AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OMNI MULTIMEDIA GROUP, INC.,
OMNI RESOURCES CORPORATION - WEST,
AND
CUSTOM SOFTWARE TURNKEY MANUFACTURING, INC.
Dated as of March 1, 1997
TABLE OF CONTENTS
PAGE
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ARTICLE I..................................................................1
DEFINITIONS................................................................1
1.01. Definitions.......................................................1
ARTICLE II.................................................................6
THE MERGER.................................................................6
2.01. Approval of Merger................................................6
2.02. Plan of Merger....................................................6
ARTICLE III...............................................................11
CLOSING...................................................................11
3.01. Closing Date.....................................................11
3.02. CSTM Closing Documents...........................................11
3.03. Documents to be Delivered by West and OMG at the Closing.........11
3.04. CSTM Stockholders Closing Documents..............................11
ARTICLE IV................................................................11
REPRESENTATIONS AND WARRANTIES OF CSTM....................................11
4.01. Corporate Existence and Power....................................12
4.02. Corporate Authorization..........................................12
4.03. Governmental Authorization; Consents.............................12
4.04. Non-Contravention................................................12
4.05. Capitalization; Subsidiaries.....................................13
4.06. Financial Statements.............................................13
4.07. Absence of Certain Changes.......................................13
4.08. Property and Equipment...........................................15
4.09. No Undisclosed Material Liabilities..............................16
4.10. Litigation.......................................................16
4.11. Material Contracts...............................................16
4.12. Insurance Coverage...............................................17
4.13. Compliance with Laws; No Defaults................................18
4.14. Finders, Fees....................................................18
4.15. Intellectual Property............................................18
4.16. Inventories......................................................20
4.17. Receivables......................................................20
4.18. Taxes............................................................20
4.19. Employees........................................................21
4.20. Environmental Compliance.........................................21
4.21. Customers and Suppliers..........................................23
4.22. Transactions with Affiliates.....................................23
4.23. Other Information................................................23
4.24. Intercompany Arrangements........................................24
4.25. Transactional Expenses...........................................24
4.26. Schedules........................................................24
ARTICLE V.................................................................24
REPRESENTATIONS AND WARRANTIES OF WEST AND OMG............................24
5.01. Organization and Existence.......................................24
5.02. Corporate Authorization..........................................24
5.03. Governmental Authorization.......................................25
5.04. Non-Contravention................................................25
5.05. Finders' Fees....................................................25
5.06. Litigation.......................................................25
5.07. SEC Reports......................................................25
5.08. Status of West...................................................26
5.09. OMG Shares.......................................................26
ARTICLE VI................................................................26
COVENANTS OF ALL PARTIES..................................................26
6.01. Commercially Reasonable Efforts..................................27
6.02. Certain Filings..................................................27
6.03. Public Announcements.............................................27
6.04. Tax Free Exchange................................................27
ARTICLE VII...............................................................27
EMPLOYEE BENEFITS
7.01. Employee Benefits Definitions....................................27
7.02. ERISA Representations............................................28
7.03. No Third Party Beneficiaries.....................................29
ARTICLE VIII..............................................................29
CONDITIONS TO CLOSING.....................................................29
8.01. Conditions to the Obligations of Each Party.......................29
8.02. Conditions to Obligation of West and OMG..........................30
8.03. Conditions to Obligation of CSTM..................................31
ARTICLE IX................................................................32
SURVIVAL; INDEMNIFICATION.................................................32
9.01. Survival..........................................................32
9.02. Indemnification...................................................32
9.03. Procedures; No Waiver.............................................33
9.04. Limitation of Liability; Exclusivity of Remedy....................36
9.05. Representative....................................................36
ARTICLE X.................................................................37
TERMINATION...............................................................37
10.01. Grounds for Termination..........................................37
10.02. Effect of Termination............................................38
ARTICLE XI................................................................38
MISCELLANEOUS.............................................................38
11.01. Notices..........................................................38
11.02. Amendments; No Waivers...........................................39
11.03. Expenses.........................................................39
11.04. Successors and Assigns...........................................39
11.05. Governing Law....................................................40
11.06. Counterparts; Effectiveness......................................40
11.07. Entire Agreement.................................................40
11.08. Captions.........................................................40
11.09. Jurisdictions....................................................40
Schedules
Schedule 1.01 Assets
Schedule 4.03 Required Consents
Schedule 4.05 CSTM Stockholders and Conversion Percentage
Schedule 4.06 Financial Statements
Schedule 4.07 Certain Changes
Schedule 4.08 Title Matters
Schedule 4.09 Liabilities
Schedule 4.10 Litigation
Schedule 4.11 Material Contracts
Schedule 4.13 Permits
Schedule 4.15 Intellectual Property
Schedule 4.19 Employees
Schedule 4.21 Environmental Liabilities
Schedule 7.02 Employee Plans
Exhibits
Exhibit A-1 Certificate of Merger - CSTM
Exhibit A-2 Certificate of Merger - West
Exhibit B Agreement of Merger
Exhibit C Articles of Merger
Exhibit D Registration Rights Agreement
Exhibit E Employment Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of the 1st
day of March, 1997, by and among OMNI MULTIMEDIA GROUP, INC., a Delaware
corporation (herein, "OMG"), OMNI RESOURCES CORPORATION - WEST, a Massachusetts
corporation (herein, "West"), and CUSTOM SOFTWARE TURNKEY MANUFACTURING, INC., a
California corporation (herein, "CSTM").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of OMG, West and CSTM deem it
advisable and in the best interest of their respective companies and the
stockholders of each of the respective companies, that West merge with and into
CSTM pursuant to this Agreement and the applicable provisions of the laws of the
state of California and of the Commonwealth of Massachusetts, whereby all of the
issued and outstanding shares of the capital stock of CSTM will be exchanged for
shares of the Common Stock, $0.01 par value per share of OMG, the parent company
of West, in accordance with the terms and conditions contained in this Agreement
(herein, the "Merger"); and
WHEREAS, the respective Boards of Directors of CSTM and West, and the
Board of Directors of OMG, as the sole stockholder of West, have each approved
and adopted this Agreement and Plan of Merger and intend that it qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the foregoing and the various
agreements, undertakings, representations and warranties of the parties set
forth herein below, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"Agreed Customer" means any and all customers of CSTM or West
other than any customers of CSTM or West that were previously customers of
either (a) ▇▇▇▇▇▇▇▇▇ Industries, Inc., a California corporation, at any time
during calendar 1996 and prior to October 5, 1996 and had not been customers of
CSTM during calendar 1996 or (b) any other business which the Surviving
Corporation may acquire or be merged with, and who subsequently became
customers of CSTM after the Closing but had not been customers of CSTM or West
during the period January 1, 1996 through to the day preceding such merger or
acquisition.
"Agreement of Merger" means the agreement containing a summary
of the terms of the Merger, to be signed by the parties hereto, in the form and
substance set forth in Exhibit B hereto.
"Ancillary Agreements" means the Certificates of Merger
attached hereto as Exhibits A-1 and A-2, the Agreement of Merger attached hereto
as Exhibit B, the Articles of Merger attached hereto as Exhibit C, the
Registration Rights Agreement attached hereto as Exhibit D and the Employment
Agreement attached hereto as Exhibit E.
"Articles of Merger" means the summary of certain terms of the
Merger required to be filed with and on a form prescribed by, the Secretary of
State of the Commonwealth of Massachusetts, in the form and substance set forth
in Exhibit C hereto.
"Assets" means any and all assets owned or used by CSTM or
with respect to which CSTM has the right to use in connection with the conduct
of its business, including, without thereby limiting the generality of the
foregoing, the following:
(1) any and all items of equipment, including those listed in
Schedule 1.01 annexed hereto;
(2) any and all items of inventory (including work-in-process and
finished goods inventory) including those listed on Schedule
1.01 annexed hereto;
(3) any and all items of furniture, including those listed on
Schedule 1.01 annexed hereto;
(4) any and all fixtures and leasehold improvements, including
those listed on Schedule 1.01 annexed hereto;
(5) any and all accounts receivable existing as of the Closing
Date;
(6) any and all cash, cash equivalents, deposits and other
negotiable assets of CSTM existing as of the Closing Date;
(7) any and all general intangibles of CSTM, including any and all
Intellectual Property Rights, including those listed on
Schedule 1.01 annexed hereto;
(8) all items of leased equipment, including those shown on those
shown on Schedule 1.01 annexed hereto;
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(9) all customers of CSTM, including those shown on Schedule 1.01
annexed hereto;
(10) any and all good will of CSTM;
(11) any and all telephone numbers for CSTM, including the numbers
listed on Schedule 1.01 annexed hereto;
(12) all pending purchase orders for customers, including those
purchase orders listed on Schedule 1.01 annexed hereto;
(13) the exclusive right to negotiate with and continue to seek to
employ all current employees of CSTM, subject to their right
to refuse such employment; and
(14) any and all motor vehicles of CSTM, including those listed on
Schedule 1.01 annexed hereto.
