions contemplated by the Merger Agreement
including, (a) any administrative or other order or notification relating to any
violation or claimed violation of the rules and regulations by the FCC affecting
or potentially affecting the Subsidiary's ability to consummate the Merger and
(b) any fact relating to the Subsidiary that could cause the commission to
withhold its consent to the transfer of control of Station Licenses. In
addition, the Subsidiary must give the Company prompt written notice of (a) the
occurrence or failure to occur of any event likely to result in a breach of its
representations or warranties in the Merger Agreement and (b) the failure of the
Subsidiary or any officer, director, employee or agent of the Subsidiary, to
comply in any material respect with any covenant, condition or agreement to be
complied with or satisfied by it under the Merger Agreement.
FUND III EQUITY FUNDING COMMITMENT
The Subsidiary has delivered to the Company a binding commitment letter
from Fund III pursuant to which Fund III will provide equity financing in the
amount of $27.2 million to provide the Subsidiary a portion of the funds
required to consummate the transactions contemplated by the Merger Agreement.
MUTUAL COVENANTS
The Merger Agreement contains mutual covenants between the Company and the
subsidiary including, (i) to file jointly any required applications requesting
the FCC Consent and to take all proper steps reasonably
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<PAGE> 35
necessary to diligently prosecute the applications and obtain the FCC Consent;
(ii) to refrain from consummating the Merger until the grant of the FCC Consent
has become a Final Order; (iii) to promptly, following the execution of the
Merger Agreement, file with the appropriate governmental authorities (other than
the FCC) such requests, reports or notifications as may be required in
connection with the Merger Agreement, including filings required by the HSR Act;
(iv) representing and warranting to each other that Bankers Trust Company of New
York and Robert Chaisson are the only brokers or finders in connection with the
Merger Agreement; (v) to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
Merger, including, entering into the Release, and if the Subsidiary has
preferred stock issued and outstanding prior to the Effective Time, at the
request of the Subsidiary, amending the Merger Agreement to provide that such
preferred stock be converted into preferred stock of the Surviving Corporation
and amending the Certificate of Incorporation of the Company to the extent
necessary to allow such preferred stock to become preferred stock of the
Surviving Corporation; and (vi) entering into the Escrow Agreement.
CONDITIONS TO THE MERGER
The respective obligations of each party to the Merger Agreement to
consummate the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions: (i) requisite approval by the
Company's stockholders shall have been obtained; (ii) requisite consent from the
FCC shall have been obtained and become a Final Order; (iii) the waiting period
applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") shall have expired or been terminated; (iv) no temporary
restraining order, preliminary or permanent injunction, order or decree by any
court of competent jurisdiction or other legal restraint which prevents the
consummation of the Merger shall have been issued and in effect; (v) no action
shall have been taken and no statute, rule or regulation shall have been enacted
by any governmental entity which would prevent the consummation of the Merger or
make the consummation of the Merger illegal; and (vi) all authorizations,
waivers, consents, orders and approvals, declarations or filings with, or
expirations of waiting periods imposed by any governmental entity required for
the consummation of the Merger and the transactions contemplated by the Merger
Agreement required to consummate the Merger shall have been made or obtained and
in effect at the Effective Time.
The obligations of the Company to consummate the Merger are subject to the
satisfaction at or prior to the Effective Time of the following further
conditions, unless waived by the Company: (i) the performance by the Subsidiary
in all material respects of the obligations required to be performed by it under
the Merger Agreement prior to the Closing Date; (ii) the accuracy of the
representations and warranties of the Subsidiary contained in the Merger
Agreement (in all material respects for any representation or warranty not
already qualified for materiality) as of the date of the Merger Agreement and as
of the Closing Date as though made on and as of the Closing Date; (iii) the
receipt by company of an opinion of each of Vinson & Elkins L.L.P. and Fisher,
Wayland, Cooper & Leader, counsel and special FCC Counsel, respectively, to the
Subsidiary in substantially the forms attached to the Merger Agreement; and (iv)
the delivery by the Subsidiary of all documents and instruments required to be
delivered by it to the Company.
The obligations of the Subsidiary to consummate the Merger are subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived by the Subsidiary: (i) the performance by the Company
in all material respects of the obligations required to be performed by it under
the Merger Agreement prior to the Closing Date; (ii) the accuracy of the
representations and warranties of the Company contained in the Merger Agreement
(in all material respects for any representation or warranty not already
qualified for materiality) as of the date of the Merger Agreement and as of the
Closing Date as though made on and as of the Closing Date (unless otherwise
limited to the date of the Merger Agreement); (iii) receipt by the Subsidiary of
an opinion of each of Paul, Weiss, Rifkind, Wharton & Garrison and Haley, Bader
& Potts, PLC, counsel and special FCC Counsel, respectively, to the Company, in
substantially the forms attached to the Merger Agreement; (iv) the review by the
Subsidiary of evidence reasonably satisfactory to it of the requisite consents
necessary to consummate the transactions contemplated by the Merger Agreement;
(v) the receipt by the Company of the consent of each holder of outstanding
Options or Warrants to purchase Shares to the settlement of such holder's
Options or Warrants through the exchange of
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<PAGE> 36
such Options or Warrants for the Option Consideration and the Warrant
Consideration, as the case may be; (vi) the execution and delivery by the
Company of an employment agreement containing Mr. Osborn's new employment
arrangements; (vii) the restriction of the aggregate fees and expenses payable
to ABS, Bankers Trust Company of New York and Robert Chaisson in connection with
the Merger Agreement to an amount not to exceed $2,075,000; (viii) the execution
and delivery by Mr. Osborn of a subscription agreement thereby subscribing for
Common Stock, par value $0.01 per share, of the Parent in exchange for Shares;
and (ix) delivery by the Company of all documents, instruments, certificates or
other items required to be delivered by it to the Subsidiary.
TERMINATION
The Merger Agreement may be terminated, either before or after approval by
the Company's stockholders, under certain circumstances, including the
following:
(1) by mutual consent of the Subsidiary and the Company;
(2) by either the Subsidiary or the Company:
(a) if there has been any breach of any representation or warranty,
or any material breach of any covenant or agreement, on the part of the
Subsidiary, on the one hand, or the Company, on the other hand, set
forth in the Merger Agreement which breach has not been cured within
twenty (20) days (the "Cure Period") following receipt by the breaching
party of written notice of such breach;
(b) if a court of competent jurisdiction or other governmental
entity has issued an order, decree or ruling or taken any other action
(which order, decree or ruling the parties hereto shall use their best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger
Agreement, and such order, decree, ruling or other action has become
final and nonappealable;
(c) if, for any reason, the FCC denies or dismisses any of the
applications filed with the FCC requesting the FCC's written consent to
the transfer of control of the Station Licenses pursuant to the Merger
Agreement (the "Applications") and the time for reconsideration or court
review under the Communications Act of 1934, as amended (the
"Communications Act"), with respect to such denial or dismissal has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(d) if, for any reason, any of the Applications is designated for
an evidentiary hearing by the FCC;
(e) if the Merger Agreement and the transactions contemplated
thereby, when presented to the holders of Common Stock for their
consideration, whether by vote or by consent, fails to receive the
requisite vote or consent for approval and adoption by the holders of
Common Stock; or
(f) if the Closing has not occurred by the later of the first
anniversary date of the Merger Agreement, or the date to which the
Closing Date is extended pursuant to the Merger Agreement; provided,
however, that the right to terminate the Merger Agreement under this
clause (f) will not be available to any party whose breach of the Merger
Agreement was the cause of, or resulted in, the failure of the Closing
to occur on or before such date; or
(3) by the Subsidiary:
(a) with respect to a Trading Event, Banking Event, or a Station
Event, at its option, as provided in the Merger Agreement (as used in
the Merger Agreement, a "Trading Event" means that trading generally in
securities on the New York Stock Exchange has been suspended or
materially limited; a "Banking Event" means that a general moratorium on
commercial banking activities in New York, New York has been declared by
any federal or state authority; and a "Station Event" means any act of
nature, calamity or casualty (including but not limited to fires,
floods, earthquakes and storms) that has caused one or more of the
Company's radio stations representing
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<PAGE> 37
an aggregate of 3% of the consolidated gross revenues of the Company for
the last full 12 calendar months not to be operating in compliance with
its or their respective station licenses.);
(b) if the FCC grants any of the Applications with any material
adverse conditions not generally imposed on grants of such applications
and the time for reconsideration or court review under the
Communications Act with respect to such material adverse conditions has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(c) if (A) the Company's Board (1) withdraws its recommendation of
the Merger Agreement or the Merger (whether or not under the
circumstances permitted by the Merger Agreement) or shall have resolved
to do so or (2) shall have recommended to the stockholders any Business
Combination Transaction, whether or not in the circumstances under which
the Company has a right to terminate the Merger Agreement pursuant to
its terms, or resolved to do so or (B) a tender offer or exchange offer
for 50% or more of the outstanding shares of capital stock of the
Company is commenced (other than by the Company or its affiliates) and
the Company's Board of Directors fails to recommend against the
stockholders of the Company tendering their shares into such tender
offer or exchange offer; or
(d) if the Company fails to perform its Closing obligations under
the Merger Agreement; or
(4) by the Company:
(a) if, prior to the receipt of the requisite vote or consent for
approval and adoption by the holders of Common Stock of the Merger
Agreement and the transactions contemplated thereby, in the exercise of
its good faith judgment as to its fiduciary duties to its stockholders
under applicable law, the Company's Board of Directors determines that
such termination is required by such fiduciary duties by reason of a
Business Combination Proposal on terms more favorable to the
stockholders of the Company than the Merger and which has a reasonable
prospect of being consummated in accordance with its terms (such
determination being based on consultations with ABS and the opinion of
its independent legal counsel that such termination is required in order
for the Company's Board of Directors not to breach its fiduciary duties
to stockholders imposed by applicable law); provided that the Company
has provided the Subsidiary with at least 48 hours prior written notice
of its intent to so terminate the Merger Agreement (together with a
summary of the material terms of such Business Combination Transaction
Proposal); and provided, further, that any termination of the Merger
Agreement by the Company shall not be effective until the Company has
made payment of the Alternative Proposal Fee; or
(b) if the Subsidiary fails to perform any of its obligations under
the Merger Agreement.
The right of any party to the Merger Agreement to terminate the Merger
Agreement will remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party thereto, any person controlling
any such party or any of their respective officers, directors, employees,
accountants, consultants, legal counsel, agents or other representatives whether
prior to or after the execution of the Merger Agreement. Notwithstanding
anything in the foregoing to the contrary, no party to the Merger Agreement that
is in material breach of the Merger Agreement is entitled to terminate the
Merger Agreement except with the consent of the other parties thereto.
FEES AND EXPENSES
Except as hereinafter described, all costs and expenses incurred in
connection with the Merger Agreement and the Merger are to be paid by the party
incurring them.
The Company is required to pay to the Subsidiary the Alternative Proposal
Fee if the Merger Agreement is terminated by the Subsidiary because (i) the
Company's Board of Directors (A) determines not to give or withdraws its
approval or recommendation of the Merger Agreement or the transactions
contemplated thereby or (B) recommends to the stockholders of the Company any
Business Combination Transaction, whether or
30
<PAGE> 38
not under the circumstances permitted by the Merger Agreement, or (ii) a tender
offer or exchange offer for 50% or more of the outstanding Shares is commenced
and the Company's Board of Directors fails to recommend against the stockholders
of the Company tendering their Shares into such tender offer or exchange offer,
or (iii) if prior to the receipt of the requisite vote or consent for approval
and adoption by the Company's stockholders of the Merger Agreement, in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders under applicable law, the Company's Board of Directors determines
that such termination is required by such fiduciary duties by reason of a
proposal that either constitutes a Business Combination Transaction or may
reasonably be expected to lead to a Business Combination Transaction on terms
more favorable to the Company's stockholders than the Merger and which has a
reasonable prospect of being consummated in accordance with its terms.
AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be amended at any time prior to the Effective Time
by written agreement of the Company, the Parent and the Subsidiary, except that
after stockholder approval and adoption of the Merger, no amendment may be made
which either decreases the amount or changes the type of consideration into
which each Share will be converted pursuant to the Merger Agreement upon
consummation of the Merger.
CERTAIN OTHER EFFECTS OF THE MERGER
If the Merger is consummated, the Company's stockholders will not have the
opportunity to continue their equity interest in the Company and, therefore,
will not share in the future earnings and growth of the Company. Further, if the
Merger is consummated, public trading of the Shares will cease, the Shares will
no longer be listed on Nasdaq and the registration of the Shares under the
Exchange Act will be terminated.
The Merger will have certain effects on the Company's officers and
directors as described herein. In its deliberations concerning the Merger, the
Board of Directors was aware of these effects. However, because these effects
reflect amounts to be received based on the same per Share price as will be
received by all stockholders or are a continuation of obligations of the Company
which existed prior to the commencement of negotiations to sell the Company, the
Board of Directors did not consider such matters as affecting the fairness of
the Merger to the Company's stockholders. Certain officers of the Company are
party to employment or other agreements with the Company which would provide
compensation to the officer upon a change in control of the Company or provides
severance benefits upon termination of employment. In addition, the Subsidiary
requires as a condition to Closing that Mr. Osborn execute an employment
agreement with the Surviving Corporation and a Subscription Agreement to
subscribe for shares in the Parent. See "THE MERGER -- Interests of Certain
Persons in the Merger."
As of the Record Date, executive officers and directors of the Company as a
group (nine persons) owned of record or beneficially an aggregate of 1,071,968
Shares, for which they will receive the same Merger Consideration as other
stockholders if the Merger is consummated, except that pursuant to the
Subscription Agreement, Frank D. Osborn will have the right to acquire
approximately 6% of the common stock of the Parent at the Per Share Common Stock
Price in exchange for a portion of the Shares held by him valued at the Merger
Consideration. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" and "THE MERGER -- Interests of Certain Persons in the Merger."
Executive officers of the Company also hold Options to acquire 65,417 Option
Shares which are not currently exercisable but for which they will be entitled
to receive an average settlement price of $8.22 per Option Share if the Merger
is consummated. See "THE MERGER AGREEMENT -- Settlement of Options and
Warrants." The officers and directors of the Subsidiary immediately prior to the
Effective Time will be the initial officers and directors of the Surviving
Corporation, except that the president and chief executive officer of the
Company immediately prior to the Effective Time shall be the president and chief
executive officer of the Surviving Corporation at the Effective Time.
31
<PAGE> 39
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE DISCUSSION SET FORTH BELOW PRESENTS ALL MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO THE STOCKHOLDERS OF THE COMPANY. THIS DISCUSSION
AS IT RELATES TO A PARTICULAR STOCKHOLDER MAY VARY DEPENDING UPON THE
STOCKHOLDER'S PARTICULAR CIRCUMSTANCES. EACH STOCKHOLDER IS URGED TO CONSULT HIS
OR HER OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THE
STOCKHOLDER OF THE MERGER OR THE EXERCISE OF DISSENTERS' APPRAISAL RIGHTS,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAXES.
The exchange of Shares pursuant to the Merger (and the receipt of cash in
respect of the exercise of dissenters' appraisal rights) will be taxable
transactions for federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be taxable transactions under applicable state,
local, foreign and other tax laws. For federal income tax purposes, each holder
of Shares whose Shares are exchanged in the Merger will generally recognize gain
or loss equal to the difference between the amount of cash received by such
stockholder in the Merger and such stockholder's adjusted tax basis in such
shares. As long as the stockholder is not also the holder, directly or
indirectly, of an equity interest in the Parent, gain or loss recognized will be
treated as a long-term capital gain or loss if the Shares are held as capital
assets and have been held for a period of more than one year at the Effective
Time.
If a noncorporate stockholder recognizes a capital loss in connection with
the sale or exchange of Shares, the stockholder may offset the capital loss
against any other capital gains realized by such stockholder in the taxable year
and against up to $3,000 of such stockholder's ordinary income (for individual
filing joint returns). Any excess loss may be carried forward indefinitely. A
corporate stockholder may use a capital loss recognized in connection with the
sale or exchange of Shares to offset any capital gains realized by it in the
same taxable year but not to offset ordinary income. Any unused capital loss of
a corporation may generally be carried back to its three preceding taxable years
and then, to the extent unused, forward for five succeeding taxable years, in
each case to offset capital gains, if any.
ACCOUNTING TREATMENT
The Merger will be treated by the Subsidiary as a "purchase" for accounting
and financial reporting purposes.
ANTITRUST MATTERS
The HSR Act provides that certain acquisition transactions, including the
Merger, may not be consummated unless specified information is furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and certain waiting period requirements have been satisfied. The required
information was supplied by the Company and the Subsidiary on November 12, 1996.
See "THE MERGER AGREEMENT -- Conditions to the Merger."
DISSENTERS' RIGHTS OF APPRAISAL
For purposes of this section of the Proxy Statement, the term "Company"
will be deemed to also refer to the Surviving Corporation with respect to
actions taken after the Effective Time.
Pursuant to the Merger Agreement and the DGCL, the holders of Shares will
have dissenters' rights in connection with the Merger under Section 262 of the
DGCL ("Section 262"), a copy of which is attached to this Proxy Statement as
Appendix C. A stockholder of the Company may object to the Merger Proposal and
demand in writing that the Company pay the fair value of such stockholder's
Shares. If a stockholder properly exercises dissenters' rights of appraisal in
connection with the Merger under Section 262 (a "Dissenting Stockholder"), any
Shares ("Dissenting Shares") held by the Dissenting Stockholder will not be
converted into the right to receive the Merger Consideration, but instead will
be converted into the right to receive the
32
<PAGE> 40
fair value of such Shares pursuant to Section 262. THE FOLLOWING SUMMARY OF THE
PROVISIONS OF SECTION 262 IS NOT INTENDED TO BE A COMPLETE STATEMENT THEREOF AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262, A
COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C AND INCORPORATED
HEREIN BY REFERENCE. The Company will not give any notice of the following
requirements other than as described in this Proxy Statement and as required by
the DGCL.