"Balance Sheet" means the balance sheet of CSTM as of December
31, 1996 referred to in Section 4.06.
"Balance Sheet Date" means January 31, 1996.
"Certificates of Merger" means the Certificates of Approval of
Agreement of Merger for each of CSTM and West in the form and substance of
Exhibits A-1 and A-2 hereto.
"Closing Date" means the date of the Closing.
"Conversion Percentage" means a percentage with respect to
each CSTM Stockholder, as reflected in Schedule 4.05 hereto.
"CSTM" means Custom Software Turnkey Manufacturing, Inc., a
California corporation.
"CSTM Shares" means all outstanding capital stock of CSTM.
"CSTM Stockholders" means the stockholders of CSTM immediately
prior to the effectiveness of the Merger.
"Earn-Out Stock" means a number of shares of Common Stock,
$0.01 par value per share, of OMG, which is to be calculated and delivered as
provided in Sections 2.02.D.(ii) hereinbelow, and adjusted as provided in
Section 2.02.D(iv) hereinbelow.
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"Intellectual Property Right" means any trademark, trade name,
trade dress, service ▇▇▇▇, service name, logo, and corporate name, registration
thereof or application for registration therefor; invention, patent, patent
application, patent disclosure and any related continuation,
continuation-in-part, divisional, reissue, re-examination, certificate of
invention and design patent, patent application, registration and application
for registration; mask work and registration and application for registration
thereof; copyright, copyright registration, application for copyright
registration; and any right to use any of the foregoing which is owned by CSTM.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, restriction or encumbrance of any kind in
respect of such asset.
"Material Adverse Change" means a material adverse change in
(i) the business, assets, condition (financial or otherwise), results of
operations or prospects of CSTM or (ii) the ability of the parties to consummate
the Merger.
"Material Adverse Effect" means a material adverse effect on
(i) the business, assets, condition (financial or otherwise), results of
operations or prospects of CSTM or (ii) the ability of the parties to consummate
the Merger.
"Minimum Stock" means the 100,000 shares of Common Stock, $.01
par value per share, of OMG to be delivered by OMG at the Closing as provided in
Section 2.02.D.(i) hereof.
"Net Sales" means the total of all invoices rendered to
customers of CSTM or West, in accordance with its general accounting standards,
to Agreed Customers, less any amounts included in any invoice for freight,
insurance, taxes, non-customary products sold and services provided in
connection with any invoice which have been provided as a courtesy to the
customer and with respect to which CSTM has made no ▇▇▇▇ up charge (other than
to cover shipping and handling costs), and net of rebates, returns and credits
with respect to such invoices.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"OMG" means Omni MultiMedia Group, Inc., a Delaware
corporation.
"OMG Shares" means the Minimum Stock, the Earn-Out Stock and
the sum of all Additional Stock (plus cash delivered in lieu of any Additional
Stock).
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
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"Registration Rights Agreement" means the Registration Rights
Agreement between OMG and each CSTM Stockholder in the form set forth in Exhibit
B.
"West" means Omni Resources Corporation - West, a
Massachusetts corporation.
"West's Counsel" means the law firm of ▇▇▇▇▇▇ & Wise or
▇'▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
---- -------
Act 5.07
Additional Stock 2.02.D.(v)
Benefit Arrangement 7.01
CERCLA 4.21
Closing 3.01
Code 4.18(a)
CSTM Claims 9.02(b)
CSTM Group 9.02(b)
CSTM Representative 9.03(c)(iii)
Damages 9.02(a)
Delivery Date 2.02.D.(iii)
Earn-Out Period 2.02.D.(ii)
Effective Date 2.02.A.(ii)
Employee Plans 7.01
Environmental Laws 4.21(a)
Environmental Liabilities 4.21(a)
ERISA 7.01
ERISA Affiliate 9.01
Escrow Agent 9.03(b)(v)
Financial Statements 4.06
Hazardous Substance 4.21(a)
Indemnification Price 2.02.D.(iv)
Indemnified Party 9.03(a)
Indemnifying Party 9.03(a)
Merger The first recital hereof
Merger Price 2.02.C.(i)
Multiemployer Plan 7.01
OMG Claims 9.02(a)
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OMG Group 9.02(a)
Participating Stockholder 2.02.D.(v)
Permit 4.13(b)
Plan of Merger 2.01.A.
Regulated Activity 4.21(a)
Returns 4.18(a)
SEC 5.07
SEC Filings 5.07
Surviving Corporation 2.02
Target Price 2.02.D.(v)
Tax 4.18(a)
Taxes 4.18(a)
ARTICLE II
THE MERGER
2.01. Approval of Merger.
A. By CSTM: CSTM hereby represents and warrants that the board
of directors of CSTM has (i) determined that the Merger is in the best interests
of CSTM, (ii) determined that the consideration to be received in the Merger is
fair and reasonable, and (iii) approved the plan of merger contained in Section
2.02 of this Agreement (herein, the "Plan of Merger") and recommended the Plan
of Merger to the CSTM Stockholders. On or before the Closing Date, CSTM shall
take all steps necessary to obtain unanimous approval by the CSTM Stockholders
of the Plan of Merger and the Agreement of Merger in accordance with the laws of
the state of California and the articles of incorporation and by-laws of CSTM.
B. By West and OMG: West and OMG hereby represent and warrant
that the board of directors of West, and the board of directors of OMG as the
sole stockholder of West, have approved the Merger in accordance with the laws
of the laws of their respective states of incorporation and their respective
articles of organization and by-laws.
2.02. Plan of Merger.
A. Structure and Consummation of Merger; Effective Date.
(i) On the Effective Date (defined hereinbelow), West shall be
merged with and into CSTM, in accordance with the applicable provisions of
Chapter 11 of the General Corporation Law of the State of California, and the
separate existence of West shall thereupon cease. CSTM as the surviving
corporation in the Merger (herein, the "Surviving Corporation") shall continue
its corporate existence under the laws of the State of California. Upon
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consummation of the Merger, all of the assets of each of CSTM and West shall
vest in the Surviving Corporation without further act or deed. The Surviving
Corporation shall assume and be liable for all of the liabilities and
obligations of each of CSTM and West in accordance with the General Corporation
Law of the State of California.
(ii) Subject to the terms and conditions hereof, on the
Closing Date the parties shall cause the Merger to be consummated by delivering
the Agreement of Merger and Certificates of Merger duly executed by CSTM and
West to the Secretary of State for the State of California in accordance with
Section 1103 of the General Corporation Law of the State of California and by
delivering the Articles of Merger duly executed by CSTM and West to the
Secretary of State for the Commonwealth of Massachusetts in accordance with
Massachusetts General Laws, chapter 156B, section 79. The Merger shall become
effective as of the latter of the filing of (1) the Agreement of Merger and the
officers' Certificates of Merger with the Secretary of State of the State of
California, and (2) the Articles of Merger with the Secretary of State for the
Commonwealth of Massachusetts (herein, the "Effective Date").
B. The Surviving Corporation.
(i) Article First of the Articles of Incorporation of the
Surviving Corporation shall be amended as of the Effective Date to read in its
entirety as follows:
The name of this corporation is Omni Resources Corporation West.
(ii) The Articles of Incorporation of CSTM as in effect on the
Effective Date, amended as described in Subsection (i), above, shall be the
Articles of Incorporation of the Surviving Corporation, and the purposes set
forth therein shall be the purposes of the Surviving Corporation.
(iii) The By-Laws of West as in effect on the Effective Date
shall be the By-Laws of the Surviving Corporation.
(iv) The directors and officers of the Surviving Corporation
on the Effective Date, to serve in accordance with the By-Laws of the Surviving
Corporation, shall be as follows:
Directors: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇.
Chief Executive Officer: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President: ▇▇▇▇▇ ▇▇▇▇▇
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Executive Vice President and Chief Financial Officer: ▇▇▇▇▇▇ ▇. ▇▇▇
Treasurer: ▇▇▇▇▇▇ ▇. ▇▇▇
Secretary: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
C. Conversion of Shares. As of the Effective Date, by virtue
of the Merger--
(i) Each of the CSTM Stockholders shall have their respective
shares of CSTM Stock converted into the right to receive their Conversion
Percentage of the Minimum Stock and of the Earn-Out Stock, and the right to
receive their applicable share of Additional Stock or cash in lieu thereof
pursuant to the adjustment mechanisms set forth in Section 2.02.D.(v) and
2.02.(D)(vi), hereinbelow (all of such shares and payments being referred to
collectively as the "Merger Price"), except that in the case of any fractional
shares of OMG's stock, such fraction shall in each case, be rounded down to the
largest whole number of OMG Shares then to be delivered.
(ii) Each outstanding share of common stock of West shall be
converted into one share of fully paid and nonassessable common stock of the
Surviving Corporation.
D. Merger Price. The Merger Price shall be as follows:
(i) The Minimum Stock (which shall be for 100,000 shares),
certificates of which shall be delivered at the Closing to each of the CSTM
Stockholders, subject to the requirements of sections 2.02.F. and 3.04 hereof.
(ii) A number of shares of Earn-Out Stock initially equal to
200,000 times a fraction based on the Net Sales of the Surviving Corporation
during the twelve month period commencing March 1, 1997 and expiring on February
28, 1998 (herein, the "Earn-Out Period"). The numerator of this fraction shall
be the lesser of (y) $3,000,000 or (z) the amount by which Net Sales during the
Earn-Out Period exceeded Net Sales of CSTM for the twelve month period March 1,
1996 through February 28, 1997, and the denominator of which shall be
$3,000,000. OMG agrees to require, at its expense, OMG's certified independent
public accountants to calculate this fraction as soon as practicable following
the conclusion of the Earn-Out Period and to report this fraction (with a
summary of the calculation in reasonable detail) to the CSTM Stockholders and to
OMG as soon as practicable, but in all events no later than May 31, 1998. The
calculation of this fraction by such certified public accountant shall be
conclusive and binding on both OMG and the CSTM Stockholders.
(iii) On or before the tenth (10th) business day following
receipt by OMG of the calculation by its certified independent public
accountants of the fraction applicable to Earn-Out Shares described in subpart
(ii), above, (herein, the "Delivery Date"), OMG shall calculate
8
the number of shares of Earn-Out Stock then due to the CSTM Stockholders. In
addition, OMG shall, within such period, deliver to each of the CSTM
Stockholders who shall theretofore have surrendered their certificates
representing the number of shares of CSTM Stock held by them and who shall have
executed and delivered a copy of the Registration Rights Agreement such CSTM
Stockholder's Conversion Percentage of Earn-Out Stock then due to such CSTM
Stockholder, registered in the name of such stockholder (rounded in each case
down to the largest whole number of Earn-Out Shares).
(iv) The number of shares of Earn-Out Stock determined in
accordance with the provisions of subsection (ii) above, shall be reduced by a
number calculated by (y) dividing the total dollar amount of all OMG Claims for
which a right of indemnification has properly been asserted as of the Delivery
Date, if any, in accordance with the provisions of section 9.03, hereinbelow, by
the greater of six dollars ($6.00) or the average closing price of OMG's stock
during the twenty (20) trading days first following the expiration of the
Earn-Out Period (the greater of such numbers being referred to herein as the
"Indemnification Price"), and (z) rounding such dividend down to the nearest
whole integer. The amount of such reduction shall then be further divided into
two categories. First, the number of shares of Earn-Out Stock representing the
value (at the Indemnification Price) of OMG Claims which shall be undisputed as
among the parties hereto shall permanently reduce the amount of Earn-Out Stock
to be delivered. Second, the remaining balance of the reduction shall be
delivered to and held in escrow by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire until such time as
either (y) the parties hereto shall agree in writing as to the disposition of
such remaining shares or (z) the validity and extent of the OMG Group's right of
indemnification under section 9.02(a) hereof shall have been finally determined
in accordance with the provisions of section 9.03(a) hereof. Following such
final determination, a number of shares of Earn-Out Stock so escrowed and having
a value (at the Indemnification Price) equal to the adjudicated amount of such
OMG Claims shall be returned to OMG and shall constitute an additional and final
reduction in the number of the Earn-Out Shares, and the balance, if any, shall
be distributed to the CSTM Stockholders in proportion to their respective
Conversion Percentages.
(v) With respect to and only with respect to each CSTM
Stockholder who has not sold or transferred any of the OMG Shares delivered to
them pursuant to this Section 2.02.D. as of February 28, 1999 (except for
transfers (a) pursuant to any and all laws governing descent and distribution,
(b) pursuant to any other testamentary bequest, (c) to immediate family member
of any CSTM Stockholder (d) pursuant to gifts to entities having status under
Section 501(c)(3) of the Code, or (e) to any trust of which the CSTM Stockholder
of any of his or her heirs, executors, administrators or permitted donees
(hereunder), is the primary beneficiary, which transfers are as expressly
permitted under Section 11.04 hereinbelow, and any OMG Shares so transferred
shall be treated as owned by the CSTM Stockholder making such transfer for
purposes of this Section 2.02.d.) (herein, a "Participating Stockholder"), each
such Participating Stockholder shall have the right to receive additional
consideration in connection with the Merger, if the average closing price for
OMG stock during the first ten (10) trading days of March, 1999 (herein, the
"Target Price") is less than six dollars ($6.00) per share (adjusted for any
stock
9
dividends, stock splits and similar events) prior to April 1, 1999, calculated
as follows: An amount equal to $6.00 minus the Target Price shall be multiplied
by the total number of OMG Shares owned by each, such Participating Stockholder,
and this resulting sum shall then be divided by the Target Price. This final
number so calculated shall be the number of additional shares of stock to which
such Participating Stockholder shall be entitled (herein, the "Additional
Stock"). Certificates for Shares of all Additional Stock shall be delivered to
each Participating Stockholder on or before April 30, 1999. In the event that
any OMG Shares are held in escrow by the Escrow Agent pursuant to Section 9.3 at
the time of calculation of the number of Additional Shares, if any, that a
Participating Stockholder is entitled to receive pursuant to this Section, then
the Additional Shares issued in connection with such OMG Shares then held in
escrow shall be delivered to the Escrow Agent, to be held in escrow in
accordance with Section 9.3, and such Additional Shares shall be delivered or
paid to such Participating Stockholder at such time as the OMG Shares to which
such Additional Shares relate are released in accordance with such Section 9.3.
(vi) OMG shall have the right to replace all or a portion of
the shares of Additional Stock to be delivered to each Participating Stockholder
with the contemporaneous delivery of the sum of six dollars ($6.00) for each
share not so delivered, by complying with the following conditions: (a) Notice
of such election and of the percentage of Additional Stock to be replaced with
money shall be given to the CSTM Stockholders on or before April 15, 1999; (b)
the ratio of Additional Stock to money to be delivered to each Participating
Stockholder shall be the same; and (c) OMG shall deliver to the CSTM
Stockholders, contemporaneously with its April 15, 1999 notice of election to
replace the number of shares of Additional Stock with money, an opinion of OMG's
regular tax counsel to the effect that the payment of money in lieu of shares of
Additional Stock as elected by OMG will not cause the Merger to lose its status
as a reorganization under Section 368(a)(1)(A) of the Code.
E. Certificates for OMG Shares. Each certificate for Minimum
Stock and for Earn-Out Stock issued to any of the CSTM Stockholders as a part of
the Merger Price shall bear the following legend:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of except in accordance with the
terms thereof and unless registered with the Securities and Exchange
Commission of the United States and the securities regulatory
authorities of certain states or unless an exception from such
registration is available."
In addition, all OMG Shares shall be registered pursuant to the terms and
conditions of the Registration Rights Agreement attached hereto and made a part
hereof as Exhibit B.
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F. Dissenting Shares. Notwithstanding any provision in this
agreement to the contrary, in the event that this Merger has not been approved
unanimously by all of the CSTM Stockholders and West and OMG elect to close this
transaction, then any CSTM Stock in respect of which any of the CSTM
Stockholders properly exercised dissenters rights under the General Corporation
Law of the State of California shall not be converted as provided in Section C
above, and the portion of the Merger Price attributable to such CSTM Stock shall
not be paid or payable unless and until such CSTM Stockholder loses any further
right to pursue dissenters' rights either by wavier or by failure to comply with
applicable statutory procedures. The sole right of any CSTM Stockholder who
exercises and properly pursues dissenters' rights shall be to receive payment
for their respective CSTM Stock as required by California law.
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ARTICLE III
CLOSING
3.01. Closing Date. The closing of the Merger and the transactions
contemplated hereunder (herein, the "Closing") shall take place at the offices
of ▇▇▇▇▇▇ & ▇▇▇▇ in Boston, Massachusetts at 10:00 a.m., Eastern Time on the
28th day of February, 1997, or at such other place, time and date as shall be
agreed upon by all of the parties hereto. On the Closing Date, each of the
conditions precedent to the obligations of the respective parties set forth in
Article VIII, hereof, shall have been satisfied or waived by the party entitled
to require performance of such conditions. All proceedings to be taken and all
documents to be executed and delivered by all parties at the Closing shall be
deemed to have been taken and executed simultaneously, and no proceeding shall
be deemed to have been taken nor any documents executed or delivered until all
have been taken, executed and delivered.
3.02. CSTM Closing Documents. At the Closing CSTM shall deliver to West
(a) the opinion of CSTM's counsel described in Section 8.02(b) hereof, (b) the
certified resolutions required by Section 8.02(c) hereof, (c) the Employment
Agreement required under Section 8.02(c) hereof, (d) the letters of resignation
described in Section 8.02(f) hereof, (e) all of the minute books, stock
certificate books, stock register, documents and seals of CSTM not previously
delivered to West and (f) original signed copies of all Ancillary Agreements. In
addition, CSTM shall deliver to West on the Closing Date the certificates
representing the CSTM Stock owned by any or all of the CSTM Stockholders so that
payment may be made to such CSTM Stockholders as required hereunder.