Section 262. Under the DGCL, record holders of Shares who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger or consented thereto will be entitled to have their Shares appraised by
the Delaware Court of Chancery and to receive payment of the "fair value" of
such Shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, as
determined by such court.
Under Section 262, if a proposed merger is to be submitted for approval and
adoption at a meeting of stockholders, as in the case of the Special Meeting,
not less than 20 days prior to the meeting, the Company must notify each of the
holders of Shares at the close of business on the Record Date that such
appraisal rights are available and include in each such notice a copy of Section
262. This Proxy Statement constitutes such notice. Any such stockholder who
wishes to exercise appraisal rights should review the following discussion and
Appendix C carefully because failure to timely and properly comply with the
procedures specified in Section 262 will result in the loss of appraisal rights
under Section 262.
A holder of Shares wishing to exercise appraisal rights must deliver to the
Company, before the taking of the vote on the approval and adoption of the
Merger Proposal at the Special Meeting, a written demand for appraisal of such
holder's Shares. In addition, a holder of Shares wishing to exercise appraisal
rights must hold of record such Shares on the date the written demand for
appraisal is made and must continue to hold such Shares through the Effective
Time.
Only a holder of record of Shares is entitled to assert appraisal rights
for the Shares registered in that holder's name. A demand for appraisal should
be executed by or on behalf of the holder of record fully and correctly, as the
holder's name appears on the stock certificates.
If the Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the Shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds as nominee for
several beneficial owners may exercise appraisal rights with respect to the
Shares held for one or more beneficial owners while not exercising such rights
with respect to the Shares held for other beneficial owners; in such case, the
written demand should set forth the number of shares as to which appraisal is
sought and where no number of shares is expressly mentioned the demand will be
presumed to cover all Shares held in the name of the record owner. Holders of
Shares who hold their Shares in brokerage accounts or other nominee forms and
who wish to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such nominee. All written demands for appraisal should be mailed or delivered to
Michael F. Mangan, Vice President & Secretary, Osborn Communications
Corporation, 130 Mason Street, Greenwich, Connecticut 06830 so as to be received
before the vote on the approval and adoption of the Merger Agreement at the
Special Meeting.
Within 10 days after the Effective Time, the Company must send a notice as
to the effectiveness of the Merger to each person who has satisfied the
appropriate provisions of Section 262. Within 120 days after the Effective Time,
but not thereafter, the Company, or any holder of Shares entitled to appraisal
rights under Section 262 and who has complied with the foregoing procedures, may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of such shares. The Company is not under any obligation, and has
no present intention, to file a petition with respect to the appraisal of the
fair value of the
33
<PAGE> 41
Shares. Accordingly, it is the obligation of the stockholders to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 days after the Effective Time, any record holder of Shares who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of Shares not voted in favor of the Merger and with
respect to which demands for appraisal have been received and the aggregate
number of holders of such Shares. Such statements must be mailed to such record
holder within 10 days after a written request therefor has been received by the
Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of Shares
entitled to appraisal rights and will appraise the "fair value" of the Shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. Holders considering seeking
appraisal should be aware that the fair value of their Shares as determined
under Section 262 could be more than, the same as, or less than the value of the
Merger Consideration that they would otherwise receive if they did not seek
appraisal of their Shares. The Delaware Supreme Court has stated that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in the appraisal proceedings. More specifically, the Delaware Supreme Court has
stated that: "Fair value, in an appraisal context, measures 'that which has been
taken from [the stockholder], viz., his proportionate interest in a going
concern.' In the appraisal process the corporation is valued 'as an entity,' not
merely as a collection of assets or by the sum of the market price of each share
of its stock. Moreover, the corporation must be viewed as an on-going
enterprise, occupying a particular market position in the light of future
prospects." In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
Shares have been appraised. The costs of the action may be determined by the
Court and taxes upon the parties as the Court deems equitable. The Court may
also order that all or a portion of the expenses incurred by any holder of
Shares in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all of the Shares
entitled to appraisal.
Any holder of Shares who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the Shares
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those Shares (except dividends or other
distributions payable to holders of record of Shares as of a date prior to the
Effective Time).
If any holder of Shares who demands appraisal of Shares under Section 262
fails to perfect, or effectively withdraws or loses the right to appraisal, as
provided in the DGCL, the Shares of such holder will be converted into Merger
Consideration in accordance with the Merger Agreement. A holder of Shares will
fail to perfect, or effectively lose, the right to appraisal if no petition for
appraisal is filed within 120 days after the Effective Time. A holder may
withdraw a demand for appraisal by delivering to the Company a written
withdrawal of the demand for appraisal and acceptance of the Merger, except that
any such attempt to withdraw made more than 60 days after the Effective Time
will require the written approval of the Surviving Corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
The foregoing is a summary of certain of the provisions of Section 262 of
the DGCL and is qualified in its entirety by reference to the full text of such
Section, a copy of which is attached hereto as Appendix C.
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<PAGE> 42
LEGAL PROCEEDINGS
The Company is a defendant in a purported class action filed on July 30,
1996, in the Court of Chancery of the State of Delaware in and for New Castle
County, against the Company and all its directors and executive officers (the
"Individual Defendants"). The Complaint alleges principally that (i) the Merger
Consideration is unfair and does not constitute a maximization of stockholders
value and (ii) the Individual Defendants breached their fiduciary duties by
failing to take reasonable steps to maximize shareholder value. The plaintiff
seeks injunctive relief to enjoin the consummation of the Merger, but as of the
date of this filing has not moved for preliminary injunctive relief and has not
sought expedited proceedings. Alternatively, in the event that the Merger is
consummated, the plaintiff seeks damages caused by the alleged breach of
fiduciary duties by the Individual Defendants. The Company believes, based,
inter alia, on the facts set forth at pages 13 to 16 above, that it has valid
defenses to the plaintiff's claims and intends to vigorously defend the action.
The plaintiff and the defendants have stipulated that the time when the
defendants are required to move or answer with respect to the complaint is
extended until the 15th day from the date the plaintiff serves written notice of
a request for such a response.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Ernst & Young LLP, independent accountants and auditors
of the Company's financial statements, are expected to be present at the Special
Meeting, and will have an opportunity to make statements if they so desire and
will be available to respond to appropriate questions.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements and
other information with the SEC. Such reports, proxy statements, and other
information can be inspected at the public reference facilities maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Regional Offices of the SEC at the Northwestern Atrium Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1300,
Seven World Trade Center, New York, New York 10048. In addition, copies of such
materials may also be obtained at prescribed rates from the Public Reference
Section of the SEC at its principal office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, proxy statements and other information
also may be inspected at the office of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, DC 20006.
After the Effective Time, the Shares will no longer be publicly traded and
the Shares will cease to be listed on Nasdaq. Moreover, the Surviving
Corporation of the Merger will be relieved of the obligations to file
informational reports under the Exchange Act, such as proxy statements, and its
officers, directors and more than 10% stockholders will be relieved of the
reporting requirements under, and the 'short-swing' profit recapture provisions
of, Section 16 of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC are incorporated
herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1996;
4. Quarterly Report on Form 10-Q for the quarter ended September 30,
1996;
5. Report on Form 8-K dated February 2, 1996;
6. Report on Form 8-K dated May 3, 1996 as amended on Form 8-K/A-1
dated July 15, 1996;
7. Report on Form 8-K dated July 23, 1996; and
8. Report on Form 8-K dated September 3, 1996.
35
<PAGE> 43
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
These documents (without exhibits, unless such exhibits are specifically
incorporated by reference into the information that this Proxy Statement
incorporates by reference herein) are available without charge to each person,
including each beneficial owner, to whom a copy of this Proxy Statement is
delivered, upon written or oral request of such person and by first class mail
or other equally prompt means within one business day of receipt of request.
Requests should be directed to Osborn Communications Corporation, 130 Mason
Street, Greenwich, CT 06830, Attention: Secretary; telephone number (203)
629-0905.
CERTAIN RECENT EVENTS
Subsequent to signing the Merger Agreement and with the consent of the
Subsidiary, the Company entered into agreements to acquire several additional
radio stations. Under these agreements, the Company has agreed to acquire radio
stations WTXT-FM serving Tuscaloosa, Alabama and WYNU-FM serving Jackson,
Tennessee. The approximate aggregate purchase price to be paid by the Company
for these properties is $8,700,000 (including certain contingent, consulting,
and noncompetition fees which may be payable to certain sellers).
As previously announced, the Company has also agreed to sell radio stations
KNAX-FM and KRBT-FM serving Fresno, California for approximately $11,000,000 in
a transaction that is expected to close prior to the convening of the Special
Meeting.
The transactions described above do not require Stockholder action, and
Stockholders are not being asked to approve or disapprove of any of these
transactions. The Company may enter into other acquisition and or sale
transactions prior to the consummation of the Merger, subject to the
Subsidiary's consent.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the Special Meeting and does not know of any other matters that
may be brought before the Special Meeting by others. If any other matter should
come before the Special Meeting, the persons named in the enclosed proxy will
have discretionary authority to vote the Shares represented thereby in
accordance with their best judgment.
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<PAGE> 44
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OCC ACQUISITION COMPANY, INC.,
OSBORN COMMUNICATIONS CORPORATION,
AND
OCC HOLDING CORPORATION
(FOR CERTAIN LIMITED PURPOSES SET FORTH HEREIN)
DATED AS OF
JULY 23, 1996
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE MERGER
<S> <C> <C>
1.1. The Merger ........................................................... 1
1.2. Effective Time ....................................................... 2
1.3. Effect of the Merger ................................................. 2
1.4. Certificate of Incorporation; Bylaws ................................. 2
1.5. Directors and Officers ............................................... 2
1.6. Merger Consideration; Conversion and Cancellation of Securities ...... 2
1.7. Employee Stock Options ............................................... 3
1.8. Warrants ............................................................. 4
1.9. Dissenting Shares .................................................... 4
1.10. Payment; Surrender of Certificates ................................... 4
1.11. Stock Transfer Books ................................................. 5
1.12. Stockholder Approval ................................................. 6
1.13. Proxy Statement ...................................................... 6
1.14. Letter of Credit ..................................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties Regarding Osborn ...................... 8
2.2. Representations and Warranties of Mergeco ............................ 22
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1. Covenants of Osborn .................................................. 23
3.2. Negative Trade Balance ............................................... 26
3.3. Environmental Site Assessments ....................................... 26
ARTICLE IV
ADDITIONAL AGREEMENTS OF OSBORN
4.1. No Solicitation of Transactions ...................................... 26
4.2. Access and Information ............................................... 27
4.3. Assistance ........................................................... 29
4.4. Compliance With Station Licenses ..................................... 29
</TABLE>
(i)
<PAGE> 46
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.5. Notification of Certain Matters ...................................... 30
4.6. Third Party Consents ................................................. 30
4.7. Frank D. Osborn Employment Agreement ................................. 30
ARTICLE V
COVENANTS OF MERGECO
5.1. Notification of Certain Matters ...................................... 30
5.2. Commitment Letter .................................................... 31
ARTICLE VI
MUTUAL COVENANTS
6.1. Application for Commission Consent ................................... 31
6.2. Control of Stations .................................................. 31
6.3. Other Governmental Consents .......................................... 32
6.4. Brokers or Finders ................................................... 32
6.5. Additional Agreement ................................................. 32
6.6. Escrow Agreement ..................................................... 32
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation ................................ 33
7.2. Conditions to Obligation of Mergeco .................................. 33
7.3. Conditions to Obligations of Osborn .................................. 34
ARTICLE VIII
CLOSING
8.1. Closing .............................................................. 35
8.2. Actions to Occur at Closing .......................................... 36
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination .......................................................... 37
9.2. Fees and Expenses .................................................... 39
9.3. Effect of Termination ................................................ 39
</TABLE>
(ii)
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
----
ARTICLE X
GENERAL PROVISIONS
<S> <C> <C>
10.1. Non-Survival of Representations, Warranties and Covenants ............ 40
10.2. Knowledge ............................................................ 40
10.3. Amendment and Modification ........................................... 40
10.4. Waiver of Compliance ................................................. 40
10.5. Severability ......................................................... 40
10.6. Expenses and Obligations ............................................. 41
10.7. Parties in Interest .................................................. 41
10.8. Notices .............................................................. 41
10.9. Interpretation ....................................................... 42
10.10. Counterparts ......................................................... 42
10.11. Entire Agreement ..................................................... 42
10.12. Governing Law ........................................................ 42
10.13. Public Announcements ................................................. 43
10.14. Assignment ........................................................... 43
10.15. Further Assurances ................................................... 43
10.16. Director, Officer and Stockholder Liability .......................... 43
10.17. Certain Definitions .................................................. 43
</TABLE>
(iii)
<PAGE> 48
EXHIBITS:
<TABLE>
<S> <C> <C>
Exhibit A -- Form of Certificate of Incorporation of the Surviving Corporation
Exhibit B -- Form of Employment Agreement
Exhibit C -- Form of Subscription Agreement
Exhibit D -- Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit E -- Form of Opinion of Haley, Bader & Potts
Exhibit F -- Form of Opinion of Vinson & Elkins L.L.P.
Exhibit G -- Form of Opinion of Fisher, Wayland, Cooper & Leader
Exhibit H -- Form of Voting Agreement
Exhibit I -- Form of Escrow Agreement
Exhibit J -- Form of Letter of Credit
Exhibit K -- Form of Commitment Letter
Exhibit L -- Form of Release
</TABLE>
SCHEDULES:
<TABLE>
<S> <C> <C>
Schedule 2.1(b) -- Subsidiaries
Schedule 2.1(c) -- Options, Warrants and Capitalization of Subsidiaries
Schedule 2.1(f) -- Unrecorded Liabilities and Conduct of Business
Schedule 2.1(g) -- Licenses and Permits
Schedule 2.1(h) -- Litigation
Schedule 2.1(i) -- Insurance
Schedule 2.1(j) -- Real Estate
Schedule 2.1(l) -- Liens and Encumbrances
Schedule 2.1(m) -- Environmental Matters
Schedule 2.1(o) -- Certain Agreements
Schedule 2.1(p) -- Collective Bargaining Agreements
Schedule 2.1(q) -- Patents, Trademarks; Etc.
Schedule 2.1(r) -- Affiliate Relationships
Schedule 3.1(k) -- Permitted Acquisitions and Dispositions
</TABLE>
(iv)
<PAGE> 49
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of July
23, 1996, is entered into by and among OCC Acquisition Company, Inc., a Delaware
corporation ("Mergeco"), Osborn Communications Corporation, a Delaware
corporation ("Osborn"), and for purposes of Sections 1.12 and 10.14 only, OCC
Holding Corporation, a Delaware corporation which holds all of the outstanding
capital stock of Mergeco ("Parent").
RECITALS:
WHEREAS, Mergeco, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), will merge with and into Osborn (the "Merger");
WHEREAS, the Board of Directors (the "Osborn Board") of Osborn has
determined that the Merger is fair to, and in the best interests of, Osborn and
its stockholders and has approved and adopted this Agreement and the
transactions contemplated hereby, and recommended approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of
Osborn;
WHEREAS, the Board of Directors (the "Mergeco Board") of Mergeco, a
wholly-owned subsidiary of Parent, has determined that the Merger is fair to,
and in the best interests of, Mergeco and the Parent and has approved and
adopted this Agreement and the transactions contemplated hereby, and recommended
approval and adoption of this Agreement and the transactions contemplated hereby
by the Parent; and
WHEREAS, the Parent, by its execution of this Agreement, has consented
to, and has authorized, approved and adopted, this Agreement and the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto covenant and agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with Delaware Law, at the Effective Time
(as defined in Section 1.2), Mergeco shall be merged with and into Osborn. As a
result of the Merger, the separate corporate existence of Mergeco shall cease
and Osborn shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). The name of the Surviving Corporation shall be "Osborn
Communications Corporation."
1.2. Effective Time. The Merger shall be consummated, as and when
provided in Section 8.1 hereof, by filing a Certificate of Merger with the
Secretary of State of the State of
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Delaware, in such form as is required by, and executed in accordance with the
relevant provisions of, Delaware Law (the date and time of the completion of
such filing being the "Effective Time").
1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject to the applicable
provisions of Delaware Law, at the Effective Time, all the property, rights,
privileges, powers and franchises of Mergeco and Osborn shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Mergeco and
Osborn shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4. Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Osborn, as in effect immediately prior to the Effective Time, shall be
amended and restated as of the Effective Time by operation of this
Agreement and by virtue of the Merger without any further action by the
stockholders or directors of the Surviving Corporation to read in its
entirety as set forth on Exhibit A hereto.
(b) At the Effective Time, the Bylaws of Osborn, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation.
1.5. Directors and Officers. The directors of Mergeco immediately prior
to the Effective Time shall be the directors of the Surviving Corporation at the
Effective Time, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Mergeco immediately prior to the Effective Time shall be the officers of the
Surviving Corporation at the Effective Time, except that the president and chief
executive officer of Osborn immediately prior to the Effective Time shall be the
president and chief executive officer of the Surviving Corporation at the
Effective Time, in each case until their respective successors are duly elected
or appointed and qualified.