3.03. Documents to be Delivered by West and OMG at the Closing. At the
Closing, West and OMG shall deliver to CSTM (a) the opinion of West's counsel
described in Section 8.03(b) hereof, (b) original signed copies of all Ancillary
Agreements, and, (c) assuming complete compliance with section 3.04,
certificates for the CSTM Stock.
3.04. CSTM Stockholders Closing Documents. Prior to the receipt of any OMG
Shares, each CSTM Stockholder will deliver all certificates for shares of CSTM
Stock owned by such stockholder and a copy of the Registration Rights Agreement
duly executed by such stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CSTM
CSTM hereby represents and warrants to West and to OMG, upon which
representations and warranties West and OMG shall be entitled to rely regardless
of any investigation by West or OMG of the affairs of CSTM but subject to
section 4.25 hereof, as follows:
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4.01. Corporate Existence and Power. CSTM is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. CSTM is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
make such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
4.02. Corporate Authorization. The execution and delivery by CSTM of this
Agreement and, the performance of its obligations hereunder and the consummation
by CSTM of the transactions contemplated hereby are within CSTM's corporate
powers and have been duly authorized by all necessary corporate action on the
part of CSTM. This Agreement constitutes a valid and binding agreement of CSTM.
4.03. Governmental Authorization; Consents.
(a) The execution and delivery by CSTM of this Agreement and
the performance by it of its obligations hereunder require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, except for the filing of (i) the Certificates of Merger and the
Agreement of Merger with the California Secretary of State and (ii) the Articles
of Merger with the Massachusetts Secretary of State.
(b) Except as set forth on Schedule 4.03, no consent,
approval, waiver or other action by any Person under any contract, agreement,
indenture, lease, instrument or other document to which CSTM is a party or by
which it is bound is required or necessary for the execution and delivery of
this Agreement by CSTM, the performance of its obligations hereunder or the
consummation of the transactions contemplated hereby, except where the failure
to obtain such consent, approval, waiver or other action would not have a
Material Adverse Effect, either individually or in the aggregate.
4.04. Non-Contravention. The execution and delivery by CSTM of this
Agreement, the performance by it of its obligations hereunder, and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene or conflict with the corporate charter or bylaws of CSTM, (ii)
assuming the filing of the Certificate of Merger with the California Secretary
of State, contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to CSTM; (iii) assuming the filing of the Certificate of Merger with
the California Secretary of State, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of CSTM or to a loss of any benefit to which CSTM is entitled under
any provision of any agreement, contract or other instrument binding upon CSTM
or any permit held by CSTM except such defaults, rights and losses which would
not have a Material Adverse Effect, either individually or in the aggregate, on
CSTM, the Assets or the Merger or (iv) assuming the filing
13
of the Certificate of Merger with the California Secretary of State, result in
the creation or imposition of any Lien on any asset of CSTM.
4.05. Capitalization; Subsidiaries. The authorized capital stock of CSTM
consists of 20,000,000 shares of common stock, at no par value. As of the date
hereof, there is issued and outstanding 6,458,382 shares of the common capital
stock of CSTM. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and are owned by the CSTM
Stockholders as listed in Schedule 4.05 hereto and except as set forth in this
Section 4.05, there are no outstanding (i) shares of capital stock, other
securities or phantom or other equity interests of CSTM, (ii) securities of CSTM
convertible into or exchangeable for shares of capital stock or other equity
securities of CSTM or (iii) options or other rights to acquire from CSTM any
capital stock, other equity securities or phantom or other equity interests of
CSTM. CSTM does not have and never has had any subsidiaries or any material
ownership or equity interest in or control of (direct or indirect) any other
Person.
4.06. Financial Statements. CSTM has previously furnished West with a true
and complete copy of (i) the balance sheets of CSTM as of September 30, 1996,
September 30, 1995 and September 30, 1994 and the statements of operations, cash
flows and changes in stockholders' equity of CSTM for the respective fiscal
years then ended, as compiled by ▇▇▇▇▇▇ ▇▇▇▇▇▇, CSTM's in-house accountant, and
(ii) the balance sheet of CSTM as of December 31, 1996 and the statements of
operations, cash flows and changes in stockholders' equity of CSTM for the
interim period then ended (collectively, the "Financial Statements" which are
attached hereto as Schedule 4.06). Each of the consolidated balance sheets
included in the Financial Statements fairly presents in all material respects
the consolidated financial position of CSTM as of its date, and the other
statements included in the Financial Statements fairly present in all material
respects the consolidated results of operations, cash flows and stockholders'
equity, as the case may be, of CSTM for the periods therein set forth, in each
case in accordance with generally accepted accounting principles consistently
applied during the periods involved except as otherwise stated therein and, with
respect to the interim financial statements, for the omission of footnote
disclosures and, to the extent consistent with generally accepted accounting
principles, for normally recurring year-end adjustments.
4.07. Absence of Certain Changes. Except as set forth on Schedule 4.07,
since the Balance Sheet Date, CSTM and the Subsidiaries have conducted their
businesses in the ordinary course consistent with past practices and there has
not been:
(a) any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any CSTM Shares or any repurchase,
redemption or other acquisition
14
by CSTM of any outstanding shares of capital stock or other equity securities
of, or other ownership interests in, CSTM;
(c) any amendment of any outstanding equity security of CSTM;
(d) any incurring, assumption or guarantee by CSTM of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices;
(e) any making of any loan, advance or capital contributions
to or investment in any Person (excluding sales evidenced by any account
receivable and excluding reasonable and customary advances for travel and other
customary reimbursables);
(f) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of CSTM which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(g) any transaction or commitment made, or any contract or
legal agreement entered into, by CSTM relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by CSTM of any contract or other right, in either case, material to CSTM, other
than transactions, commitments, and contracts in the ordinary course of business
consistent with past practices and those contemplated by this Agreement;
(h) any change in any method of accounting or accounting
practice by CSTM;
(i) except as disclosed pursuant to Section 4.19, any (i)
grant of any severance or termination pay to any director, officer or employee
of CSTM, (ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of CSTM, (iii) change in benefits payable under
existing severance or termination pay policies or employment agreements or (iv)
change in compensation, bonus or other benefits payable to directors, officers
or employees of CSTM;
(j) any change in the business or operations or in the manner
of conducting the business or operations of CSTM other than changes in ordinary
course of business;
(k) any mortgage, pledge or subjection of any properties or
assets to any claim, Lien or liability, except claims, Liens of the type
described in Section 4.08.(a);
(l) any write-down of the value of any material inventory, or
write-off of any notes or material accounts receivable or any material portion
thereof as uncollectible, other
15
than valuation reserves established for inventory, notes and receivables in
accordance with generally accepted accounting principles;
(m) any cancellation or release of any other debts or claims,
or waivers of any rights;
(n) any sale, transfer or conveyance of any property or
assets, except in the ordinary course of business consistent with past practice;
(o) any disposition of, or lapse, or other failure to preserve
the exclusive rights of CSTM to any material Intellectual Property Right;
(p) any agreement, whether in writing or otherwise, to take
any action described in this Section 4.07.
4.08. Property and Equipment.
(a) Except as disclosed in Schedule 4.08, CSTM has good title
to all items of assets described in categories (1) through (6), inclusive, and
(14) under the definition of "Assets," free and clear of any and all Liens,
except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established on the Balance Sheet); or
(iii) Other liens which do not materially detract from the
value of such property or assets as now used, or materially
interfere with any present or intended use of such property or
assets.
(b) There are no developments affecting any of such properties
or assets pending or, to the knowledge of CSTM threatened, which might
materially detract from the value of such property or assets, materially
interfere with any present or intended use of any such property or assets or
materially adversely affect the marketability of such properties or assets.
(c) The equipment owned by CSTM has no material defects, is in
good operating condition and repair (ordinary wear and tear excepted), and is
adequate for the uses to which it is being put.
(d) CSTM has a valid and enforceable leasehold interest in all
of the property and assets leased by it.
16
(e) The Assets owned or leased by CSTM, or which it otherwise
has the right to use, constitute all of the assets held for use or used in
connection with the business of CSTM and are generally adequate to conduct such
business as currently conducted.
(f) This Section 4.08 shall not apply to Intellectual Property
Rights.
4.09. No Undisclosed Material Liabilities. Except as set forth in Schedule
4.09, there are no liabilities of CSTM of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(i) liabilities disclosed or provided for in the Balance
Sheet;
(ii) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date; and
(iii) other liabilities which, both individually and in the
aggregate, are not material.
4.10. Litigation. Except as disclosed in Schedule 4.10 there is no action,
suit, investigation or proceeding (or to the knowledge of CSTM, any basis
therefor) pending against, or to the knowledge of CSTM, threatened against, CSTM
or any of its properties or the transactions contemplated hereby before any
court or arbitrator or any governmental body, agency, official or authority that
could reasonably be expected to have a Material Adverse Effect, either
individually or in the aggregate.