1.6. Merger Consideration; Conversion and Cancellation of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Mergeco, Osborn or the holders of Osborn's securities:
(a) Subject to the other provisions of this Section 1.6, each
share of common stock, par value $0.01 per share, of Osborn ("Common Stock")
issued and outstanding immediately prior to the Effective Time (other than any
share of Common Stock to be canceled pursuant to Section 1.6(b), any Dissenting
Shares (as defined in Section 1.9) and any share of Common Stock described in
Section 1.6(c)) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive $15.375 in
cash (the "Merger Consideration"), without any interest thereon, payable to the
holder thereof upon surrender of the certificate formerly representing such
share. As a result of its conversion each converted share of Common Stock
(collectively, the "Converted Shares") shall cease to be outstanding and shall
automatically be canceled and retired. Until surrendered to the Surviving
Corporation, each certificate previously
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evidencing the Converted Shares outstanding immediately prior to the Effective
Time shall be deemed for all purposes to evidence solely the right to receive
the consideration described in this Section 1.6(a). Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger Consideration shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares. The aggregate Merger Consideration payable to
each stockholder shall be rounded to the nearest penny.
(b) Notwithstanding any provision of this Agreement to the
contrary, each share of Common Stock held in the treasury of Osborn immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) Notwithstanding any provision of this Agreement to the
contrary, each share of Common Stock held by the Parent or Mergeco immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(d) Each share of common stock, par value $0.01 per share
("Mergeco Common Stock"), of Mergeco issued and outstanding immediately prior to
the Effective Time shall be converted into one share of common stock, par value
$0.01 per share, of the Surviving Corporation ("Surviving Corporation Common
Stock").
1.7. Employee Stock Options. At the Effective Time, each holder of then
outstanding options ("Options") to purchase shares (the "Option Shares") of
Common Stock granted by Osborn pursuant to the Osborn Communications Corporation
Incentive Stock Plan, as amended (the "Option Plan"), (whether or not then
presently exercisable) shall be entitled to receive, and shall receive, in
settlement of each Option, a cash payment (the "Option Consideration") from the
Surviving Corporation in an amount equal to the product of (a) $15.375 minus the
exercise price per Option Share and (b) the number of Option Shares (including
any fractional Option Shares) covered by such Option, less any applicable
withholding taxes. Each agreement previously evidencing the Options immediately
prior to the Effective Time that are settled pursuant to this Section 1.7 (the
"Settled Options") shall be deemed for all purposes to evidence solely the right
to receive the Option Consideration. The Committee (the "Committee")
administering the Option Plan shall have the right at any time or from time to
time following the execution hereof to accelerate and vest, in full or in part,
any and all Settled Options not currently exercisable in full. Osborn, acting
through the Osborn Board or the Committee, shall take all necessary actions to
make the Option Plan consistent with this treatment of the Options and shall
cause each holder of an Option to consent to the settlement of its Options
pursuant to the terms of this Section 1.7. The Option Consideration payable to
each Option holder shall be rounded to the nearest penny.
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1.8. Warrants. Immediately prior to the Effective Time, each holder of
then outstanding warrants (the "Warrants") to purchase shares of Common Stock
granted by Osborn (whether or not then presently exercisable) shall be entitled
to receive, and shall receive, in settlement of each Warrant, where the amount
set forth in clause (i) below is positive, a cash payment (the "Warrant
Consideration") from Osborn in an amount equal to the product of (i) $15.375
minus the exercise price per share of the Warrant and (ii) the number of shares
of Common Stock (including any fractional shares) covered by such Warrant, less
any applicable withholding taxes. Each agreement or certificate previously
evidencing such Warrants (the "Settled Warrants") immediately prior to the
Effective Time shall be deemed for all purposes to evidence solely the right to
receive the Warrant Consideration. Osborn, acting through the Osborn Board or
any committee thereof, shall have the right at any time or from time to time
following the execution hereof to accelerate and vest, in full or in part, any
and all Settled Warrants not currently exercisable in full. Osborn, acting
through the Osborn Board or any committee thereof, shall take all necessary
actions to make the terms of the Warrants consistent with this treatment of the
Warrants and shall cause each holder of a Warrant to consent to the settlement
of its Warrants pursuant to the terms of this Section 1.8. The Warrant
Consideration payable to each Warrant holder shall be rounded to the nearest
penny.
1.9. Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by stockholders who have properly
exercised appraisal rights with respect thereto under Section 262 of the
Delaware Law (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration as provided in Section 1.6(a), but the holders
of Dissenting Shares shall be entitled to receive such payment as shall be
determined pursuant to Section 262 of the Delaware Law; provided, however, that
if any such holder shall have failed to perfect or shall withdraw or lose the
right to appraisal and payment under the Delaware Law, each such holder's shares
of Common Stock shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, without any
interest thereon, as provided in Section 1.6(a), and such shares shall no longer
be Dissenting Shares.
1.10. Payment; Surrender of Certificates.
(a) Exchange Fund. At or prior to the Effective Time, Mergeco
shall deposit, or cause to be deposited, with a bank or trust company designated
by Mergeco or, at Mergeco's election, with the Surviving Corporation (such bank
or trust company or the Surviving Corporation being referred to as the "Exchange
Agent"), for the benefit of the former holders of Converted Shares, Settled
Options or Settled Warrants, for exchange in accordance with this Section
1.10(a) through the Exchange Agent, cash in an amount equal to the sum of (i)
the sum of the Merger Consideration applicable to all Converted Shares, (ii) the
sum of the Option Consideration applicable to all Settled Options, and (iii) the
sum of the Warrant Consideration applicable to all Settled Warrants. The cash
deposited with the Exchange Agent in accordance with this Subsection 1.10(a) is
hereinafter referred to as the "Exchange Fund." The Exchange Agent shall,
pursuant to irrevocable instructions, deliver cash, as described above, in
exchange for surrendered certificates or agreements pursuant to the terms of
this Agreement out of the Exchange Fund.
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(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to send
to each record holder of Common Stock, Settled Options or Settled Warrants at
the Effective Time (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to certificates
theretofore representing Common Stock and certificates or agreements
representing Settled Options or Settled Warrants (collectively, the
"Certificates") shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and contain such other provisions as
the Surviving Corporation shall determine) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for cash. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor cash in the amount such holder has the
right to receive pursuant to the provisions of this Article I, and the
Certificate so surrendered shall forthwith be canceled. Until surrendered for
exchange in accordance with the provisions of this Section 1.9, each Certificate
theretofore representing Converted Shares, Settled Options or Settled Warrants
shall from and after the Effective Time represent for all purposes only the
right to receive the Merger Consideration, Option Consideration or Warrant
Consideration, as applicable, as set forth in this Agreement. If any holder of
Converted Shares, Settled Options or Settled Warrants shall be unable to
surrender such holder's Certificates because such Certificates have been lost or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
bond in form and substance and with surety reasonably satisfactory to the
Surviving Corporation. If payment is to be made to a person other than the
person in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered Certificate or
shall establish to the satisfaction of the Surviving Corporation that such tax
has been paid or is not applicable. No interest shall be paid on any Merger
Consideration, Option Consideration or Warrant Consideration payable to former
holders of Converted Shares, Settled Options or Settled Warrants.
(c) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains unclaimed by the former holders of Converted Shares, Settled
Options or Settled Warrants on the six-month anniversary of the Closing Date
shall be delivered to the Surviving Corporation, upon demand, and any former
holders of Converted Shares, Settled Options or Settled Warrants who have not
theretofore complied with this Section 1.10 shall thereafter look only to the
Surviving Corporation for the Merger Consideration, Option Consideration or
Warrant Consideration to which they are entitled, without any interest thereon.
1.11. Stock Transfer Books. At the Effective Time, the stock transfer
books of Osborn shall be closed and there shall be no further registration of
transfers of shares of Common Stock on the records of Osborn.
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1.12. Stockholder Approval.
(a) Osborn, acting through the Osborn Board, shall, in
accordance with applicable law and Osborn's Certificate of Incorporation and
Bylaws, (i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders as soon as practicable for the purpose of
considering and taking action on this Agreement and the transactions
contemplated hereby (the "Osborn Stockholders Meeting") and (ii) subject to the
fiduciary obligations of the Osborn Board as advised by independent legal
counsel, include in the proxy statement (the "Proxy Statement") the
recommendation of the Osborn Board that the stockholders of Osborn approve and
adopt this Agreement and the transactions contemplated hereby, including,
without limitation, the Merger, and use its commercially reasonable efforts to
obtain such approval and adoption. To the extent permitted by law, Mergeco and
Parent agree to vote all shares of Common Stock then beneficially owned by the
Parent or Mergeco in favor of approval and adoption of this Agreement and the
transactions contemplated hereby.
(b) Parent, in its capacity as the sole stockholder of
Mergeco, by its execution hereof, approves and adopts this Agreement and the
transactions contemplated hereby.
1.13. Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, Osborn shall prepare and file with the Securities and Exchange
Commission (the "SEC") the preliminary Proxy Statement with respect to the
actions to be taken at the Osborn Stockholders Meeting, which shall be in form
and substance reasonably satisfactory to Mergeco based on Mergeco's review of
the preliminary Proxy Statement prior to it being filed with the SEC. Mergeco
and Osborn shall cooperate with each other in the preparation of the Proxy
Statement, and Osborn shall notify Mergeco of the receipt of any comments of the
SEC with respect to the Proxy Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information and shall provide
to Mergeco promptly copies of all correspondence between Osborn or any
representative of Osborn and the SEC. As promptly as practicable after comments
are received from the SEC with respect to the preliminary Proxy Statement,
Osborn shall use its commercially reasonable efforts to respond to the comments
of the SEC, which responses shall be in form and substance reasonably
satisfactory to Mergeco based on Mergeco's review of Osborn's proposed responses
to the SEC. Osborn shall give Mergeco and its counsel the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments of the SEC prior to
their being filed with or sent to the SEC. Mergeco shall provide Osborn with
such information as may be required to be included in the Proxy Statement or as
may be reasonably required to respond to any comment of the SEC. After all the
comments received from the SEC have been cleared by the SEC staff and all
information required to be contained in the Proxy Statement, to the reasonable
satisfaction of Mergeco, has been included therein by Osborn, Osborn shall file
with the SEC the Proxy Statement and Osborn shall use its commercially
reasonable efforts to have the Proxy Statement cleared by the SEC as soon
thereafter as practicable. Osborn shall cause the Proxy Statement to be mailed
to its stockholders of record as promptly as practicable after clearance by the
SEC. Unless Osborn is advised in writing by
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independent legal counsel that such a recommendation is no longer consistent
with the discharge of applicable fiduciary duties of the directors of Osborn,
Osborn shall cause the Proxy Statement to include, and continue to include until
the vote is taken at the Osborn Stockholders Meeting, the recommendation of the
Osborn Board in favor of the Merger.
(b) None of the information supplied or to be supplied by
Osborn for inclusion or incorporation by reference in the Proxy Statement will,
at the mailing date of the Proxy Statement and at the time of the Osborn
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. If at any time prior to the Osborn Stockholders' Meeting
any event or circumstance relating to Osborn or any of its affiliates, or its or
their respective officers or directors, should be discovered by Osborn that
should be set forth in a supplement to the Proxy Statement, Osborn shall
promptly inform Mergeco. All documents that Osborn is responsible for filing
with any Governmental Entity (as defined in Section 2.1(e)) in connection with
the transactions contemplated hereby, including the Proxy Statement to the
extent that the information contained therein relates to Osborn and its
subsidiaries or the transactions contemplated hereby, will comply as to form in
all material respects with the provisions of applicable law, including
applicable provisions of the Securities Act of 1933 (the "Securities Act"), the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations thereunder, and each such document required to be filed with any
Governmental Entity other than the SEC will comply with the provisions of
applicable law as to the information required to be contained therein.
(c) None of the information supplied or to be supplied by
Mergeco for inclusion or incorporation by reference in the Proxy Statement will,
at the mailing date of the Proxy Statement and at the time of the Osborn
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading. If at any time prior to the Osborn Stockholders'
Meeting any event or circumstance relating to Mergeco or any of its affiliates,
or its or their respective officers or directors, should be discovered by
Mergeco that should be set forth in a supplement to the Proxy Statement, Mergeco
shall promptly inform Osborn. All documents that Mergeco is responsible for
filing with any Governmental Entity in connection with the transactions
contemplated hereby, to the extent that the information contained therein
relates to Mergeco and its subsidiaries or the transactions contemplated hereby,
will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder, and each such document
required to be filed with any Governmental Entity other than the SEC will comply
with the provisions of applicable law as to the information required to be
contained therein.
1.14. Letter of Credit.
(a) Concurrently with the execution of this Agreement and as
security for liquidated damages that may be payable by Mergeco to Osborn
pursuant to Section 9.3, Mergeco shall deposit, or cause to be deposited, an
original, irrevocable letter of credit issued by Bankers
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Trust Company ("Bankers Trust") in favor of Osborn (the "Letter of Credit") for
the sum of $5,000,000 in an escrow account with Citibank, N.A., a national
banking association (the "Escrow Agent"), to be held in escrow and released
therefrom in accordance with the terms of the Escrow Agreement (herein so
called) in substantially the form of Exhibit I attached hereto to be entered
into on or before such date of deposit.
(b) If this Agreement is terminated and Osborn seeks
liquidated damages pursuant to Section 9.3, then (i) if (A) Osborn is otherwise
paid liquidated damages due under Section 9.3, or (B) Osborn and Mergeco agree
that Osborn is not entitled to the $5,000,000 as liquidated damages, Osborn and
Mergeco shall deliver joint written instructions to the Escrow Agent authorizing
the release of the Letter of Credit to Mergeco, or as directed by Mergeco, for
cancellation; (ii) if Osborn and Mergeco agree that Osborn is entitled to the
$5,000,000 as liquidated damages, Osborn and Mergeco shall deliver joint written
instructions to the Escrow Agent authorizing the Escrow Agent to release the
Letter of Credit to Osborn; (iii) if a final non-appealable judgment of a court
of competent jurisdiction (a "Final Determination") establishes Osborn's right
to liquidated damages pursuant to Section 9.3, Osborn shall deliver a copy of
the Final Determination to the Escrow Agent authorizing the Escrow Agent to
release the Letter of Credit to Osborn; or (iv) if a Final Determination
establishes Mergeco's right to the Letter of Credit, Mergeco shall deliver a
copy of the Final Determination to the Escrow Agent authorizing the release of
the Letter of Credit to Mergeco, or as directed by Mergeco, for cancellation.
Immediately prior to the Effective Time and upon satisfaction of the conditions
to Osborn's obligation to consummate the Merger set forth in Article VII, Osborn
and Mergeco shall jointly instruct the Escrow Agent to release and return the
Letter of Credit to Mergeco, or as directed by Mergeco, for cancellation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties Regarding Osborn. Osborn represents
and warrants to Mergeco as follows (with the understanding that Mergeco is
relying on such representations and warranties in entering into and performing
this Agreement).
(a) Organization, Good Standing, Etc. Each of Osborn and its
subsidiaries (as defined in Section 10.17) is a corporation or other entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation (or organization), has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each state in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to so qualify or be in good standing could not have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise), results of operations, assets or liabilities of Osborn and its
subsidiaries, taken as a whole (a "Material Adverse Effect"). Osborn has
delivered to Mergeco true and complete copies of the Certificates or Articles of
Incorporation and Bylaws (or equivalent organizational documents) of Osborn and
each of its
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subsidiaries, as in effect at the date of this Agreement. Neither Osborn nor any
subsidiary is in violation of any provisions of its Certificate or Articles of
Incorporation, Bylaws or equivalent organizational documents.
(b) Subsidiaries of Osborn. Schedule 2.1(b) sets forth a true
and complete list of all of Osborn's directly or indirectly owned subsidiaries,
together with the jurisdiction of incorporation or organization of each
subsidiary and the percentage of each subsidiary's outstanding capital stock or
other equity interests owned by Osborn or another subsidiary of Osborn. Except
as disclosed on Schedule 2.1(b), Osborn does not own, directly or indirectly,
any subsidiaries or have the right, pursuant to a contract or otherwise, to
acquire any capital stock, equity interest or other similar investment in any
corporation, partnership, joint venture association, limited liability company,
trust or other entity.