4.11. Material Contracts.
(a) Except for agreements, contracts, plans, leases,
arrangements or commitments disclosed in other Schedules to this Agreement or
Schedule 4.11, CSTM is not a party to or subject to:
(i) any lease providing for unpaid annual rentals of $10,000
or more;
(ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets providing for unpaid
annual payments by CSTM of $10,000 or more;
(iii) any partnership, joint venture or other similar
arrangement or agreement or any material license agreement under
which CSTM is the licensee, or any agency, distributor, dealer,
franchise, sales representative or other similar contract or
commitment;
17
(iv) any loan or credit agreements or any instrument
evidencing or related in any way to indebtedness incurred in the
acquisition of any asset, business, company or other entity or
indebtedness for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale, guarantee,
or otherwise, or agreement relating to the mortgaging, pledging or
otherwise placing a lien on any assets of CSTM or any guaranty of
indebtedness or performance of others by CSTM except for any of the
foregoing relating to trade indebtedness incurred in the ordinary
course of business or relating to other indebtedness incurred in the
ordinary course of business in an amount not exceeding $5,000;
(v) any contract or other document that limits the freedom of
CSTM to compete in any line of business or with any Person or in any
area or which would so limit the freedom of CSTM after the Closing
Date;
(vi) any guarantees;
(vii) any contract for personal services or employment
(including without limitation contracts with directors, officers,
employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers) which is either material
and in writing or not in writing and terminable at will;
(viii) any agreement or arrangement providing for the sale of
any of the assets, properties or rights of CSTM (other than in the
ordinary course of business) or for the grant of a preferential
right to purchase any of CSTM's assets, properties or rights or
which required the consent of any third party to the transfer and
assignment of any of its assets, properties or rights; or
(ix) any other agreements, contracts, leases, licenses or
commitments to which CSTM is a party (or under which CSTM may be
obligated or which CSTM or any of its rights, properties or assets
may be subject or bound) and which is material to the financial
condition, results of operations, business, property or prospects of
CSTM or is not made in the ordinary course of business that is
material to CSTM.
(b) Each agreement, contract, plan, lease, arrangement and
commitment disclosed in any schedule to this Agreement or required to be
disclosed pursuant to Section 4.11(a) is a valid and binding agreement of CSTM
and is in full force and effect, and neither CSTM, nor, to the knowledge of
CSTM, any other party thereto is in default in any material respect under the
terms of any such agreement, contract, plan, lease, arrangement or commitment in
any manner that could reasonably be expected to have a Material Adverse Effect,
either individually or in the aggregate.
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4.12. Insurance Coverage. CSTM has furnished to West a list of, and true
and complete copies of, all insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of CSTM. There is no claim by CSTM pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid and CSTM is otherwise in full compliance with
the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing materially similar
insurance coverage) have been in effect since January 1, 1994 and remain in full
force and effect. Such policies of insurance and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those of
CSTM. CSTM does not know of any threatened termination of, or material premium
increase with respect to, any of such policies or bonds.
4.13. Compliance with Laws; No Defaults.
(a) CSTM is not in violation of, or has since January 1, 1994
violated, any applicable provisions of any laws, statutes, ordinances or
regulations, except for violations that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) Schedule 4.13 correctly describes each license and permit
(a "Permit") material to the business of CSTM, together with the name of the
governmental agency or entity issuing such license or permit. Such licenses and
permits are valid and in full force and effect and none of such licenses or
permits will be terminated or impaired or become terminable as a result of the
transactions contemplated hereby.
(c) CSTM is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under any
judgment, order or injunction of any court, arbitrator or governmental body,
agency, official or authority which defaults or potential defaults individually
or in the aggregate would reasonably be expected to have a Material Adverse
Effect.
4.14. Finders, Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of CSTM who might be entitled to any fee or commission from West, OMG, CSTM or
any of their respective Affiliates upon consummation of the transactions
contemplated by this Agreement.
4.15. Intellectual Property.
(a) Schedule 4.15 includes a list of all material Intellectual
Property Rights owned or licensed by CSTM, specifying as to each, as applicable
the nature of such Intellectual Property Right; (ii) the owner of such
Intellectual Property Right if licensed from a third party.
19
(b) Except as set forth in Schedule 4.15, CSTM has adequate
Intellectual Property Rights for the conduct of its business as presently
conducted.
(c) The execution and delivery of this Agreement, the
performance by CSTM of its obligations hereunder and the consummation of the
other transactions contemplated hereby will not breach, violate or conflict with
any instrument or agreement governing any material Intellectual Property Right,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any material Intellectual Property Right or in any
way impair the right of CSTM to ▇▇▇, sell, license or dispose of, or to bring
any action for other infringement of, any material Intellectual Property Right
or portion thereof.
(d) Except as disclosed on Schedule 4.15, there are no
royalties, honoraria, fees or other payments payable by CSTM to any Person by
reason of the ownership, use, license, sale or disposition of any Intellectual
Property Rights.
(e) To the best of its knowledge, CSTM's manufacture,
marketing, license, sale or use of any product presently sold by CSTM or
presently planned to be sold by CSTM will not violate any license or agreement
with any third party or infringe any Intellectual Property Right or any other
party.
(f) Except as set forth on Schedule 4.15, there is no pending
or, to the knowledge of CSTM, threatened claim or litigation against CSTM,
contesting the validity, ownership or right to use, sell, license or dispose of
any Intellectual Property Right nor, to the knowledge of CSTM is there any basis
for any such claims, nor has CSTM received any notice asserting that CSTM's
planned use, sale, license or disposition of any of CSTM's products conflicts or
will conflict with the rights of any other party, nor is there, to the knowledge
of CSTM, any basis for any such assertion.
(g) Except as set forth on Schedule 4.15, CSTM has not during
the three years preceding the date of this Agreement been sued or charged in
writing with or been a defendant in any claim, suit, action or proceeding
relating to its business that has not been finally terminated prior to the date
hereof and that involves a claim of infringement of any patents, trademarks,
service marks or copyrights.
(h) CSTM has no knowledge of any continuing infringement by
any other Person of any material Intellectual Property Rights of CSTM.
(i) To the knowledge of CSTM, no third party has asserted any
claim, or has any reasonable basis to assert any valid claim, against CSTM with
respect to (i) the continued employment by, or association with, CSTM of any of
the present officers, employees of or consultants to CSTM or (ii) the use by
CSTM or any of such Persons in connection with their activities for or on behalf
of CSTM of any information which CSTM or any of such Persons
20
would be prohibited from using under any prior agreements or arrangements or any
laws applicable to unfair competition, trade secrets or proprietary information.
(j) CSTM has taken all reasonable steps to safeguard and
maintain its proprietary rights in all material Intellectual Property Rights.
(k) None of the former or present employees, officers,
directors, consultants or contractors of CSTM holds any right, title or
interest, directly or indirectly, in whole or in part, in or to any material
Intellectual Property Rights which CSTM is currently using or the use of which
is necessary for the business of CSTM as presently conducted or as proposed to
be conducted. To the knowledge of CSTM, no employee of CSTM is in violation of
any term of any employment contract, patent disclosure agreement or any other
contract or agreement relating to the relationship of any such employee with
CSTM or any other party because of the nature of the business conducted or to be
conducted by CSTM. No person has any so-called "moral rights," including any
right to identification of authorship, rights of approval of modifications or
limitations on subsequent modifications, in or to any of the material
Intellectual Property Rights.
4.16. Inventories. The inventories (including work-in-process and finished
good inventories) set forth in the Balance Sheet were properly stated therein at
the lesser of cost or fair market value determined in accordance with generally
accepted accounting principles consistently applied by CSTM. Since the Balance
Sheet Date, the inventories of CSTM have been maintained in the ordinary course
of business. All of the inventory recorded on the Balance Sheet (net of
reserves) consists of, and all inventory on the Closing Date will consist of,
items of a quality usable or salable in the ordinary course of business
consistent with past practices and are and will be in quantities sufficient for
the normal operation of the business of CSTM in accordance with past practice.
4.17. Receivables. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable of CSTM at the Closing
Date will be, valid, genuine and fully collectible within ninety (90) days in
the aggregate amount thereof, subject to normal and customary trade discounts,
less any reserves for doubtful accounts recorded on the Balance Sheet. All
accounts, notes receivable and other receivables of CSTM at the Balance Sheet
Date have been included in the Balance Sheet.
4.18. Taxes.
(a) The term "Taxes" as used herein means all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs duties, or other Taxes, fees, assessments or
other charges of any kind whatever, together with any interest and
21
any penalties, additions to Tax or additional amounts with respect thereto, and
the term "Tax" means any one of the foregoing taxes. The term "Returns" as used
herein, means all returns, declarations, reports, statements and other documents
required to be filed in respect of Taxes, and "Return" means any one of the
foregoing Returns. The term "Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code, or the Treasury regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto.