(c) Capital Structure. The authorized capital stock of Osborn
consists of 7,425,000 shares of Common Stock, 75,000 shares of non-voting common
stock, par value $0.01 per share ("Non-Voting Common Stock"), and 5,000,000
shares of preferred stock, par value $0.01 per share ("Preferred Stock"), none
of which are designated. At the close of business on the date hereof, 5,423,014
shares of Common Stock were issued and outstanding, no shares of Common Stock
were held by Osborn in its treasury, and 860,205 shares of Common Stock were
reserved for issuance as follows: (x) 338,031 shares were reserved for issuance
upon exercise of all of the issued and outstanding warrants, (y) 486,875 shares
were reserved for issuance upon exercise of all of the stock options outstanding
under the Option Plan, and (z) 35,299 shares were reserved for issuance and
available for grant pursuant to the Option Plan. At the close of business on the
date hereof, no shares of Non-Voting Common Stock and no shares of Preferred
Stock were issued and outstanding. Except as described in this Section 2.1(c)
and Schedule 2.1(c), no shares of capital stock of Osborn are reserved for
issuance for any other purpose. As of the date hereof, there are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote ("Voting Debt") on any matters on which holders of Common Stock may
vote. All the issued and outstanding shares of capital stock of Osborn are duly
authorized, validly issued, fully paid and nonassessable and have not been, and
as to shares issued in the future, will not be, issued in violation of any
preemptive or similar rights. The shares of Surviving Corporation Common Stock
will, when issued, be duly authorized, validly issued, fully paid and
nonassessable and will not be issued in violation of any preemptive or similar
rights. Except as described in this Section 2.1(c), as of the date hereof, there
are no options, warrants, calls, rights, commitments or agreements of any
character to which Osborn or any of its subsidiaries is a party or by which any
of them is bound obligating Osborn or any of its subsidiaries to issue, deliver
or sell, or cause to be, delivered or sold, additional shares of capital stock
or any Voting Debt of Osborn or any of its subsidiaries, or obligating Osborn or
any of its subsidiaries to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. All shares of Common Stock which may be
issued upon exercise of stock options granted pursuant to the Option Plan will,
when issued in accordance with the terms of such options and the Option Plan, be
validly issued, fully paid and nonassessable and not subject to any
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preemptive or similar rights. All shares of Common Stock which may be issued
upon exercise of issued warrants will, when issued in accordance with the terms
of such warrants and the respective warrant agreement, be validly issued, fully
paid and nonassessable and not subject to any preemptive or similar rights.
There are no outstanding contractual obligations of Osborn or any subsidiary to
repurchase, redeem or otherwise acquire any shares of Common Stock or other
capital stock of Osborn or any capital stock of, or any equity interest in, any
subsidiary listed on Schedule 2.1(b). Except for the Voting Agreement (as
defined in Section 10.17), there are no voting trusts, proxies or other
agreements or understandings to which Osborn or any of its subsidiaries is a
party or by which Osborn or any of its subsidiaries is bound with respect to the
voting of any shares of capital stock or other equity interests of Osborn or any
of its subsidiaries. Schedule 2.1(c) sets forth a complete and correct list as
of the date hereof, of (i) (A) the number of stock options outstanding, (B) the
exercise price of each outstanding stock option and (C) the number of stock
options then exercisable and (ii) (A) the number of warrants outstanding, (B)
the exercise price of each outstanding warrant, (C) the number of shares of
Common Stock attributable to each warrant and (D) the number of warrants then
exercisable. Schedule 2.1(c) also sets forth the capitalization of each
subsidiary of Osborn listed on Schedule 2.1(b), including the number of
authorized shares of each class of capital stock and the par value (if any)
thereof, the number of shares of each class of capital stock held in the
treasury of the subsidiary, and the number of issued and outstanding shares of
each class of capital stock and the names of ( and number of shares held by) the
record owners thereof. All the issued and outstanding shares of capital stock of
each subsidiary of Osborn are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive or similar
rights.
(d) Authority. Osborn has all requisite corporate power and
authority to enter into this Agreement, the Voting Agreement and any other
agreement executed by Osborn in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents") and to consummate the
transactions contemplated hereby or thereby. The execution and delivery of the
Transaction Documents by Osborn and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all necessary
corporate action on the part of Osborn (subject to the approval and adoption of
this Agreement and the transactions contemplated hereby by the stockholders of
Osborn as set forth in Section 1.12 of this Agreement). The Transaction
Documents have been duly executed and delivered and constitute the valid and
binding obligations of Osborn, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(e) No Conflict; Required Filings and Consents. The execution
and delivery of the Transaction Documents by Osborn do not and the performance
by Osborn of the transactions contemplated hereby or thereby will not , subject
to (i) with respect to the Merger, the approval and adoption of this Agreement
and the transactions contemplated hereby by the stockholders of Osborn as set
forth in Section 1.12 of this Agreement, and (ii) obtaining the consents,
approvals, authorizations and permits and making the filings described in this
Section 2.1(e), (A) violate, conflict with or result in any breach of any
provision of the Certificates or Articles of Incorporation or Bylaws or
equivalent organizational documents, in each case as amended or restated, of
Osborn or any of its subsidiaries, (B) violate, conflict with or result in a
violation or breach of, or constitute
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a default (with or without due notice or lapse of time or both) under, or permit
the termination of, or result in the acceleration of, or entitle any party to
accelerate (whether as a result of a change of control of Osborn or otherwise)
any obligation, or result in the loss of any benefit, or give any person the
right to require any security to be repurchased, or give rise to the creation of
any lien, charge, security interest or encumbrance upon any of the properties or
assets of Osborn or any of its subsidiaries under any of the terms, conditions
or provisions of any loan or credit agreement, note, bond, mortgage, indenture
or deed of trust, or any license, lease, agreement or other instrument or
obligation to which any of them is a party or by which they or any of their
properties or assets may be bound or subjected, or (C) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation, of any court or any
federal, state or local administrative agency or commission or other
governmental authority or instrumentality (a "Governmental Entity") applicable
to Osborn or any of its subsidiaries or by which or to which any of their
respective properties or assets is bound or subject. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Osborn or any of its
subsidiaries in connection with the execution and delivery of the Transaction
Documents by Osborn or the consummation of the transactions contemplated hereby
or thereby, except for (1) the filing of a premerger notification report under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (2) the consents of the Federal Communications Commission (the "FCC") to
the transfers of control of the Station Licenses (as defined in Section
2.l(g)(ii) below) as contemplated by Section 6.1 hereof, (3) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, and
(4) applicable requirements, if any, of the Securities Act and the Exchange Act
and state securities or blue sky laws. The Osborn Board has taken all actions
necessary under Delaware Law, including approving the transactions contemplated
by the Transaction Documents, to ensure that the prohibitions on business
combinations set forth in Section 203 of Delaware Law do not, and will not,
apply to the transactions contemplated by the Transaction Documents.
(f) Reports; Financial Statements; Absence of Certain Changes
or Events.
(i) Osborn and its subsidiaries have filed (A) all
forms, reports, statements and other documents required to be filed
with (1) the SEC, including without limitation (v) all Annual Reports
on Form 10-K, (w) all Quarterly Reports on Form 10-Q, (x) all proxy
statements relating to meetings of stockholders (whether annual or
special), (y) all Current Reports on Form 8-K and (z) all other
reports, schedules, registration statements or other documents
(collectively referred to as the "Company SEC Reports"), and (2) any
applicable state securities authorities and (B) all material forms,
reports, statements and other documents required to be filed with any
other Governmental Entities, including the FCC (all such forms,
reports, statements and other documents in clauses (A) and (B) of this
Subsection 3.1(e)(i) being referred to herein, collectively, as the
"Company Reports"). The Company Reports were prepared in all material
respects in accordance with the requirements of applicable law
(including, with respect to the Company SEC Reports, the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Company SEC
Reports) and the Company SEC Reports did not at the time they were
filed contain any untrue statement of a material
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fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) Osborn has delivered to Mergeco copies of the
audited consolidated balance sheets as of December 31, 1995 and
December 31, 1994, together with the related audited consolidated
statements of income, cash flows and changes in stockholders' equity of
Osborn for the years ended December 31, 1995, 1994 and 1993, and the
notes thereto, accompanied by the reports thereon of Ernst & Young LLP,
independent public accountants (such audited financial statements
collectively being referred to as the "Financial Statements"). The
Financial Statements, including the notes thereto, were prepared in
accordance with generally accepted accounting principles in the United
States ("GAAP") applied on a consistent basis throughout the periods
covered thereby (except to the extent disclosed therein or required by
changes in GAAP) and present fairly in all material respects the
consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of Osborn as of such dates and for
the periods then ended. The consolidated financial statements
(including, in each case, any related notes thereto) contained in the
Company SEC Reports filed subsequent to January 1, 1993 (A) have been
prepared in accordance with the published rules and regulations of the
SEC and GAAP applied on a consistent basis throughout the periods
involved (except (1) to the extent disclosed therein or required by
changes in GAAP, (2) with respect to Company SEC Reports filed prior to
the date of this Agreement, as may be indicated in the notes thereto,
and (3) in the case of the unaudited financial statements, as permitted
by the rules and regulations of the SEC) and (B) fairly present in all
material respects the consolidated financial position of Osborn and its
subsidiaries as of the respective dates thereof and the consolidated
results of operations and changes in stockholders' equity and cash
flows for the periods indicated (subject, in the case of unaudited
consolidated financial statements for interim periods, to adjustments,
consisting only of normal, recurring accruals, necessary to present
fairly such results of operations and cash flows), except that any pro
forma financial statements contained in such consolidated financial
statements are not necessarily indicative of the consolidated financial
position of Osborn and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for
the periods indicated.
(iii) Except as disclosed in Schedule 2.1(f), there
is no liability or obligation of any kind, whether accrued, absolute,
fixed, contingent or otherwise, of Osborn or its subsidiaries which
would have a Material Adverse Effect and that is not reflected or
reserved against in the balance sheet contained in the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 (the "Balance
Sheet"), other than (A) liabilities incurred in the ordinary course of
business in a manner consistent with past practice since March 31, 1996
(the "Balance Sheet Date"), or (B) any such liability or obligation
which would not be required to be presented in financial statements or
the notes thereto prepared in conformity with GAAP applied, in a manner
consistent with past practice, in the preparation of the Financial
Statements and the consolidated financial statements contained in
Company SEC Reports.
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(iv) Except as disclosed in Schedule 2.1(f), since
the Balance Sheet Date, Osborn and its subsidiaries have conducted
their respective businesses only in the ordinary course consistent with
past practice and nothing has occurred that would have been prevented
by Section 3.1 if the terms of such section had been in effect as of
and after the Balance Sheet Date. Except as disclosed in Schedule
2.1(f), since the Balance Sheet Date, there has not occurred, and
Osborn and its subsidiaries have not incurred or suffered, any Material
Adverse Effect.
(g) Compliance with Applicable Laws: FCC Matters.
(i) Except as permitted or contemplated hereby, the
businesses of Osborn and its subsidiaries have been conducted in
compliance with each applicable law, ordinance, regulation, judgment,
decree, injunction, rule or order of the FCC or any other Governmental
Entity binding on Osborn or any of its subsidiaries or their respective
properties or assets, except for such instances of noncompliance as
would not have a Material Adverse Effect. No investigation or review by
any Governmental Entity with respect to Osborn or any of its
subsidiaries is pending or, to Osborn's knowledge, threatened, except
for such investigations or reviews as would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, Osborn and
its subsidiaries have complied with the Communications Act of 1934, as
amended (the "Communications Act") in all material respects, all
material rules, regulations and written policies of the FCC thereunder,
all material obligations with respect to equal opportunity under
applicable law, and all material rules and regulations of the Federal
Aviation Administration applicable to the towers used by the radio
broadcast stations operated by Osborn and its subsidiaries (the
"Stations"). In addition, Osborn and its subsidiaries have duly and
timely filed, or caused to be so filed, with the FCC all material
reports, statements, documents, registrations, filings or submissions
with respect to the operation of the Stations and the ownership
thereof, including, without limitation, applications for renewal of
authority required by applicable law to be filed. All such FCC filings
complied with all material applicable laws when made and no material
deficiencies have been asserted with respect to any such filings. The
material required by 47 C.F.R. Section 73.3526 to be kept in the public
inspection files of the Stations is in such files.
(ii) Schedule 2.1(g) lists (A) all licenses, permits
and other authorizations, including the expiration dates thereof,
issued to Osborn or any of its subsidiaries by the FCC relating to the
Stations and held by them as of the date of this Agreement and (B) all
licenses, permits or authorizations issued to Osborn or any of its
subsidiaries by any other Governmental Entities which are material to
the operations of the Stations and held by them as of the date of this
Agreement, the loss of which could have a Material Adverse Effect. Such
licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses,
permits, permissions or authorizations, are collectively referred to
herein as the "Station Licenses." Schedule 2.1(g) lists the legally
authorized holder(s) of the Station Licenses, each of which is in full
force and effect. The Stations have been operated in all material
respects in accordance with the terms of the Station Licenses. There
are no material proceedings pending or, to Osborn's knowledge,
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threatened with respect to Osborn's or any of its subsidiaries
ownership or operation of the Stations which reasonably may be expected
to result in the revocation, material adverse modification, non-renewal
or suspension of any of the Station Licenses, the denial of any pending
applications for Station Licenses, the issuance against Osborn or any
of its subsidiaries of any cease and desist order, or the imposition of
any administrative actions by the FCC or any other Governmental Entity
with respect to the Station Licenses, or which reasonably may be
expected to adversely affect the Stations' ability to operate as
currently operated or the Surviving Corporation's ability to obtain
control of the Station Licenses. To Osborn's knowledge, no other
broadcast station or radio communications facility is causing
interference to the Stations' transmissions beyond that which is
allowed by FCC rules and regulations. Osborn has no reason to believe
that the FCC will not renew the Station Licenses issued by the FCC in
the ordinary course of business. Osborn knows of no facts relating to
Osborn under the Communications Act or the rules, regulations or
written policies of the FCC in effect on the date of this Agreement
that reasonably may be expected to disqualify Osborn from transferring
control of the Station Licenses pursuant to the terms of this Agreement
or that would prevent the consummation by them of the transactions
contemplated by this Agreement.
(h) Absence of Litigation. Except as set forth on Schedule
2.1(h), there is no claim, action, suit, inquiry, judicial or administrative
proceeding, grievance or arbitration pending or, to the knowledge of Osborn,
threatened against Osborn or any of its subsidiaries or any of their respective
properties or assets by or before any arbitrator or Governmental Entity, nor to
Osborn's knowledge are there any investigations relating to Osborn or any of its
subsidiaries or any of their respective properties or assets pending or
threatened by or before any arbitrator or Governmental Entity which would have a
Material Adverse Effect. Except as set forth in Schedule 2.1(h), there is no
judgment, decree, injunction, order, determination, award, finding, or letter of
deficiency of any Governmental Entity or arbitrator outstanding against Osborn
or any of its subsidiaries or any of their respective properties or assets which
would have a Material Adverse Effect. As of the date of this Agreement, there is
no action, suit, inquiry, judicial or administrative proceeding pending or, to
the knowledge of Osborn, threatened against Osborn or any of its subsidiaries
relating to the transactions contemplated by this Agreement.
(i) Insurance. Schedule 2.1(i) sets forth a summary of all
fire, general liability, malpractice liability, theft and other forms of
insurance and all fidelity bonds held by or applicable to Osborn or any of its
subsidiaries. No event has occurred, including, without limitation, the failure
by Osborn or any of its subsidiaries to give any notice or information or the
delivery of any inaccurate or erroneous notice or information, which limits or
impairs the rights of Osborn or any of its subsidiaries under any such insurance
policies in such a manner as could have a Material Adverse Effect. Excluding
insurance policies that have expired and been replaced in the ordinary course of
business, no insurance policy has been canceled within the last two years prior
to the date hereof.
(j) Real Estate. Each of Osborn and its subsidiaries has good
and marketable title in fee simple to all real properties owned by it and valid
leaseholds in the Leased Real Property (as
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defined herein), except to the extent marketability may be affected by the
existence of Permitted Liens (as defined in Section 2.1(l)). Each lease is valid
without default thereunder by the lessee or, as of the date hereof and to
Osborn's knowledge, the lessor. Schedule 2.1(j) lists as of the date hereof (i)
the street address and use of each parcel of real property owned by Osborn or
any of its subsidiaries (the "Owned Real Property"), (ii) the street address and
use of each parcel of real property leased by Osborn or any of its subsidiaries
(the "Leased Real Property") and (iii) two grants of easements pursuant to which
a subsidiary of Osborn is a grantee.
(k) Personal Property. Except for property held under capital
leases, Osborn has good title to all the items of machinery, equipment,
furniture, fixtures, inventory, receivables and other tangible or intangible
personal property reflected on the Balance Sheet and all such property acquired
since the Balance Sheet Date, except for any such property or assets sold or
otherwise disposed of in the ordinary course of business and consistent with
past practices since such date or which would not have a Material Adverse
Effect. The tangible personal property and fixtures owned or used by Osborn or
any of its subsidiaries that are necessary for the operation of the Stations,
including all broadcasting equipment and broadcast towers, are in good operating
condition and repair (subject to normal wear and tear) and permit the conduct of
the business of the Stations in compliance with all material FCC rules and
regulations. Osborn or any of its subsidiaries owns or holds under valid leases
all of the tangible personal property and fixtures necessary to conduct the
business of the Stations as presently conducted except where the failure to own
or hold under valid lease any tangible property or fixtures would not have a
Material Adverse Effect.
(l) Liens and Encumbrances. All properties and assets,
including leases, owned by Osborn and its subsidiaries are free and clear of all
liens, pledges, claims, security interests, restrictions, mortgages, tenancies
and other possessory interests, conditional sale or other title retention
agreements, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments and other burdens,
options or encumbrances of any kind (collectively, "Liens") except (i) statutory
Liens securing payments not yet delinquent or the validity of which are being
contested in good faith by appropriate actions, (ii) purchase money Liens
arising in the ordinary course, (iii) Liens for taxes not yet delinquent, (iv)
Liens reflected in the Balance Sheet (which have not been discharged), (v) Liens
which in the aggregate do not materially detract from the value for use for
broadcasting purposes or materially impair the present and continued use of the
properties or assets subject thereto in the usual and normal conduct of the
business of the Stations, and (vi) Liens on leases arising from the provisions
of such leases, (vii) any liens set forth on the title reports for the Owned
Real Property, copies of which reports have been provided to Mergeco, (viii) any
leases of Leased Real Property listed on Schedule 2.1(l) and (ix) any other
liens set forth on Schedule 2.1(l) (the Liens referred to in clauses (i) through
(ix) being "Permitted Liens").