(b) CSTM has filed all Returns required to be filed and has
paid all Taxes owed (whether or not shown as due on such returns), including,
without limitation, all Taxes which CSTM is obligated to withhold for amounts
owing to employees, creditors and third parties, except where the failure to
file or pay such taxes would not have a Material Adverse Effect, either
individually or in the aggregate, on CSTM, the Assets or the Merger. All Returns
have been filed completely and correctly in all material respects. All Taxes
with respect to which CSTM has become obligated pursuant to elections made by it
in accordance with generally accepted practice have been paid to the extent now
due and adequate reserves have been established in the CSTM books of account for
all Taxes accrued but not yet payable. No issues have been raised (and are
currently pending) by any taxing authority in connection with any of the
returns. No waivers of statutes of limitations with respect to any of the
Returns have been given by or requested from CSTM. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements of CSTM, or are being
contested and an adequate reserve therefor has been established and is fully
reflected in the financial statements of CSTM. All material elections with
respect to Taxes affecting CSTM, as of the date hereof, are set forth in the
financial statements of CSTM, or are annexed hereto in a disclosure schedule.
CSTM has not agreed to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. CSTM does not have and has
not had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States of America and
such foreign country.
(c) CSTM has never filed a consent pursuant to Section 341(f)
of the Code relating to collapsible corporations.
(d) There is no audit in progress of any Return filed by CSTM
with respect to, or which may relate to, items of income, gain, deduction, loss
or credit of CSTM; and CSTM has not been notified by any Tax authority that any
such audit is contemplated or pending.
4.19. Employees. Schedule 4.19 sets forth a true and complete list of (a)
the names, titles, annual salaries and other compensations of all employees of
CSTM and (b) the wage rates for non-salaried employees of CSTM, as of the date
hereof. No key employee has indicated to CSTM that he intends to resign or
retire as a result of the transactions contemplated by this Agreement or
otherwise.
4.20. Environmental Compliance.
22
(a) Environmental Definitions. The following terms, as used
herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental Responses,
Compensation and Liability Act of 1980, as amended.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws (including common or case law), regulations,
ordinances, rules, judgments, judicial decisions, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements, or
governmental restrictions, whether now or hereinafter in effect, relating to
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, or Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof.
"Hazardous Substance" means any toxic, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, regulated under Environmental Laws.
"Regulated Activity" means my question, treatment, storage,
recycling, transportation or disposal of my Hazardous Substance.
"Release" has the meaning specified in 42 U.S.C. ss.9601.
(b) Environmental Representations.
(i) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and to CSTM's knowledge, no investigation or review is
pending, or threatened by any governmental or other entity with respect to any
(A) alleged violation by CSTM of any Environmental Law or liability thereunder,
(B) alleged failure by CSTM to have any permit, certificate, license, approval,
registration or authorization required under my Environmental Law, (c) Regulated
Activity or (D) any general, treatment, storage, recycling, Release of Hazardous
Substance.
(ii) (A) CSTM has not handled any Hazardous Substance, other
than as a generator, on any property now or previously owned or leased by it;
(B) no polychlorinated biphenyls or urea formaldehyde is or has been present at
any property now or previously owned or leased by CSTM; (C) no asbestos is or
has been present at any property now or previously owned or leased by CSTM; (D)
there are not underground storage tanks for Hazardous Substances, active or
abandoned, at any property now or previously owned or leased by CSTM; (E) no
Hazardous Substance has been Released at, or under any property now or
previously
23
owned or leased by CSTM and (F) no Hazardous Substance has been, Released or is
present, in a reportable or threshold planning quantity, where such a quantity
has been established by statute, ordinance, rule, regulation or order, at, on or
under any property now or previously owned by CSTM, in each case in a manner
that could reasonably be expected to have a Material Adverse Effect on CSTM, its
Assets or the Merger.
(iii) CSTM has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to any
location which is listed or proposed for listing under CERCLA, or on any similar
state list or which is the subject of Federal, state or local enforcement
actions or other investigations which may lead to claims against West for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under CERCLA, which could
reasonably be expected to have a Material Adverse Effect, either individually or
in the aggregate, on CSTM, its Assets or the Merger.
(iv) No oral or written notification of a Release of a
Hazardous Substance has been filed by or on behalf of CSTM and to CSTM's
knowledge, no property now or previously owned or leased by CSTM is listed or,
proposed for listing, on the National Priorities List promulgated pursuant to
CERCLA or on any similar state list of sites requiring investigation or
clean-up.
(v) There are no environmental Liens on any of CSTM's assets,
and no governmental actions have been taken or are in process that could subject
any of such assets to such Liens.
(vi) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of CSTM in relation to any property or facility now or previously
owned or leased by CSTM which have not been delivered to West prior to the date
hereof.
4.21. Customers and Suppliers. CSTM has not received notice from and is
not otherwise aware that any group of customers who are under common ownership
or control and who accounted as a group for a material percentage of the
aggregate products and services furnished by CSTM during the past 18 months has
stopped or intends to stop purchasing CSTM's products or services, nor has CSTM
lost any supplier, or group of suppliers, which accounted for a material
percentage of the aggregate supplies purchased by CSTM during the past 18
months.
4.22. Transactions with Affiliates. There are no loans, leases, royalty
agreements or other continuing transactions between CSTM and any Affiliate of
CSTM, or any member of any Affiliate's family, except for reasonable and
customary advances and reimbursables for business related expenses. To the
knowledge of CSTM, none of the officers or directors of CSTM (a) has any
material direct or indirect interest in any entity which does business with
CSTM; (b) has any direct or indirect interest in any property, asset or right
which is used by CSTM in the conduct of its business other than those
constituting Benefit Arrangements; or (c) has any contractual
24
relationship with CSTM other than such relationships which occur from being an
officer, director or stockholder of CSTM.
4.23. Other Information. None of the representations or warranties made by
CSTM pursuant to this Agreement or in any Schedule hereto, when read together in
their entirety together with any documents referred to therein, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances made, not misleading. The most recent financial projections
relating to CSTM delivered to OMG constitute CSTM's best estimate of the
information purported to be shown therein.
4.24. Intercompany Arrangements. There has not been any payment by CSTM or
any of its Affiliates, charge by any of its Affiliates to CSTM or other
transaction between CSTM and any of its Affiliates, except in any such case in
the ordinary course of business of CSTM consistent with past practice and on not
less than arms' length terms.
4.25. Transactional Expenses. Any and all professional costs and expenses,
including, without limitation, all costs and expenses of accountants and
counsel, incurred by or on behalf of CSTM in connection with the Merger,
including, without limitation, the negotiation, execution, delivery and Closing
of this Agreement for the period June 1, 1996 and thereafter shall either (a)
not have exceeded $35,000 or (b) have been paid for by the CSTM Stockholders at
or prior to the Closing to the extent they exceeded $35,000.
4.26. Schedules. To the extent that any exception or item is disclosed in
any one Schedule hereto, it shall be deemed to have been disclosed and
incorporated into any other Schedule where it should have been disclosed but
from which it may have been omitted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WEST AND OMG
West and OMG, jointly and severally, hereby represent and warrant to CSTM
upon which representations and warranties CSTM shall be entitled to rely
regardless of any investigation by CSTM of the affairs of West and OMG, as
follows:
5.01. Organization and Existence. Each of West and OMG is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
5.02. Corporate Authorization. The execution and delivery of this
Agreement and those of the Ancillary Agreements to which they are a party by
West and by OMG, and the performance
25
by them of their respective obligations hereunder and thereunder, have been duly
and validly authorized and approved by the board of directors of West and OMG,
and the Plan of Merger has been duly authorized and approved by OMG as the sole
stockholder of West. No other proceedings on the part of West or OMG are
necessary to authorize the execution and delivery of this Agreement and those of
the Ancillary Agreements to which they are a party by West or OMG, or the
performance by them of their respective obligation hereunder or thereunder, or
the consummation of the transactions contemplated hereby or thereby. This
Agreement and those of the Ancillary Agreements to which they are a party
constitutes the legal, valid and binding obligation of each of OMG and West,
enforceable against them in accordance with their respective terms.
5.03. Governmental Authorization.
(a) The execution and delivery by OMG and West of this
Agreement and those of the Ancillary Agreements to which they are a party, and
the performance by them of their respective obligations thereunder, require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (i) compliance with any applicable requirements
of the 1934 Act; and (ii) compliance with the requirements of the American Stock
Exchange; (iii) compliance with applicable federal and state securities laws;
and (iv) filing the Certificate of Merger with the California Secretary of
State.
(b) No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other document to
which West or OMG is a party, or by either of them are bound is required or
necessary for the execution and delivery by West or by OMG of this Agreement or
of any of the Ancillary Agreements to which they are a party, the performance by
them of their respective obligations hereunder or thereunder, or the
consummation of the transactions contemplated hereby or thereby, except where
the failure to obtain such consent, approval, waiver or other action would not
have a material adverse effect, either individually or in the aggregate.