(m) Environmental Matters. Except as set forth on Schedule
2.1(m):
(i) The real property and facilities owned, operated
and leased by Osborn or its subsidiaries and the operations of Osborn
or its subsidiaries thereon comply in all material respects and have at
all times complied in all material respects with all applicable
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federal, state and local laws, statutes, codes, rules, regulations,
ordinances, orders, determinations or rules of common law pertaining to
the environment, natural resources and public or employee health and
safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, The Oil Pollution Act of 1990, as amended, the
Safe Drinking Water Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Toxic Substances Control Act, as
amended, and other environmental conservation or protection laws
("Environmental Laws");
(ii) No judicial proceedings are pending or, to
Osborn's knowledge, threatened against Osborn or its subsidiaries
alleging the violation of any Environmental Laws, and there are no
administrative proceedings pending or, to Osborn's knowledge,
threatened against Osborn or its subsidiaries, alleging the violation
of any Environmental Laws and no notice (in the case of clause (ii)(B),
directed to Osborn or any of its subsidiaries) from any Governmental
Entity or any private or public person has been received by Osborn or
its subsidiaries (A) claiming any violation of any Environmental Laws
in connection with any real property or facility owned, operated or
leased by Osborn or its subsidiaries that has not been complied with or
otherwise resolved to the satisfaction of the party giving notice, or
(B) requiring any remediation, clean-up, modification, repairs, work,
construction, alterations or installations on or in connection with any
real property or facility owned, operated or leased by Osborn or its
subsidiaries that are necessary to comply with any Environmental Laws
and that have not been complied with or otherwise resolved to the
satisfaction of the party giving notice;
(iii) All material permits, registrations, licenses,
authorizations, and the like ("Permits") required to be obtained or
filed by each of Osborn and its subsidiaries under any Environmental
Laws in connection with Osborn's and its subsidiaries' operations,
including, without limitation, those activities relating to the
generation, use, storage, treatment, disposal, release, or remediation
of Hazardous Substances (as such term is defined in Section 2.1(m)(iv)
hereof), have been duly obtained or filed, and each of Osborn and its
subsidiaries are and have at all times been in compliance in all
material respects with the terms and conditions of all such Permits;
(iv) All Hazardous Substances used or generated by
Osborn or its subsidiaries or, to Osborn's knowledge, any of their
predecessors, on, in, or under any of the owned, operated, or leased
real property or facilities are and have at all times been generated,
stored, used, treated, disposed of, and released by such persons or on
their behalf in such manner as not to result in any material
Environmental Costs or Liabilities. "Hazardous Substances" means (A)
any hazardous materials, hazardous wastes, hazardous substances, toxic
wastes, and toxic substances as those or similar terms are defined
under any Environmental Laws; (B) any asbestos or any material which
contains any hydrated mineral silicate, including chrysolite, amosite,
crocidolite, tremolite, anthophylite and/or actinolite,
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whether friable or non-friable; (C) PCBs, or PCB-containing materials,
or fluids; (D) radon; (E) any other hazardous, radioactive, toxic or
noxious substance, material, pollutant, contaminant, constituent, or
solid, liquid or gaseous waste; (F) any petroleum, petroleum
hydrocarbons, petroleum products, crude oil and any fractions or
derivatives thereof, any oil or gas exploration or production waste,
and any natural gas, synthetic gas and any mixtures thereof; (G) any
substance that, whether by its nature or its use, is subject to
regulation under any Environmental Laws or with respect to which any
Environmental Laws or Governmental Entity requires environmental
investigation, monitoring or remediation; and (H) any underground
storage tanks, dikes, or impoundments as defined under any
Environmental Laws. "Environmental Costs or Liabilities" means any
losses, liabilities, obligations, damages, fines, penalties, judgments,
settlements, actions, claims, costs and expenses (including, without
limitation, reasonable fees, disbursements and expenses of legal
counsel, experts, engineers and consultants, and the costs of
investigation or feasibility studies and performance of remedial or
removal actions and cleanup activities) arising from or under any
Environmental Laws, order of, or contract of Osborn or its subsidiaries
with, any Governmental Entity or any private or public persons;
(v) There are not now, nor have there been in the
past, on, in or under any property or facilities when owned, leased or
operated by Osborn or its subsidiaries or, to Osborn's knowledge, when
owned, leased or operated by any of their predecessors, any Hazardous
Substances that are in a condition that violates any Environmental Law
in any material respect or that reasonably could be expected to require
remediation under any Environmental Law;
(vi) Osborn and its Subsidiaries have not received,
and to the knowledge of Osborn do not expect to receive, any
notification from any source advising Osborn or such subsidiaries that:
(A) it is a potentially responsible party under CERCLA or any other
Environmental Laws; (B) any real property or facility currently or
previously owned, operated, or leased by it is identified or proposed
for listing as a federal National Priorities List ("NPL") (or
state-equivalent) site or a Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") list (or
state-equivalent) site; and (C) any facility to which it has ever
transported or otherwise arranged for the disposal of Hazardous
Substances is identified or proposed for listing as an NPL (or
state-equivalent) site or CERCLIS (or state-equivalent) site; and
(vii) The Stations' operations do not have a
significant environmental impact, as defined by 47 C.F.R. Section
1.1307.
(n) Taxes. Each of Osborn and its subsidiaries has filed, or
has timely applied for extensions of time to file, all tax returns, reports,
statements and other documents ("Tax Returns"') required to be filed, and all
such Tax Returns which have been filed are accurate and complete in all material
respects. Each of Osborn and its subsidiaries has paid (or there has been paid
on its behalf), or has set up an adequate reserve for the payment of, all taxes
required to be paid, withheld, or deducted, or for which any of Osborn or its
subsidiaries are liable, in respect of the
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periods covered by such Tax Returns, and with respect to each tax, from the end
of the period covered by the most recently filed Tax Return to the date hereof,
and the Balance Sheet reflects an adequate reserve for all taxes payable, or
required to be withheld and remitted, by Osborn or any of its subsidiaries, or
for which Osborn or any of its subsidiaries are liable, accrued through the
Balance Sheet Date. No material deficiencies for any taxes have been proposed,
asserted or assessed against Osborn or any of its subsidiaries and are pending,
and no requests for waivers of the time to assess any such taxes are pending.
The federal income tax returns of Osborn and its subsidiaries have not been
examined by the Internal Revenue Service. None of Osborn or its subsidiaries (i)
has filed a consent under section 341(f) of the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) has made, or is obligated or may become obligated
to make, any payments that will not be deductible by reason of section 280G of
the Code, or (iii) has been a member of an affiliated group of corporations
which has filed a consolidated federal income tax return (other than the group
of which Osborn is the common parent) or otherwise has any liability for the
taxes of any person (other than Osborn and its subsidiaries) under Treas. Reg.
Section 1.1502-6, any similar provision of state, local or foreign law, or by
reason of its status as a transferee, successor, indemnitor or otherwise. For
the purposes of this Agreement, the term "taxes" shall include all federal,
state, local and foreign income, property, sales, excise, withholding,
unemployment compensation, social security, and other taxes and charges of any
nature whatsoever (including interest, penalties and additions to tax relating
to any of the specified items).
(o) Certain Agreements. Except as set forth in Schedule 2.1(o)
and for oral or written agreements, plans or arrangements, the benefits of which
do not in the aggregate exceed $75,000, neither Osborn nor any of its
subsidiaries is a party to any oral or written agreement, plan or arrangement
with any officer, director, employee or other station or broadcast personnel
(whether an employee or an independent contractor) of Osborn or its subsidiaries
(i) the benefits of which are contingent, or the terms of which are materially
altered, upon, or result from, the occurrence of a transaction involving Osborn
of the nature of any of the transactions contemplated by this Agreement, (ii)
providing severance benefits or other benefits after the termination of
employment or other contractual relationship regardless of the reason for such
termination and regardless of whether such termination is before or after a
change of control, (iii) under which any person may receive payments subject to
the tax imposed by Section 4999 of the Code or (iv) any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Schedule 2.1(o) hereto lists
(and, in the case of clause (iv), describes) each oral or written (i) agreement,
contract, indenture or other instrument relating to the borrowing of money or
the guarantee of any obligation for the borrowing of money, (ii) Employee
Benefit Plan, as defined in Section 2.1(p), (iii) employment or consulting
contract which is not terminable without liability or penalty to Osborn or any
of its subsidiaries on 30 days or less notice, other than such employment or
consulting contracts the payments under which do not in the aggregate exceed
$75,000, (iv) covenant, agreement, or arrangement under which Osborn's or any of
its subsidiary's ability or right to compete with another Person is restricted
or impaired, or (v) contract, agreement or commitment (except for trade or
barter agreements) under which any party thereto remains obligated to provide
goods or services having a value, or to make payments aggregating, in excess of
$75,000
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per year, in any such case to which Osborn or any of its subsidiaries is a party
or bound. Each such agreement, contract or obligation described in Schedule
2.1(o) or required to be so described is a valid and binding obligation of
Osborn or one of its subsidiaries, as the case may be, and is in full force and
effect without amendment, except where not being a valid and binding obligation
or in full force and effect without amendment could not have a Material Adverse
Effect. Osborn or one of its subsidiaries, as the case may be, has performed in
all material respects the obligations required to be performed by it under the
agreements so described and is not (with or without lapse of time or the giving
of notice, or both) in material breach or default thereunder. As of the date
hereof and to the knowledge of Osborn, each other party to such contracts has
performed in all material respects the obligations required to be performed by
it under the agreements so described and is not (with or without lapse of time
or the giving of notice, or both) in material breach or default thereunder.
Schedule 2.1(o) identifies, as to each agreement, contract or obligation listed
thereon, whether the consent of the other party thereto is required in order for
such agreement, contract or obligation to continue in full force and effect upon
the consummation of the transactions contemplated hereby or whether such
agreement, contract or obligation can be canceled by the other party without
liability to such other party due to the consummation of the transactions
contemplated hereby. A copy of each written agreement, contract, obligation,
plan or arrangement and a description of each oral agreement, contract,
obligation, plan or arrangement set forth in Schedule 2.1(o) has been provided
to Mergeco.
(p) ERISA Compliance; Labor.
(i) The present value of all accrued benefits (vested
and unvested) under each "employee pension benefit plan" as such term
is defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which Osborn or any other trades or
businesses under common control within the meaning of Section
4001(b)(1) of ERISA with Osborn (collectively, the "ERISA Group")
maintains, or to which Osborn or any member of the ERISA Group is
obligated to contribute (the "Pension Plans"), did not, as of the
respective last annual valuation dates for such Pension Plans, exceed
the value of the assets of such Pension Plan allocable to such
benefits. None of the Pension Plans subject to Section 302 of ERISA has
incurred any "accumulated funding deficiency," as such term is defined
in Section 302 of ERISA (whether or not waived), since the effective
date of such Section 302. Neither Osborn or any member of the ERISA
Group, nor any officer of Osborn or any member of the ERISA Group or
any of the employee benefit plans of Osborn or any member of the ERISA
Group which are subject to ERISA, including the Pension Plans, or any
trusts created thereunder, or any trustee or administrator thereof, has
engaged in a "prohibited transaction," as such term is described in
Section 4975 of the Code, which has subjected or which could subject
Osborn or any member of the ERISA Group, any officer of Osborn or any
of its subsidiaries or any of such plans or any trust to any material
tax or penalty on prohibited transactions imposed by such Section 4975.
None of such Pension Plans subject to Title IV of ERISA or any of their
related trusts has been terminated or partially terminated, nor has
there been any "reportable event," as that term is defined in Section
4043 of ERISA, with respect thereto since the effective date of such
Section 4043. Neither Osborn or any member of the ERISA Group has
contributed or been obligated to
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contribute to any "multiemployer plan" as such term is defined in
Section 3(37) or Section 4001(a)(3) of ERISA. Except as set forth on
Schedule 2.1(p), there are no "employee benefit plans" within the
meaning of Section 3(3) of ERISA or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan or
arrangement or understanding providing benefits to any present or
former employee or contractor of Osborn or any member of the ERISA
Group maintained by Osborn or any member of the ERISA Group or as to
which Osborn or any member of the ERISA Group has any material
liability or obligation (collectively, "Employee Benefit Plans").
(ii) True, correct and complete copies of each of the
Employee Benefit Plans, and related trusts, if applicable, have been
furnished to Mergeco, along with the most recent report filed on Form
5500 and summary plan description with respect to each Employee Benefit
Plan required to file Form 5500. All reports and disclosures relating
to the Employee Benefit Plans required to be filed with or furnished to
governmental agencies or plan participants or beneficiaries have been
furnished in accordance with applicable law in a timely manner. Each
Employee Benefit Plan has been maintained in compliance in all material
respects with ERISA and the Code, and each Employee Benefit Plan
intended to be qualified under Section 401 of the Code satisfies the
requirements of such Section and has received a favorable determination
letter from the Internal Revenue Service regarding the qualified status
and has not, since receipt of the most recent favorable determination
letter, been amended or, to the knowledge of Osborn, operated in a
manner which would adversely affect such qualified status. There are no
actions, suits or claims pending (other than routine claims for
benefits) or, to the knowledge of Osborn, threatened against, or with
respect to any of the Employee Benefit Plans. All contributions
required to be made to the Employee Benefit Plans pursuant to their
terms have been timely made. To the knowledge of Osborn, there is no
matter pending with respect to any of the Employee Benefit Plans before
the Internal Revenue Service, Department of Labor or the Pension
Benefit Guaranty Corporation. Except as required by applicable law,
none of the Employee Benefit Plans provides medical insurance coverage
following retirement. Each Employee Benefit Plan which is an "employee
welfare benefit plan," as defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued prior to such amendment or termination.
(iii) Schedule 2.1(p) lists each collective
bargaining agreement to which Osborn or any of its subsidiaries is a
party. Except for those unions which are parties to one or more of the
listed collective bargaining agreements or as otherwise listed on
Schedule 2.1(p) neither Osborn nor any of its subsidiaries has agreed
to recognize any union or other collective bargaining representative,
nor has any union or other collective bargaining representative been
certified as the exclusive bargaining representative of any of their
employees. Each of Osborn and its subsidiaries (A) is, and has been
since January 1, 1993, in substantial compliance with all applicable
laws regarding labor, employment and employment practices, terms and
conditions of employment, affirmative action, wages and
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hours, plant closing and mass layoff, occupational safety and health,
immigration, and workers' compensation, (B) is not engaged, nor has it
since January 1, 1993, engaged, in any unfair labor practices, and has
no, and has not had since January 1, 1993, any, unfair labor practice
charges or complaints before the National Labor Relations Board pending
or, to Osborn's knowledge, threatened against it, (C) has no, and has
not had since January 1, 1993, any, grievances, arbitrations or other
proceedings arising or asserted to arise under any collective
bargaining agreement, pending or, to Osborn's knowledge, threatened
against it and (D) has no, and has not had since January 1, 1993, any,
charges, complaints or proceedings before the Equal Employment
Opportunity Commission, Department of Labor or any other federal, state
or local agency responsible for regulating employment practices,
pending, or, to Osborn's knowledge, threatened against it. There is no
labor strike, slowdown, work stoppage or lockout pending or, to the
knowledge of Osborn, threatened against or affecting Osborn or its
subsidiaries, and Osborn or its subsidiaries has not experienced any
labor strike, slowdown, work stoppage or lockout since January 1, 1993.
Except as set forth on Schedule 2.1(p), to Osborn's knowledge, no union
organizational campaign or representation petition is currently pending
with respect to the employees of Osborn or its subsidiaries.
(q) Patents, Trademarks, Etc. Schedule 2.1(q) sets forth each
material patent, patent application, trademark, trade name, trade name and
trademark registration, service mark, trade secret, copyright, copyright
registration and any other proprietary intellectual property rights
(collectively, "Intellectual Rights") owned by or registered in the name of
Osborn or any of its subsidiaries, or in which Osborn or any of its subsidiaries
has any right, license or interest. Osborn or its subsidiaries owns or has the
unencumbered right to use pursuant to a valid, binding and enforceable license
agreement or other contract or arrangement all such Intellectual Rights. To the
knowledge of Osborn, neither Osborn nor any of its subsidiaries is infringing
any such Intellectual Rights, and Osborn is not aware of any infringement by
others of any such rights owned by Osborn or any of its subsidiaries.
(r) Affiliate Relationships. Schedule 2.1(r) sets forth a
complete list and summary description of all contracts or other arrangements
involving Osborn or any of its subsidiaries in which any officer, director,
stockholder or any of their affiliates has a financial interest, including
indebtedness to Osborn or its subsidiaries, other than such contracts or
arrangements which in the aggregate do not exceed $75,000.
(s) Vote Required. The only votes of the holders of any class
or series of capital stock of Osborn necessary to approve the Merger and adopt
this Agreement are the affirmative votes of the holders of a majority of the
outstanding shares of the Common Stock.
(t) Opinion of Financial Advisor. Osborn has received the
opinion of Alex. Brown & Sons Incorporated ("Alex. Brown") to the effect that,
as of the date of this Agreement, the Merger is fair, from a financial point of
view to the holders of Common Stock. The fees of Alex. Brown in connection with
the transactions contemplated by this Agreement shall not exceed $825,000.