5.04. Non-Contravention. The execution and delivery by West and OMG of
this Agreement, and the performance by them of their respective obligations
hereunder, do not and will not (i) contravene or conflict with their respective
corporate charters or bylaws or (ii) assuming compliance with the matters
referred to in Section 5.03, contravene or conflict with any provision of any
law, regulation, judgment, injunction, order or decree binding upon either of
them.
5.05. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of West or OMG who might be entitled to any fee or commission from CSTM or any
or any Affiliate thereof upon consummation of the transactions contemplated by
this Agreement.
26
5.06. Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of West or OMG threatened against West or
OMG or any of their respective properties or the transactions contemplated
hereby before any court or arbitrator or any governmental body, agency or
official that could reasonably be expected to have a material adverse effect,
either individually or in the aggregate on (i) the business, assets, condition
(financial or otherwise), results of operations or prospects of OMG or (ii) the
ability of the parties to consummate the Merger.
5.07. SEC Reports. OMG has filed all required forms, reports and documents
with the Securities Exchange Commission since April 1, 1995, each of which when
filed complied as to form in all material respects with all applicable
requirements of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (herein, the "Act"). OMG has heretofore
delivered to CSTM a true and complete copy of its Form 10-KSB for the fiscal
year ended March 31, 1996, and its Form 10-QSB for the quarters ended June 30
and September 30, 1996 (collectively, the "SEC Filings"), which OMG has filed
under the Act with the Securities Exchange Commission (herein, the "SEC"). As of
their respective filing dates, the SEC Filings complied in all material respects
with the requirements of the Act and none of the SEC Filings contained any
untrue statement of a material fact or omitted to state a 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, except to the
extent corrected by documents subsequently filed with the SEC and provided to
CSTM prior to the date hereof. The financial statements of OMG, including the
notes thereto, included in the SEC Filings, comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC) and fairly present the
consolidated financial position of OMG at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal year
end audit adjustments). There has been no material change in OMG's accounting
policies except as described in the SEC Filings.
5.08. Status of West. West is a newly formed corporation with no assets or
liabilities other than the consideration received for its outstanding shares and
its obligations under this Agreement. West was formed expressly for the purpose
of participating in the Merger and has not and will not conduct any business or
operations.
5.09. OMG Shares. All of the OMG Shares to be issued and delivered under
this Agreement or pursuant hereto either are, or shall be when the same are
actually delivered by OMG, validly issued, fully paid for and nonassessable in
accordance with all laws and regulations governing the issuance thereof, and
including corporate laws of the State of Delaware and under the Act. Following
the delivery of all OMG Shares, the registered owner thereof shall have good and
valid title to the shares evidenced thereby, subject to no liens or encumbrances
due to OMG, except for applicable requirements of the Act and the provisions
contained or referred to in the
27
Registration Rights Agreement. All OMG Shares to be issued pursuant to this
Agreement will be exempt from the registration requirements under the Act by
virtue of Section 4(2) thereunder.
ARTICLE VI
COVENANTS OF ALL PARTIES
The parties hereto hereby covenant to and agree with each other that:
6.01. Commercially Reasonable Efforts. Subject to the terms and conditions
of this Agreement, each party will use all commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. All parties each
agree to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
in order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
6.02. Certain Filings. The parties hereto shall cooperate with each other
(a) in determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (b) in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.
6.03. Public Announcements. The parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
6.04. Tax Free Exchange. The parties agree that they will report the
transaction contemplated by this Agreement as a reorganization under Section
368(a)(1)(A) of the Code and shall otherwise each use their best efforts to
cause the Merger to be treated as a reorganization within the meaning of Section
368(a)(1)(A) of the Code.
ARTICLE VII
EMPLOYEE BENEFITS
7.01. Employee Benefits Definitions. The following terms, as used herein,
having the following meanings:
28
"Benefit Arrangement" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
CSTM and (iii) covers any employee or former employee of CSTM.
"Employee Plans" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by CSTM or any of its ERISA Affiliates,
as the case may be.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
7.02. ERISA Representations. CSTM hereby represents and warrants to West
that:
(a) Schedule 7.02 lists each Employee Plan that covers any
employee of CSTM, copies or descriptions of all of which have previously been
made available or furnished to West. With respect to each Employee Plan, CSTM
has provided the most recently filed Form 5500 and an accurate summary
description of such plan. CSTM has provided West with complete age, salary,
service and related data as of the most recent practicable date for employees of
CSTM.
(b) Schedule 7.02 also includes a list of each significant
Benefit Arrangement. Copies or descriptions of all Benefit Arrangements have
been made available or furnished previously to West.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. CSTM has not incurred any liability under
Title IV of ERISA arising in connection with the termination of any plan covered
or previously covered by Title IV of ERISA.
(d) Each Employee Plan which is intended to be qualified under
Section 401 (a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501 (a) of
29
the Code. CSTM has furnished to West copies of the most recent Internal Revenue
Service determination letters with respect to each such plan. Each Employee Plan
has been maintained in compliance in all material respects with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such plan.
(e) Each Benefit Arrangement has been maintained in
substantial compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Benefit Arrangement.
(f) With respect to the employees and former employees of
CSTM, there are no employee post-retirement medical or health plans in effect,
except as required by Section 4980B of the Code.
(g) All contributions, reserves and premium payments required
to be made or accrued under each Employee Plan and Benefit Arrangement through
the date hereof have been made or accrued and as of the Closing Date will be
made or accrued. Except as disclosed in writing to West prior to the date
hereof, there has been no amendment to, written interpretation of or
announcement (whether or not written) by CSTM or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the period ending on the Balance Sheet
Date.
(h) There is no contract, agreement, plan or arrangement
covering any employee or former employee of CSTM that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 28OG of the Code.
(i) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(j) No employee of CSTM will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
7.03. No Third Party Beneficiaries. No provision of this Article VII shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of CSTM in respect of
continued employment (or resumed employment) with CSTM and no provision of this
Article VII shall create any such rights in any such Persons in respect of any
benefits that may be provided, directly or indirectly, under any Employee Plan
or Benefit Arrangement or any plan or arrangement that may be established by
West or any of its Affiliates. No provision of this Agreement shall constitute a
limitation on
30
rights to amend, modify or terminate after the Closing Date any Employee Plan or
Benefit Arrangement.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to the Obligations of Each Party. The obligations of the
parties hereto to consummate the Merger are subject to the fulfillment or waiver
by all parties of the following conditions on or before the Closing Date:
(a) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending. No
court, arbitrator or governmental body, agency or official shall have issued any
order, and there shall not be any statute, rule or regulation, restraining the
effective operation by West of the business of CSTM after the Closing Date.
(b) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been obtained.
(c) The CSTM Stockholders shall have approved of the Plan of
Merger as described in Article II hereof by a unanimous vote.
8.02. Conditions to Obligation of West and OMG. The obligation of West to
consummate the Merger is subject to the fulfillment or waiver by West and OMG of
the following further conditions on or before the Closing Date:
(a)(i) CSTM shall have performed in all material respects all
of its obligations hereunder required to be performed on or prior to the Closing
Date, and (ii) the representations and warranties of CSTM contained in this
Agreement at the time of its execution and delivery and in any certificate or
other writing delivered by CSTM pursuant hereto, shall be true at and as of the
Closing Date, as if made at and as of such date.
(b) West and OMG shall have received an opinion of CSTM's
Counsel, dated the Closing Date, to the effect specified in Sections 4.01
through 4.05 and 4.10 and with respect to such other matters as West and OMG may
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by the laws of
jurisdictions other than or the federal laws of the United States of America,
upon opinions of counsel reasonably satisfactory to West and OMG, copies of
which shall be contemporaneously delivered to West and OMG, and as to matters of
fact, upon certificates of CSTM or officers of CSTM.
31
(c) CSTM, ▇▇▇▇▇ ▇▇▇▇▇, and each of the CSTM Stockholders shall
have executed and delivered, or caused to be executed and delivered, each of the
Ancillary Agreements to be entered into by them at the Closing, in each case
substantially in the form attached as an exhibit to this Agreement.
(d) West and OMG shall have received all other closing
documents specified in Section 3.02 and 3.04 of this Agreement and all other
closing documents that they may reasonably request, all in form and substance
reasonably satisfactory to West.
(e) The CSTM Stockholders shall have approved of the Plan of
Merger as described in Section 2 hereof by a unanimous vote and CSTM shall have
delivered to West and OMG a certified copy of the resolutions adopted by the
CSTM Stockholders so approving the Plan of Merger.
(f) All options and warrants to purchase capital stock of CSTM
shall have been terminated, and there shall be no further claims thereunder for
which CSTM shall be responsible other than such as are fully accrued on the
Financial Statements. All of the board elected officers and directors of CSTM
shall have submitted their resignations from all CSTM offices and positions.