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2.2. Representations and Warranties of Mergeco. Mergeco represents and
warrants to Osborn as follows (with the understanding that Osborn is relying on
such representations and warranties in entering into and performing this
Agreement):
(a) Organization Standing and Power. Mergeco is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
(b) Authority. Mergeco has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Mergeco and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Mergeco (including
the approval and adoption of this Agreement and the transactions contemplated
hereby by the Parent). This Agreement has been duly executed and delivered and
constitutes the valid and binding obligation of Mergeco, enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity). The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to a loss of a material benefit under, any provision
of the Certificate of Incorporation or Bylaws of Mergeco or any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Mergeco or its
properties or assets, except for any such conflicts, violations or defaults or
terminations, cancellations or accelerations which individually or in the
aggregate do not have a material adverse effect on Mergeco's ability to
consummate its obligations hereunder. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Mergeco in connection with the
execution and delivery of this Agreement by Mergeco or the consummation by it of
the transactions contemplated hereby, except for (i) the filing of a premerger
notification report under the HSR Act, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (iii) the filing
with the FCC and the grant of the consent of the FCC to the transfer of control
of the Station Licenses pursuant to the terms of this Agreement (as contemplated
by Section 6.1), and (iv) applicable requirements, if any, of the Securities Act
and the Exchange Act and the rules and regulations thereunder and state
securities or blue sky laws. Mergeco is acquiring the shares of Surviving
Corporation Common Stock for investment purposes and without a view to the
distribution thereof in violation of the Securities Act.
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(c) Litigation. As of the date hereof, there is no action,
suit, inquiry, judicial or administrative proceeding pending or, to the
knowledge of Mergeco, threatened against it relating to the transactions
contemplated by this Agreement.
(d) FCC Matters. Mergeco knows of no facts relating to it
under the Communications Act or the rules, regulations or written policies of
the FCC in effect on the date of this Agreement that reasonably may be expected
to disqualify it from obtaining control of the Station Licenses or that would
prevent it from consummating the transactions contemplated by this Agreement.
Mergeco is able to certify on an FCC Form 315 that it is financially qualified.
(e) Real Estate. As of the date hereof, Mergeco does not own
or lease any real property.
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1. Covenants of Osborn. Except as contemplated by this Agreement or
to the extent that Mergeco shall otherwise consent in writing, from the date of
this Agreement until the Effective Time, Osborn covenants and agrees that it
shall not, and shall not permit any of its subsidiaries to:
(a) conduct its business in any material respect except in the
ordinary course consistent with past practice; or
(b) if it would cause a Material Adverse Effect, fail to use
its commercially reasonable efforts to preserve intact Osborn's present business
organization and to keep available the services of its present officers, station
managerial personnel (including the General Manager, Station Manager, General
Sales Manager, Local Sales Manager, National Sales Manager, Programming Director
and Business Manager, or persons performing comparable duties, of each Station
(collectively, the "Station Management")) and over-the-air employees or
independent contractors and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be materially impaired at the Closing Date. The (i)
failure to renew an employment agreement pursuant to Section 3.1(g) due to a
failure by Mergeco to consent to an increase in compensation or (ii) renewal of
an employment agreement pursuant to Section 3.1(g) with an increase in
compensation thereunder which has been consented to by Mergeco, shall not be
deemed to be a violation of this Section 3.1(b); or
(c) other than as previously disclosed in writing, fail to use
its commercially reasonable efforts to maintain the present format of the
Stations and with programming consistent with past practices; or
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(d) split, combine, divide, distribute or reclassify any
shares of its capital stock, declare, pay or set aside for payment any dividend
or other distribution in respect of its capital stock, or directly or
indirectly, redeem, purchase or otherwise acquire any shares of its capital
stock or other securities; provided that nothing herein shall prevent any of its
subsidiaries from paying dividends or making other distributions to Osborn; or
(e) issue, sell, pledge, dispose of, encumber or deliver
(whether through the issuance or granting of any options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
securities convertible into or exercisable or exchangeable for shares of stock
of any class (other than the issuance of certificates in replacement of lost
certificates); or
(f) change or amend its charter documents or bylaws; or
(g) except for amendments, terminations (without payment of
penalty or damages), renewals or failures to renew (without payment of penalty
or damages) of employment agreements with over-the-air personnel in the ordinary
course of business and consistent with past practice (subject to prior
consultation with Mergeco reasonably in advance thereof), enter into, materially
amend, terminate, or fail to use its commercially reasonable efforts to renew
any material contract (i.e., a contract or agreement of the type required to be
described in Schedule 2.1(o) (provided that neither Osborn nor its subsidiaries
shall be required to renew any material contract on terms that are less
favorable to Osborn or its subsidiaries) or default in any material respect (or
take or omit to take any action that, with or without the giving notice or
passage of time, would constitute a material default) under any material
contract or enter into any new material contract; or
(h) merge or consolidate with or into any other legal entity,
dissolve or liquidate; or
(i) incur or assume any long-term debt (including obligations
in respect of capital leases and for interest), assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person (other than endorsements of
checks in the ordinary course) or make any loans, advances or capital
contributions to, or investments in, any person (other than advances to
employees in the ordinary course of business); or
(j) adopt or amend any Employee Benefit Plan or collective
bargaining agreement, or increase in any manner the compensation or fringe
benefits of any director, officer or employee or other station and broadcast
personnel (whether employees or independent contractors) or pay any benefit not
by any existing agreement, except in the ordinary course of business and
consistent with past practices and as required by law, provided that, before
entering into any employment agreement or increasing or agreeing to increase the
compensation, bonuses or other benefits of any Station Management or
over-the-air talent in the ordinary course of business and as required by law,
Osborn shall first have consulted in good faith with Mergeco with respect to the
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terms of any such employment agreement or increase or change in compensation,
bonuses or other benefits; or
(k) except as set forth on Schedule 3.1(k), acquire
(including, without limitation, by merger, consolidation or the acquisition of
any equity interest or assets) or sell (whether by merger, consolidation or the
sale of an equity interest or assets), lease or dispose of any assets except in
the ordinary course of business and consistent with past practice or, even if in
the ordinary course of business and consistent with past practices (other than
sales of surplus or obsolete equipment), whether in one or more transactions, in
no event having a fair market value in excess of $75,000; or
(l) mortgage, pledge or subject to any material Lien any of
its properties or assets, tangible or intangible, other than in the ordinary
course of business consistent with past practice; or
(m) except as required by GAAP, applicable law or
circumstances which did not exist as of the Balance Sheet Date, change any of
the material accounting principles or practices used by it; or
(n) make any settlement of or compromise any tax liability,
change any tax election or tax method of accounting or make any new tax election
or adopt any new tax method of accounting which settlement, compromise, method
or election is material to Osborn and its subsidiaries, taken as a whole; or
(o) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business consistent with past
practice, or fail to pay or otherwise satisfy (except if being contested in good
faith) any material accounts payable, claims, liabilities or obligations on a
basis, and within the time, consistent with past practice; or
(p) change in any material respect its existing practices and
procedures with respect to the collection of accounts receivable of the Stations
and, except with respect to good faith attempts consistent with past practice to
obtain payment of a past due receivable, or except in accordance with existing
practices, a contested receivable, offer to discount the amount of any
outstanding receivable or extend any other incentive (whether to the account
debtor or any employee or third party responsible for the collection of
receivables) to accelerate the collection thereof, or change any Station's
advertising rates or policies, procedures or methods in connection with the sale
of advertising time in a manner primarily intended to accelerate the receipt of
cash payments or fail to incur annual advertising and promotional department
expenses in cash and trade below 90% of that budgeted for 1996 (as such budget
previously has been delivered to Mergeco); or
(q) except as contemplated by that certain Option Agreement
dated as of July 8, 1996, by and between Wheeling Radio Company and Mountain
Radio Corporation, enter into, or enter into negotiations or discussions with
any person other than Mergeco with respect to, any local
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marketing agreement, time brokerage agreement, joint sales agreement or any
other similar agreement; or
(r) agree to or make any commitment, orally or in writing, to
take any actions prohibited by this Agreement.
3.2. Negative Trade Balance. Osborn shall use commercially reasonable
efforts to ensure that the Osborn Negative Trade Balance, as defined below, of
the Stations, taken as a whole, does not exceed $75,000 (excluding the Station
in Fresno, California) in the aggregate at the Closing Date. "Osborn Negative
Trade Balance" means the difference, if negative, between the value of time owed
under barter agreements to which any of the Stations is a party or by which any
of them is bound and the value of the goods and services to be received under
such agreements.
3.3. Environmental Site Assessments. If Mergeco or its lenders or other
financing sources require Phase I or Phase II environmental site assessments
("ESAs"), Osborn covenants and agrees that, upon written notice from Mergeco to
Osborn identifying the locations at which such ESAs are required, Osborn shall
at its sole cost and expense cause to be performed by a nationally recognized
and duly qualified environmental consultant reasonably acceptable to Mergeco and
Osborn an ESA at each identified transmission site owned, operated or leased by
Osborn or its subsidiaries and at such other identified real properties and
facilities owned, operated or leased by Osborn or its subsidiaries. The ESAs
which are to be conducted for the benefit of Mergeco shall be performed in a
manner that at a minimum satisfies the requirements of ASTM Practice E 1527-94.
Osborn covenants and agrees that, upon receipt of the notice referred to above,
it shall diligently pursue the performance of the requisite ESAs to their
completion, with final copies of the Phase I environmental site assessment
reports (and, if applicable, Phase II Environmental Site Assessment reports)
made available to Mergeco by no later than 45 days following the date on which
Osborn receives the notice referred to above.
ARTICLE IV
ADDITIONAL AGREEMENTS OF OSBORN
4.1. No Solicitation of Transactions. Osborn shall not, nor shall it
permit its subsidiaries to, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, Osborn
or any of its subsidiaries or any merger, consolidation, share exchange,
business combination or other similar transaction with Osborn or any of its
subsidiaries or participate in any negotiations regarding, or furnish to any
other person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing; provided,
however, that prior to the receipt of the requisite vote or consent for approval
and adoption by the holders of Common Stock of this Agreement and the
transactions contemplated hereby, nothing contained in this Section 4.1 shall
prohibit Osborn from
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furnishing information to, or entering into discussions or negotiations with,
any person in connection with an unsolicited proposal by such person to acquire
Osborn pursuant to a merger, consolidation, share exchange, business combination
or other similar transaction or to acquire all or substantially all of the
assets of Osborn received by Osborn after the date of the Agreement, if, and
only to the extent that, (a) the Osborn Board determines in good faith that such
action is required in order for the Osborn Board not to breach its fiduciary
duties to stockholders imposed by applicable law, such determination being based
on consultations with Alex. Brown and the opinion of its independent legal
counsel that such action is required in order for the Osborn Board not to breach
its fiduciary duties to stockholders imposed by applicable law, and (b) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, Osborn (i) gives Mergeco as promptly as practicable prior
written notice of Osborn's intention to furnish such information or begin such
discussions and (ii) receives from such person an executed confidentiality
agreement on terms no less favorable to Osborn than those contained in the
Confidentiality Agreement (as defined in Section 4.2). Osborn shall promptly
communicate to Mergeco the material terms of any such proposal (and the identity
of the party making such proposal) which it may receive. Osborn agrees not to
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which Osborn is a party. Osborn immediately shall cease
and cause to be terminated all existing discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. From and
after the receipt of the requisite vote or consent for approval and adoption by
the holders of Common Stock of this Agreement and the transactions contemplated
hereby, Osborn shall not, nor shall it permit its subsidiaries to, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage the submission of any proposal or offer from any person relating to
any acquisition or purchase of all or any material portion of the assets of, or
any equity interest in, Osborn or any of its subsidiaries or any merger,
consolidation, share exchange, business combination or other similar transaction
with Osborn or any of its subsidiaries or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing.
4.2. Access and Information. (a) Until the Closing, subject only to
applicable rules and regulations of the FCC, Osborn shall afford to Mergeco and
its representatives (including accountants and counsel) full access, during
normal business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of the business of Osborn or its
subsidiaries, to all properties, books, records and returns of Osborn and its
subsidiaries and all other information with respect to its business, together
with the opportunity to make copies of such books, records and other documents
and to discuss the business of Osborn and its subsidiaries with such corporate
officers, station managerial personnel (including the General Manager, Station
Manager, General Sales Manager, Programming Director, Business Manager and
Traffic Manager, or persons performing comparable duties, of each Station),
accountants, consultants and counsel for Osborn as Mergeco deems reasonably
necessary or appropriate for the purposes of familiarizing itself with Osborn
and the Stations, including, without limitation, the right to visit each Station
at least monthly; provided that such Station visits shall be scheduled at least
five business days in advance and shall be conducted in a manner intended to
minimize the disruption to the operations of the Stations. In furtherance of the
foregoing, Osborn shall authorize and instruct Ernst & Young LLP
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to meet with Mergeco and its representatives, including its independent public
accountants, to discuss the business and accounts of Osborn and to make
available (with the opportunity to make copies) to Mergeco and its
representatives, including its independent public accountants, all the work
papers of Ernst & Young LLP related to their audit of the consolidated financial
statements and tax returns of Osborn. All information provided pursuant to this
Agreement shall remain subject in all respects to the Confidentiality Agreement
(herein so called) dated May 30, 1996 between Hicks, Muse, Tate & Furst
Incorporated and Osborn until such time as the transactions contemplated by this
Agreement have been consummated. Osborn waives any provisions in the
Confidentiality Agreement that would otherwise prohibit the execution of this
Agreement and the consummation of the transactions contemplated hereby.
(b) Within 30 days after the end of each calendar month (other
than in the case of December 1996, and then within 90 days after the end of such
month), Osborn shall deliver to Mergeco, for each of the Stations, and for
Osborn as a whole, monthly operating statements (in a form consistent with the
monthly operating statements previously supplied to Mergeco) prepared in the
ordinary course of business for internal purposes, including comparisons to
comparable prior year periods and current year budget. Further, within 45 days
after the end of each calendar quarter, Osborn shall deliver to Mergeco, for
each of the Stations, quarterly statements prepared in the ordinary course for
internal purposes containing the dollar amount of all trade and barter
agreements of each Station. Osborn shall deliver to Mergeco the rating books and
such other ratings information subscribed to by Osborn including, without
limitation, Arbitrends, Accuratings or any other written information reflective
of the quantitative or qualitative nature of the audiences of the Stations for
each of the Stations upon receipt of the same by the corporate officers of
Osborn. Osborn shall instruct the Station Management of each Station to provide
such information and reports to Osborn's corporate officers promptly upon
receipt by such Station Management. In addition, as soon as the same are
distributed to Osborn's corporate officers by each Station, Osborn will provide
Mergeco with copies of each Station's weekly sales pacing reports, with
comparisons to sales pacing in the corresponding period of the prior year.
(c) Without duplication of Sections 4.2(b), at such time as
Osborn provides the same to its lenders, Osborn shall provide Mergeco with
copies of the financial statements and other information delivered by Osborn to
such lenders.
(d) Osborn shall promptly deliver to Mergeco true and correct
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement.
4.3. Assistance. If Mergeco requests, Osborn will cooperate, and will
cause Ernst & Young LLP to cooperate, in all reasonable respects with the
efforts of Mergeco to finance the transactions contemplated by this Agreement,
including without limitation, providing assistance in the preparation of one or
more registration statements or other offering documents relating to debt and/or
equity financing and any other filings that may be made by Mergeco with the SEC,
all at the sole expense of Mergeco. Osborn (a) shall furnish to Ernst & Young
LLP, as independent accountants to Osborn, such customary management
representation letters as Ernst & Young LLP may require of Osborn as a condition
to its execution of any required accountants' consents
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necessary in connection with any filing by Mergeco with the SEC or in connection
with the delivery of any "comfort" letters requested by Mergeco's financing
sources and (b) shall furnish to Mergeco all financial statements (audited and
unaudited) and other information in the possession of Osborn or its
representatives or agents as Mergeco shall reasonably determine is necessary or
appropriate for the preparation of such offering documents, registration
statements or filings. Mergeco will indemnify and hold harmless Osborn and its
officers, directors and controlling persons against any and all claims, losses,
liabilities, damages, costs or expenses (including reasonable attorneys' fees
and expenses) that may arise out of or with respect to the efforts by Mergeco to
finance the transactions contemplated hereby, including, without limitation, any
registration statement, prospectus, offering documents and other filings related
thereto; provided, however, that subject to the limitations and provisions of
this Agreement, nothing herein shall prevent Mergeco from asserting any claim
for breach of representation or warranty under this Agreement.
4.4. Compliance With Station Licenses. Osborn shall cause the Stations
to be operated in all material respects in accordance with the Station Licenses
and all applicable rules and regulations of the FCC and in compliance in all
material respects with all other applicable laws, regulations, rules and orders.
Osborn shall use its commercially reasonable efforts not to cause or permit any
of the Station Licenses to expire or be surrendered, adversely modified or
terminated. Osborn shall file or cause to be filed with the FCC all applications
(including license renewals) or other documents required to be filed in
connection with the operation of the Stations. In addition, if requested by
Mergeco and at Mergeco's expense, Osborn shall file or cause to be filed with
the FCC applications for new, specifically identified frequencies that may be
useful in connection with the operation of the Stations. Should the FCC
institute any proceedings for the suspension, revocation or adverse modification
of any of the Station Licenses, Osborn will use its commercially reasonable
efforts to promptly contest such proceedings and to seek to have such
proceedings terminated in a manner that is favorable to the Stations. Osborn
will use its commercially reasonable efforts to maintain the FCC construction
permits (if any) listed in Schedule 2.1(g) in effect until the applicable
construction projects are complete and to diligently prosecute all pending FCC
applications listed in Schedule 2.1(g). If Osborn (or its FCC counsel) receives
an administrative or other order or notification relating to any violation or
claimed violation of the rules and regulations of the FCC, or of any other
Governmental Entity, that could affect Osborn's ability to consummate the
transactions contemplated hereby, or should Osborn (or its FCC counsel) become
aware of any fact relating to the qualifications of Osborn that reasonably could
be expected to cause the FCC to withhold its consent to the transfer of control
of the Station Licenses, Osborn shall promptly notify Mergeco in writing and use
its commercially reasonable efforts to take such steps as may be necessary to
remove any such impediment to the transactions contemplated by this Agreement.
4.5. Notification of Certain Matters. Osborn shall give prompt written
notice to Mergeco of (a) the occurrence, or failure to occur, of any event of
which it becomes aware that has caused or that would be likely to cause any
representation or warranty of Osborn contained in this Agreement to be untrue or
inaccurate (in any material respect for any representation or warranty not
already qualified for materiality) at any time from the date hereof to the
Closing Date, (b) the failure of Osborn to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (c) the occurrence of a Station Event (as defined in
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Section 8.1) and (d) the occurrence of any threat by any officer of Osborn or
any of its subsidiaries or any General Manager, Station Manager, General Sales
Manager or Programming Director of a Station to resign or otherwise terminate
their employment or independent contractor relationship with Osborn or its
subsidiaries. No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder.
4.6. Third Party Consents. After the date hereof and prior to the
Closing, Osborn shall use its commercially reasonable efforts to obtain the
written consent from any party to an agreement or instrument identified in
Schedule 2.1(o) which is required to permit the consummation of the transactions
contemplated hereby.
4.7. Frank D. Osborn Employment Agreement. Immediately prior to the
Effective Time, Osborn hereby agrees to execute and deliver an employment
agreement to Frank D. Osborn in substantially the form of Exhibit B attached
hereto.
ARTICLE V
COVENANTS OF MERGECO
5.1. Notification of Certain Matters. If Mergeco (or its FCC counsel)
receives an administrative or other order or notification relating to any
violation or claimed violation of the rules and regulations of the FCC, or of
any Governmental Entity, that could affect Mergeco's ability to consummate the
transactions contemplated hereby, or should Mergeco (or its FCC counsel) become
aware of any fact relating to the qualifications of Mergeco that reasonably
could be expected to cause the FCC to withhold its consent to the transfer of
control of the Station Licenses, Mergeco shall promptly notify Osborn thereof
and shall use its commercially reasonable efforts to take such steps as may be
necessary to remove any such impediment to the transactions contemplated by this
Agreement. In addition, Mergeco shall give to Osborn prompt written notice of
(a) the occurrence, or failure to occur, of any event of which it becomes aware
that has caused or that would be likely to cause any representation or warranty
of Mergeco contained in this Agreement to be untrue or inaccurate at any time
from the date hereof to the Closing Date, and (b) the failure of Mergeco, or any
officer, director, employee or agent thereof, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder. No such notification shall affect the representations
or warranties of the parties or the conditions to their respective obligations
hereunder.
5.2. Commitment Letter. On or before September 3, 1996, Mergeco shall
deliver to Osborn a binding commitment letter from Hicks, Muse, Tate & Furst
Equity Fund III, L.P., a Delaware limited partnership ("Fund III"), to provide
financing in an amount of $27.2 million to provide Mergeco a portion of the
funds necessary to enable Mergeco to consummate the transactions contemplated
hereby. Fund III shall at such time have subscription commitments for
unallocated capital equal to at least its committed amount and there shall be no
restrictions on Fund III's ability to call such capital.
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ARTICLE VI
MUTUAL COVENANTS
6.1. Application for Commission Consent. By the tenth business day
after the date hereof, Osborn and Mergeco will join in one or more applications
filed with the FCC requesting the FCC's written consent to the transfer of
control of the Station Licenses pursuant to this Agreement (the "Applications").
The parties will take all proper steps reasonably necessary (a) to diligently
prosecute the Applications and (b) to obtain the Commission's determination that
the grant of each Application will serve the public interest, convenience and
necessity (the "Commission Consent"). The failure by either party to timely file
or diligently prosecute its portion of any Application shall be a material
breach of this Agreement.
6.2. Control of Stations. This Agreement will not be consummated until
after the Commission Consents with respect to the Applications referred to in
Section 6.1 are granted without any material adverse conditions not customarily
imposed on the grant of such applications and have become Final Orders. "Final
Order" means an order, action or decision of the FCC (without the inclusion of
any material adverse conditions not customarily imposed with respect to such
consents) that has not been reversed, stayed, enjoined, annulled or suspended
and as to which (a) no timely request for stay, appeal, petition for
reconsideration, application for review, or reconsideration by the FCC on its
own motion is pending and (b) the time for filing any such request, appeal,
petition or application, or for reconsideration by the FCC on its own motion,
has expired. Between the date of this Agreement and the Closing Date, Mergeco
will not directly or indirectly control, supervise or direct the operation of
the Stations. Further, between the date of this Agreement and the Closing Date,
Osborn shall, directly or indirectly, supervise or control the operation of the
Stations. Such operation shall be the sole responsibility of Osborn.
6.3. Other Governmental Consents. Promptly following the execution of
this Agreement, the parties shall proceed to prepare and file with the
appropriate governmental authorities (other than the FCC) such requests, reports
or notifications as may be required in connection with this Agreement, and shall
diligently and expeditiously prosecute, and shall cooperate fully with each
other in the prosecution of, such matters. Without limiting the foregoing, the
parties shall (a) file promptly with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications and other
information (if any) required to be filed under the HSR Act with respect to the
transactions contemplated hereby and shall use their commercially reasonable
efforts to cause all applicable waiting periods under the HSR Act to expire or
be terminated as of the earliest possible date and (b) make all necessary
filings, and thereafter make any other required submissions with respect to the
transactions contemplated hereby under the Securities Act and the Exchange Act
and the rules and regulations thereunder, including filing the Proxy Statement,
and any other applicable federal or state securities laws.
6.4. Brokers or Finders. Mergeco represents and warrants to Osborn, and
other than Bankers Trust and Robert Chaisson, Osborn represents and warrants to
Mergeco, that no agent,
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broker, investment banker or other or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement. Osborn also
represents and warrants that the aggregate fees payable to Bankers Trust and
Robert Chaisson in connection with any of the transactions contemplated by this
Agreement shall not exceed $1,250,000.
6.5. Additional Agreement. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its commercially reasonable
efforts to do, or cause to be taken all action and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including, entering into the Release (as defined in Section 9.3) as
contemplated by Section 9.3 and, if Mergeco has preferred stock issued and
outstanding prior to the Closing, at the request of Mergeco, amending Sections
1.4 and 1.6 to provide that such preferred stock shall be converted into
preferred stock of the Surviving Corporation and amending the Certificate of
Incorporation of Osborn to the extent necessary to allow such preferred stock to
become preferred stock of the Surviving Corporation.
6.6. Escrow Agreement. The parties hereto who are to be parties to the
Escrow Agreement hereby covenant and agree to execute and deliver the Escrow
Agreement on the date of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation. The respective obligations
of each party to effect the transactions contemplated hereby are subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Merger and this Agreement and
the other transactions contemplated hereby shall have been approved and adopted
by the requisite vote or consent of the stockholders of Osborn.
(b) Other Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained. The Commission Consents shall have become Final Orders.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
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(d) No Action. No action shall have been taken nor any
statute, rule or regulation shall have been enacted by any Governmental Entity
that makes the consummation of the transactions contemplated hereby illegal.
7.2. Conditions to Obligation of Mergeco. The obligation of Mergeco to
effect the Merger and the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
Mergeco:
(a) Representations and Warranties. The representations and
warranties of Osborn set forth in this Agreement shall be true and correct (in
all material respects for any representation or warranty not already qualified
for materiality) as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (unless otherwise limited to the date
of this Agreement), and Mergeco shall have received a certificate signed on
behalf of Osborn by the chief executive officer or by the chief financial
officer to such effect with respect to Osborn.
(b) Performance of Obligations. Osborn shall have performed in
all material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date, and Mergeco shall have received a
certificate signed on behalf of Osborn by the chief executive officer or by the
chief financial officer to such effect.
(c) Consents Under Agreements. Mergeco shall have been
furnished with evidence reasonably satisfactory to it of the consent or approval
of each person that is a party to a contract or agreement identified in Schedule
2.1(o) whose consent or approval shall be required in order to permit the
consummation of the transactions contemplated hereby.
(d) Legal Opinions. Mergeco shall have received from (i) Paul,
Weiss, Rifkind, Wharton & Garrison, counsel to Osborn, and (ii) Haley, Bader &
Potts, special FCC counsel to Osborn, one or more opinions dated the Closing
Date, in substantially the forms attached as Exhibits D and E hereto, which
opinions shall expressly provide that they may be relied upon by Mergeco's
lenders, underwriters or other sources of financing with respect to the
transactions contemplated hereby.
(e) Subscription. Concurrently with the execution of this
Agreement, Frank D. Osborn shall have entered into a Subscription Agreement in
substantially the form of Exhibit C attached hereto and thereby subscribed for
one share of the common stock, par value $0.01 per share, of the Parent in
exchange for each share of Common Stock held of record by him. The closing
contemplated by the Subscription Agreement shall have occurred immediately prior
to the Effective Time.
(f) Options and Warrants. Osborn shall have obtained the
consent of each holder of Options or Warrants, as applicable, to the settlement
of such holder's Options or Warrants pursuant to the terms of Sections 1.7 and
1.8, respectively.
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(g) Closing Deliveries. All documents, instruments,
certificates or other items required to be delivered by Osborn pursuant to
Section 8.2 shall have been delivered.
(h) Frank D. Osborn Employment Agreement. Osborn shall have
executed and delivered the employment agreement to Frank D. Osborn as required
by Section 4.7.
(i) Fees and Expenses. The aggregate fees and expenses payable
to Alex. Brown, Bankers Trust and Robert Chaisson which have been incurred in
connection with any of the Transactions contemplated by this Agreement, shall
not have exceeded $2,075,000.
7.3. Conditions to Obligations of Osborn. The obligation of Osborn to
effect the Merger and the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
Osborn:
(a) Representations and Warranties. The representations and
warranties of Mergeco set forth in this Agreement shall be true and correct (in
all material respects for any representation or warranty not already qualified
for materiality) as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, and Osborn shall have received a
certificate signed on behalf of Mergeco by the chief executive officer or by the
chief financial officer of Mergeco to such effect.
(b) Performance of Obligations of Mergeco. Mergeco shall have
performed in all material respects the obligations required to be performed by
it under this Agreement prior to the Closing Date, and Osborn shall have
received a certificate signed on behalf of Mergeco by the chief executive
officer or by the chief financial officer of Mergeco to such effect.
(c) Legal Opinions. Osborn shall have received from (i) Vinson
& Elkins L.L.P., counsel to Mergeco, and (ii) Fisher, Wayland, Cooper & Leader,
special FCC counsel to Mergeco, opinions dated the Closing Date, in
substantially the forms attached hereto as Exhibits F and G.
(d) Closing, Deliveries. All documents and instruments
required to be delivered by Mergeco pursuant to Section 8.2 shall have been
delivered.
ARTICLE VIII
CLOSING
8.1. Closing. The closing of the Merger (the "Closing") will take place
at the offices of Vinson & Elkins L.L.P., Dallas, Texas, at 10:00 a.m., local
time, or at such other place and time as Mergeco and Osborn may agree, subject
to the satisfaction or waiver of the conditions set forth in Article VII, on or
before the 10th business day after the Commission Consent has become a Final
Order, upon five business days' prior written notice, given within the first 5
business days after the Commission Consent has become a Final Order, from
Mergeco to Osborn of the date on which the Closing shall occur (the "Closing
Date"); provided, however, that in no event shall the Closing occur
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prior to February 20, 1997. Notwithstanding the foregoing, (a) in the case of a
Trading Event, a Banking Event or a Station Event (in each case as defined
below), (i) if the Cessation Date (as defined below) is less than 60 days after
the Event Date (as defined below), Mergeco, in its discretion, may extend the
Closing Date to a date not later than the 30th day after the Cessation Date,
(ii) if the Cessation Date is more than 60, but less than 90, days after the
Event Date, Mergeco, in its discretion, shall elect on the first to occur of the
10th business day after the Cessation Date or the 90th day (or, if not a
business day, the next business day) after the Event Date (the "Election Date")
to either (A) close the Merger on the later to occur of the 5th business day
after the Election Date or the 90th day (or, if not a business day, the next
business day) after the Event Date or (B) terminate this Agreement, or (iii) if
the Cessation Date has not occurred by the 90th day after the Event Date, then
on the 90th day (or, if not a business day, the next business day) after the
Event Date Mergeco, in its discretion, shall elect to close the Merger on the
5th business day thereafter or terminate this Agreement, (b) in the case of a
Conflict Event, Mergeco, in its discretion, may only extend the Closing Date to
a date not to exceed the 90th day after the Event Date, (c) if a Cure Period (as
defined in Section 9.1(b)(i)) has not ended on or before the Closing Date, the
Closing Date shall be extended to the end of the Cure Period, and (d) if the
Closing does not occur within 20 days after the date of the Final Order, the
parties hereby agree to request approval from the FCC to extend the Closing so
that the Closing contemplated hereunder will not violate any FCC rules or
regulations. For purposes of this Agreement, a "Trading Event" shall mean that
trading generally in securities on the New York Stock Exchange shall have been
suspended or materially limited; a "Banking Event" shall mean that a general
moratorium on commercial banking activities in New York, New York shall have
been declared by any federal or state authority; a "Conflict Event" shall mean
the occurrence of any major armed conflict involving a substantial participation
by the armed forces of the United States of America; a "Station Event" shall
mean any act of nature, calamity or casualty (including but not limited to
fires, floods, earthquakes and storms) that has caused one or more Stations
representing an aggregate of 3% of the consolidated gross revenues of Osborn for
the last full 12 calendar months not to be operating in compliance with its or
their respective Station License(s); an "Event Date" shall mean the date on
which a Trading Event, Banking Event, Conflict Event or a Station Event occurs;
and a "Cessation Date" shall mean the date on which a Trading Event, Banking
Event, Conflict Event or a Station Event ends. Pro forma adjustments shall be
made for purposes of calculating gross revenues for the 12-month period
specified in the definition of "Station Event" to (i) eliminate the gross
revenues of any Station sold during such 12-month period and (ii) with respect
to any radio broadcast station acquired during such 12-month period, to assume
that such station was acquired at the beginning of such 12-month period and
include the gross revenues of such station for the full 12-month period.
8.2. Actions to Occur at Closing.
(a) At the Closing, Mergeco shall deliver to Osborn the
following:
(i) the certificates in Section 7.3(a) and (b);
and
(ii) the opinions of counsel in Section 7.3(c).
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(b) At the Closing, Osborn shall deliver to Mergeco the
following:
(i) the certificates described in Section 7.2(a)
and (b); and
(ii) the opinions of counsel in Section 7.2(d).
(c) At the Closing, Mergeco shall receive from Osborn an
affidavit described in Section 1445(b)(3) of the Code.
(d) At the Closing, the Certificate of Merger shall be signed
by the parties and filed with the Secretary of State of the State of Delaware.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated prior to the
Closing:
(a) by mutual consent of Mergeco and Osborn;
(b) by either Mergeco or Osborn:
(i) if there shall have been any breach of any
representation or warranty, or any material breach of any covenant or agreement,
on the part of Mergeco, on the one hand, or Osborn, on the other hand, set forth
in this Agreement which breach shall not have been cured within twenty (20) days
(the "Cure Period") following receipt by the breaching party of written notice
of such breach;
(ii) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and nonappealable;
(iii) if, for any reason, the FCC denies or dismisses
any of the Applications and the time for reconsideration or court review under
the Communications Act with respect to such denial or dismissal has expired and
there is not pending with respect thereto a timely filed petition for
reconsideration or request for review;
(iv) if, for any reason, any of the Applications is
designated for an evidentiary hearing by the FCC;
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(v) if this Agreement and the transactions
contemplated hereby, when presented to the holders of Common Stock for their
consideration, whether by vote or by consent, shall fail to receive the
requisite vote or consent for approval and adoption by the holders of Common
Stock; or
(vi) if the Closing shall not have occurred by the
later of the first anniversary date of this Agreement, or the date to which the
Closing Date is extended pursuant to the second sentence of Section 8.1;
provided, however, that the right to terminate this Agreement under this clause
(vi) shall not be available to any party whose breach of this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date; or
(c) by Mergeco:
(i) with respect to a Trading Event, Banking Event,
or a Station Event, at its option, as provided in the second sentence of Section
8.1;
(ii) if the FCC grants any of the Applications with
any material adverse conditions not generally imposed on grants of such
applications and the time for reconsideration or court review under the
Communications Act with respect to such material adverse conditions has expired
and there is not pending with respect thereto a timely filed petition for
reconsideration or request for review;
(iii) if (A) the Osborn Board (1) withdraws its
recommendation of this Agreement or the Merger (whether or not under the
circumstances permitted by this Agreement) or shall have resolved to do so or
(2) shall have recommended to the stockholders of Osborn any Business
Combination Transaction (as defined in Section 9.2), whether or not in the
circumstances under which Osborn has a right to terminate this Agreement
pursuant to Section 9.1(d)(i) of this Agreement, or resolved to do so or (B) a
tender offer or exchange offer for 50% or more of the outstanding shares of
capital stock of Osborn is commenced (other than by Osborn or its affiliates)
and the Osborn Board fails to recommend against the stockholders of Osborn
tendering their shares into such tender offer or exchange offer; or
(iv) if Osborn shall fail to perform its obligations
under Section 8.2; or
(d) by Osborn:
(i) by Osborn if, prior to the receipt of the
requisite vote or consent for approval and adoption by the holders of Common
Stock of this Agreement and the transactions contemplated hereby, in the
exercise of its good faith judgment (subject to Section 4.1) as to its fiduciary
duties to its stockholders under applicable law, the Osborn Board determines
that such termination is required by such fiduciary duties by reason of a
proposal that either constitutes a Business Combination Transaction or may
reasonably be expected to lead to a Business Combination Transaction on terms
more favorable to the stockholders of Osborn than the Merger and which has a
reasonable prospect of being consummated in accordance with its terms (such
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determination being based on consultations with Alex. Brown and the opinion of
its independent legal counsel that such termination is required in order for the
Osborn Board not to breach its fiduciary duties to stockholders imposed by
applicable law) (a "Business Combination Transaction Proposal"); provided that
Osborn has provided Mergeco with at least 48 hours prior written notice of its
intent to so terminate this Agreement (together with a summary of the material
terms of such Business Combination Transaction Proposal); and provided further
that any termination of this Agreement by Osborn pursuant to this Section
9.1(d)(i) shall not be effective until Osborn has made payment of the
Alternative Proposal Fee (as hereinafter defined) and the Acquiror Expenses (as
hereinafter defined) as required by Section 9.2 hereof; or
(ii) if Mergeco shall fail to perform any of its
obligations under Section 8.2.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents or other
representatives whether prior to or after the execution of this Agreement.
Notwithstanding anything in the foregoing to the contrary, no party that is in
material breach of this Agreement shall be entitled to terminate this Agreement
except with the consent of the other parties hereto.
9.2. Fees and Expenses. Osborn shall pay Mergeco a fee (an "Alternative
Proposal Fee") of $3,750,000 if this Agreement is terminated pursuant to Section
9.1(c)(iii) or simultaneously with any termination of this Agreement pursuant to
Section 9.1(d)(i). As used herein, the term "Business Combination Transaction"
shall mean any of the following involving Osborn: (a) any merger, consolidation,
share exchange, business combination or other similar transaction (other than
the Merger); (b) any sale, lease, exchange, transfer or other disposition (other
than a pledge or mortgage) of 50% or more of the assets of Osborn and its
subsidiaries in a single transaction or series of related transactions; or (c)
the acquisition by a person or entity or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership of 35% or more of the shares of Common
Stock, whether by tender offer, exchange offer or otherwise.
9.3. Effect of Termination. In the event of termination of this
Agreement by either Osborn or Mergeco as provided in Section 9.1, this Agreement
shall forthwith become void, the Merger shall be abandoned and there shall be no
liability on the part of Osborn or Mergeco of any kind whatsoever, except (i)
with respect to Section 9.2 which shall continue to apply in accordance with its
terms and (ii) each party shall remain liable for a breach of this Agreement.
Termination of this Agreement shall have no effect on the rights and obligations
of the parties under the Confidentiality Agreement. In the event that Osborn
terminates this Agreement under Section 9.1(b)(i), the parties agree and
acknowledge that Osborn will suffer damages that are not practicable to
ascertain at the time of execution of this Agreement. Accordingly, Osborn and
Mergeco agree that, in such event, Osborn shall be entitled to the sum of
$5,000,000 as liquidated damages. The parties agree that the foregoing
liquidated damages are reasonable considering all the circumstances
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existing as of the date hereof and constitute the parties' good faith estimate
of the actual damages reasonably expected to result from the termination of this
Agreement by Osborn pursuant to Section 9.1(b)(i). Osborn agrees that, to the
fullest extent permitted by law, the right to payment of the $5,000,000 as
liquidated damages under this Section 9.3 shall be its sole and exclusive remedy
if the Closing does not occur with respect to any damages whatsoever that Osborn
may suffer or allege to suffer as a result of any claim or cause of action
asserted by Osborn relating to or arising from breaches of the representations,
warranties or covenants of Mergeco contained in this Agreement and to be made or
performed at or prior to the Closing; provided that as a condition to payment,
and upon receipt, of liquidated damages under this Section 9.3, Osborn hereby
(a) irrevocably and unconditionally releases, acquits, and forever discharges
Mergeco, Parent and their respective successors, assigns, employees, agents,
stockholders, partners, subsidiaries, parent companies and other affiliates
(corporate or otherwise) (the "Released Parties") of and from any and all
claims, demands, causes of action, or liabilities of any kind whatsoever,
whether known or unknown, matured or unmatured, suspected or unsuspected,
liquidated or unliquidated, absolute or contingent, direct or derivative,
against the Released Parties, including, without limitation, any claim, demand,
cause of action, or liability arising out of, based upon, resulting from or
relating to the negotiation, execution, performance, breach or otherwise related
to or arising out of this Agreement or any agreement entered into in connection
herewith or related hereto, and (b) agrees to deliver a Release (herein so
called) in the form of Exhibit L attached hereto, to Mergeco and Parent.
ARTICLE X
GENERAL PROVISIONS
10.1. Non-Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement shall terminate at the
Effective Time. Except for those covenants and agreements which are fully
performed on or prior to the Effective Time, all covenants and agreements in
this Agreement shall survive the Effective Time indefinitely.
10.2. Knowledge. Wherever reference is made in this Agreement to a
particular statement being "to the knowledge of Osborn" (or any correlative
phrase), such phrase shall be deemed to include the actual knowledge of any
officer of Osborn or its subsidiaries, and the General Managers and/or Station
Managers and Chief Engineers of each of the Stations.
10.3. Amendment and Modification. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after the approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of Osborn, no amendment may be made that
would reduce the amount or change the type of consideration into which each
share of Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
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10.4. Waiver of Compliance. Any failure of Mergeco on the one hand, or
Osborn, on the other hand, to comply with any obligation, covenant, agreement or
condition contained herein may be waived only if set forth in an instrument in
writing signed by the party or parties to be bound thereby, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any other failure.
10.5. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of applicable law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
10.6. Expenses and Obligations. Except as otherwise expressly provided
in this Agreement or as provided by law, all costs and expenses incurred by the
parties hereto in connection with the consummation of the transactions
contemplated hereby shall be borne solely and entirely by the party which has
incurred such expenses. In the event of a dispute between the parties in
connection with this Agreement and the transactions contemplated hereby, each of
the parties hereto hereby agrees that the prevailing party shall be entitled to
reimbursement by the other party of reasonable legal fees and expenses incurred
in connection with any action or proceeding.
10.7. Parties in Interest. This Agreement shall be binding upon and,
except as provided below, inure solely to the benefit of each party hereto and
their successors and assigns, and nothing in this Agreement, except as set forth
below, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
10.8. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Mergeco or Parent, to
OCC Acquisition Company, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart
Facsimile: (214) 740-7313
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<PAGE> 89
with a copy to
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Michael D. Wortley
Facsimile: (214) 220-7716
(b) If to Osborn,
Osborn Communications Corporation
130 Mason Street
Greenwich, Connecticut 06830
Attn: Frank D. Osborn
Facsimile: (203) 629-1749
with a copy to
Paul, Weiss, Rifkind, Wharton & Garrison
1385 Avenue of the Americas
New York, New York 10019
Attn: Robert M. Hirsh
Facsimile: (212) 757-3990
10.9. Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The table of contents, if any, and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes," or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
10.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
10.11. Entire Agreement. This Agreement (which term shall be deemed to
include the Confidentiality Agreement referred to in Section 4.2(a), the
exhibits and schedules hereto and the other certificates, documents and
instruments delivered hereunder) constitutes the entire agreement of the parties
hereto and supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof. There are no
representations or
41
<PAGE> 90
warranties, agreements or covenants other than those expressly set forth in this
Agreement (as so defined).
10.12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. ANY SUIT OR PROCEEDING
BROUGHT HEREUNDER SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
LOCATED IN DELAWARE.
10.13. Public Announcements. (a) Mergeco and Osborn shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation and (b) prior to the Effective Time, Osborn
will not issue any other press release or otherwise make any public statements
regarding its business, except as may be required by applicable law or any
listing agreement with the National Association of Securities Dealers, Inc. to
which Osborn is a party.
10.14. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that (a)
upon notice to Osborn and without releasing Mergeco from any of its obligations
or liabilities hereunder, Mergeco may assign or delegate any or all of its
rights or obligations under this Agreement to any affiliate thereof, and (b)
nothing in this Agreement shall limit Mergeco's ability to make a collateral
assignment of its rights under this Agreement to any institutional lender that
provides funds to Mergeco without the consent of Osborn. Osborn shall execute an
acknowledgment of such assignment(s) and collateral assignments in such forms as
Mergeco or its institutional lenders may from time to time reasonably request;
provided, however, that unless written notice is given to Osborn that any such
collateral assignment has been foreclosed upon, Osborn shall be entitled to deal
exclusively with Mergeco as to any matters arising under this Agreement or any
of the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding on Mergeco's assigns. Nothing in this Agreement shall prevent the
Parent from assigning its interest in Mergeco to an affiliate of the Parent.
10.15. Further Assurances. At the Closing or from time to time
thereafter, the Surviving Corporation shall execute and deliver such other
instruments of assignment, transfer and delivery and shall take such other
actions as the other reasonably may request in order to consummate, complete and
carry out the transactions contemplated by this Agreement.
10.16. Director, Officer and Stockholder Liability. The directors,
officers and stockholders of Mergeco and the directors, officers and
stockholders of the Parent shall not have any personal liability for any
liabilities arising under this Agreement. The directors, officers and
stockholders of Osborn and its subsidiaries shall not have any personal
liability for any liabilities arising under this Agreement.
10.17. Certain Definitions. For purposes of this Agreement, the term:
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(a) "affiliate" of a specified person means a person who,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a
person who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote pursuant to
any agreement, arrangement or understanding, (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such person or any of its
affiliates or associates or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any such shares, or (iv)
pursuant to Section 13(d) of the Exchange Act and any rules or regulations
promulgated thereunder;
(c) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized to close in New York, New York.
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, limited
liability company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or other legal entity or government, political
subdivision, agency or instrumentality of a government; and
(f) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns or
has rights to acquire, directly or indirectly, 50% or more of the capital stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
(g) "Voting Agreement" shall mean the Voting Agreement in
substantially the form of Exhibit H hereto dated as of even date herewith, by
and among Mergeco and the stockholders of Osborn named therein.
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<PAGE> 92
IN WITNESS WHEREOF, Mergeco, Osborn, and the Parent have caused this
Agreement to be signed, all as of the date first written above.
MERGECO:
OCC ACQUISITION COMPANY, INC.
/s/ Eric C. Neuman
____________________________________
By: Eric C. Neuman
Its: President
OSBORN:
OSBORN COMMUNICATIONS CORPORATION
/s/ Frank D. Osborn
____________________________________
By: Frank D. Osborn
Its: President
PARENT:
OCC HOLDING CORPORATION
/s/ Eric C. Neuman
____________________________________
By: Eric C. Neuman
Its: President
<PAGE> 93
APPENDIX B
July 23, 1996
The Board of Directors
Osborn Communications Corporation
130 Mason Street
Greenwich, CT 06830
Dear Sirs:
Osborn Communications Corporation, Inc., a Delaware corporation
("Osborn" or the "Company"), Capstar Broadcasting Partners, L.P., a Delaware
limited partnership ("Buyer"), OCC Acquisition Company, Inc., a Delaware
corporation and a wholly-owned subsidiary of Buyer ("Mergeco"), and OCC Holding
Corporation, a Delaware corporation ("Parent") which holds all of the
outstanding capital stock of Mergeco have entered into an Agreement and Plan of
Merger dated as of July 23, 1996 (the "Agreement"). Pursuant to the Agreement,
the implementation of which is contingent on approval by Osborn stockholders,
Mergeco will merge with and into Osborn (the "Merger") through the acquisition
of each share of issued and outstanding Osborn common stock (the "Common Stock")
for $15.375 in cash. You have requested our opinion as to whether the
consideration to be received by the holders of Osborn Common Stock, pursuant to
the Agreement, is fair from a financial point of view, to such holders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of
its investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of Osborn
in connection with the Merger and will receive a fee for our services, which fee
is contingent upon the consummation of the Merger. We have also, from time to
time, provided other investment banking services to Osborn. Alex. Brown
regularly publishes research reports regarding the broadcasting industry and the
businesses and securities of publicly owned companies in that industry.
In connection with our opinion, we have reviewed certain publicly
available financial information concerning Osborn, as well as certain internal
financial analyses and other financial information furnished to us by the
Company. We have also held discussions with senior management of Osborn
regarding its businesses and prospects. In addition, we have (i) reviewed the
reported price and trading activity for the Common Stock of Osborn; (ii)
compared certain financial and stock market information for Osborn with similar
information for certain other radio broadcasting companies whose securities are
publicly traded; (iii) reviewed the financial terms of certain recent business
combinations in the radio broadcasting industry; and (iv) performed such other
studies and analyses and considered such other factors as we deemed appropriate.
<PAGE> 94
The Board of Directors
Osborn Communications Corporation
July 23, 1996
We have not independently verified the information described above; and
for purposes of this opinion, we have assumed the accuracy, completeness and
fairness thereof. With specific regard to the information received relating to
the prospects of Osborn, we have assumed that such information reflects the best
currently available judgments and estimates of Osborn management as to the
likely future financial performance of the Company. In addition, we have not
made, been provided with, not relied upon an independent evaluation or appraisal
of the assets of Osborn. Our opinion is based on market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
Our services and the opinion expressed herein were prepared for the use
of the Board of Directors of Osborn and do not, nor are intended to, constitute
a recommendation to the holders of the Osborn Common Stock, as to how they
should vote at the stockholder's meeting in connection with the Merger. At the
request of the Board of Directors of Osborn, but without expanding, nor
intending to expand, the limited use and purpose hereof, we hereby consent to
the inclusion (but only to the extent such inclusion is legally required) of
this opinion as an exhibit to filings required to be made with the Securities
and Exchange Commission or with materials required to be distributed to
stockholders of Osborn in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of
the date of July 22, 1996, the consideration to be received by the holders of
the Osborn Common Stock, pursuant to the Agreement is fair, from a financial
point of view, to such holders.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By: /s/ STEVEN K. FISCHER
Name: Steven K. Fischer
Managing Director
<PAGE> 95
APPENDIX C
APPRAISAL RIGHTS
PROVISIONS OF THE
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 251), 252, 254, 257, 258, 263 or 264 of this title:
(i) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock, which
stock, or depository receipt in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the holders of
the surviving corporation as provided in subsection (f) of sec. 251 of this
title.
(ii) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to
sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
(1) Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
(2) Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as
<PAGE> 96
a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
(3) Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs (i) and (ii) of
this paragraph;
(4) Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a., b., and c. of
this paragraph.
(iii) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under sec. 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation, or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(i) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to take
such action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in favor of
or consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(ii) If the merger or consolidation was approved pursuant to
sec. 228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal rights
on the effective date of the merger or consolidation and that
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appraisal rights are available for any or all of the shares of the constituent
corporation, and shall include in such notice a copy of this section. The notice
shall be sent by certified or registered mail, return receipt requested,
addressed to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from the surviving or
resulting corporation the appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation which
shall, within 20 days after such service, file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware, or such publication
as the Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
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stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest if any, to be paid upon the
amount determined to be the fair value. In deter mining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payments shall be so made to each such stockholder, in the case of
holders of uncertified stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the fees and
expenses of experts, to be charged pro rata against the value of all the shares
entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall
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be dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(i) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation. (Last amended by
Ch. 79, L. '95, eff. 7-1-95.)
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OSBORN COMMUNICATIONS CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
OF OSBORN COMMUNICATIONS CORPORATION
Special Meeting of Stockholders - December 17, 1996
The undersigned stockholder of Osborn Communications Corporation, a
Delaware corporation ("Osborn"), hereby appoints Frank D. Osborn, Thomas S.
Douglas and Michael F. Mangan, and each of them, the lawful attorneys and
proxies of the undersigned, each with several powers of substitution, to vote
all of the shares of common stock of Osborn held of record by the undersigned on
November 8, 1996 at the Special Meeting of Stockholders, or any adjournment or
postponement thereof (the "Special Meeting"), with all the powers the
undersigned would possess if personally present, upon all matters set forth in
the Notice of Special Meeting of Stockholders and the Proxy Statement, each
dated November 14, 1996.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote such shares, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney and
proxy shall be present and acting, then that one shall have and may exercise all
the powers of said attorneys and proxies.
<PAGE> 101
/x/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
OSBORN COMMUNICATIONS CORPORATION
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1:
For Against Abstain
1. The proposal to adopt the Agreement and / / / / / /
Plan of Merger by and among Osborn
Communications Corporation, OCC Holding Corporation and OCC Acquisition
Company, Inc., and the transactions contemplated thereby.
2. In their discretion with respect to any other
matters that may properly come before the
Special Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE HEREIN. IF NO SPECIFICATIONS ARE MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement with respect to the
Special Meeting.
Dated: ________________________, 1996
Please sign as name(s) appear on this proxy. If a joint account, each joint
owner must sign. If signing for a corporation or a partnership or as agent,
attorney or fiduciary, indicate the capacity in which you are signing.
- --------------------------------------------------------
Signature(s)
Mark box at right if comments or address change have / /
been noted on the reverse side of this card.
- --------------------------------------------------------
DETACH CARD DETACH CARD