8.03. Conditions to Obligation of CSTM. The obligation of CSTM to
consummate the Merger at the Closing is subject to the fulfillment by West and
OMG, or waiver by CSTM, of the following conditions on or before the Closing
Date:
(a)(i) West and OMG shall have performed in all material
respects all of their obligations hereunder required to be performed by them at
or prior to the Closing Date, and (ii) the representations and warranties of
West and OMG contained in this Agreement at the time of its execution and
delivery and in any certificate or other writing delivered by West and OMG
pursuant hereto shall be true at and as of the Closing Date, as if made at and
as of such date.
(b) CSTM shall have received an opinion of West's Counsel,
dated the Closing Date, to the effect specified in Sections 5.01 through 5.04
and 5.06 and with respect to such other matters as CSTM shall reasonably
request. In rendering such opinion, such counsel may rely upon certificates of
public officers, as to matters governed by the laws of jurisdictions other than
the Commonwealth of Massachusetts or the federal laws of the United States of
America, upon opinions of counsel reasonably satisfactory to CSTM, copies of
which shall be contemporaneously delivered to CSTM, and as to matters of fact,
upon certificates of officers of West and OMG.
(c) West and OMG shall have executed and delivered each of the
Ancillary Agreements to be entered into by them at the Closing, in each case
substantially in the form attached as an exhibit to this Agreement.
32
(d) OMG shall have caused a registration statement under the
Securities Act on an appropriate form relating to the resale of the Minimum
Stock to be filed pursuant to the Registration Rights Agreement.
(e) CSTM shall have received all items specified in Section
3.03 of this Agreement and all other closing documents that it may reasonably
request, all in form and substance reasonably satisfactory to it.
33
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01. Survival. The representations, warranties and covenants contained in
this Agreement shall survive the Closing and continue until the first
anniversary of the Closing, except (a) to the extent that any such
representations, warranties or covenants are the basis for the assertion of any
OMG Claims which have properly been asserted in accordance with the provisions
of this Article IX, then such representations, warranties and covenants by CSTM
contained herein shall survive to the limited extent to permit such OMG claims
to be finally determined as provided in this Article IX after such first
anniversary of the Closing, and (b) the representations, warranties or covenants
contained in Sections 2.02 and 5.09, Article VI, Article IX and, to the extent
necessary to the foregoing, the provisions of Article XI, shall survive until
the expiration of the applicable statutory period of limitations (giving effect
any waiver, mitigation or extension thereof).
9.02. Indemnification.
(a) CSTM hereby indemnifies West and OMG, (collectively, the "OMG
Group") against and agrees to defend and hold them harmless from any and all
damage, loss, liability and expense (including without limitation reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) (herein, "Damages") incurred or
suffered by any of the OMG Group arising out of (i) any inaccuracy in or breach
of any representation or warranty of CSTM contained in this Agreement or any
Ancillary Agreement or any certificate or other writing delivered in connection
with the Closing hereof, (ii) any failure by CSTM to perform any of its
obligations or covenants as set forth in this Agreement prior to the Effective
Date (iii) any and all actions, suits, litigation, arbitrations, proceedings,
investigations or claims arising out of any of the foregoing and based on facts
that have occurred on or prior to the Closing Date (except for costs related to
the enforcement of this paragraph) even though such action, suit, litigation,
arbitration, proceeding, investigation or claim may not be filed or come to
light until after the Closing Date and (iv) reimbursement by any member of the
OMG Group to any of their Affiliates, directors, officers or agents for Damages
suffered or incurred by any of them arising out of or relating to any of the
foregoing, irrespective of whether or not such member of the OMG Group has any
legal obligation to make or pay such reimbursement (collectively, the "OMG
Claims").
(b) West and OMG hereby indemnify CSTM and the CSTM Stockholders
(collectively, the "CSTM Group") against and agree to defend and hold them
harmless from any and all Damages incurred or suffered by any of the CSTM Group
arising out of (i) any inaccuracy and/or breach of any representation or
warranty of West or OMG contained in this Agreement or any Ancillary Agreement
or any certificate or other writing delivered pursuant hereto or in connection
herewith, (ii) any failure by West or OMG to perform any of their respective
obligations or covenants as set forth in this Agreement prior to the Effective
Date, (iii) any and all actions, suits,
34
litigation, arbitrations, proceedings, investigations or claims arising out of
any of the foregoing and based on facts that have occurred on or prior to the
Closing Date (except for costs related to the enforcement of this paragraph)
even though such action, suit, litigation, arbitration, proceeding,
investigation or claim may not be filed or come to light until after the Closing
Date (collectively, the "CSTM Claims") and (iv) reimbursement by any member of
the CSTM Group to any of their Affiliates, directors, officers or agents for
Damages suffered or incurred by any of them arising out of or relating to any of
the foregoing, irrespective of whether or not such member of the CSTM Group has
any legal obligation to make or pay such reimbursement.
9.03. Procedures; No Waiver.
(a) The party seeking indemnification under Section 9.02 (the
"Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under such Section. The Indemnifying Party may, and at the request
of the Indemnified Party shall, participate in and control the defense of any
third party suit, action or proceeding at its own expense. The Indemnifying
Party shall not be liable under Section 9.02 for any settlement effected without
its consent of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder.
(b) With respect to any OMG Claims, the following special
procedures and provisions shall apply in addition to the foregoing:
(i) West's and OMG's sole and exclusive remedy for OMG
Claims and Damages shall be to adjust downward the number of
Earn-Out Shares to be delivered pursuant hereto.
(ii) Notwithstanding any provision of this Agreement to
the contrary, it is agreed that the OMG Group shall have no
right to indemnification unless and until the total Damages
relating to either agreed to or finally allowed OMG Claims
shall have equalled or exceeded a threshold of $87,500
(exclusive of Damages relating to a breach of the
representations and warranties set forth in section 4.25, as
to which no threshold limit to a right to indemnity shall
apply); provided, however, that for purposes of measuring this
threshold, and only for such purpose, all qualifications to
any of the representations and warranties contained in Article
IV hereof by reference to the word "material" (or any
derivative terms, including, without limitation, Material
Adverse Effect) shall be deemed to be omitted from such
representations and warranties. Once such threshold level has
been achieved, however, both the foregoing $87,500 (exclusive
of Damages relating to a breach of the representations
and warranties set forth in section 4.25, as to which no
threshold limit to a right
35
to indemnity shall apply) exclusionary threshold limit, and
the elimination of such qualifications shall have no further
force and effect.
(iii) CSTM and the CSTM Stockholders hereby irrevocably
appoint ▇▇▇▇▇ ▇▇▇▇▇ as their authorized representative
(herein, in such capacity, the "CSTM Representative") for
purposes of binding CSTM and the CSTM Stockholders to the
resolution of all OMG claims. Notice of all OMG Claims shall
be given to the CSTM Representative as hereinabove provided.
West and OMG acknowledge and agree that the CSTM
Representative is authorized to act on behalf of CSTM with
respect to all matters relating to this Article IX.
(iv) After the giving of notice of any OMG Claim, the
CSTM Representative and the OMG Group shall cooperate with
each other to exchange such information as may be necessary or
desirable in order to allow the CSTM Representative to
evaluate the validity and extent of any such OMG Claim. In the
event the OMG Group and the CSTM Representative agree as to
the validity of any such OMG Claim and the amount of Damages
associated therewith, then the number of Earn-Out Shares to be
delivered pursuant to the provisions of Section 2.02.D.(iv),
above, shall be reduced in accordance with the provisions of
such section by the amount of such Damages; provided that no
such adjustment shall be required unless and until the
threshold level described in sub-paragraph (ii), above, has
been exceeded.
(v) In the event of a dispute between the CSTM
Representative and the OMG Group as to the validity of one or
more OMG Claims or the amount of Damages associated therewith,
which dispute has not been resolved by the Delivery Date, OMG
shall, on or before the first anniversary of the Closing,
delivery to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire (herein, the "Escrow
Agent," to be held by him in escrow, a number of Earn-Out
Shares equal to the value designated by OMG of such OMG Claim,
calculated as provided in section 2.02.D.(iv) hereinabove, to
be held by the Escrow Agent, pending either a future agreement
by the CSTM Representative and OMG or issuance of a final and
non-appealable order of the Suffolk Superior Court in Boston,
Massachusetts. A copy of such notice to the Escrow Agent shall
be provided to the CSTM Representative. The parties agree to
cooperate to sign such reasonable escrow agreements and
instructions as may be requested by the Escrow Agent. The
costs of any such escrow arrangement shall be borne by OMG.
(vi) With respect to any OMG Claims or the damages
associated therewith which are disputed and which cannot be
resolved consensually by
36
the parties, the parties agree to cause them to be resolved
through arbitration. The parties shall first endeavor to agree
on one arbitrator to hear the matter. If such agreement cannot
be reached within ten (10) business days following receipt of
notice from one party to the other that arbitration is
requested, then within ten (10) business days thereafter, the
parties shall designate to the other the name of an arbitrator
located within the six (6) New England states and having
reasonable experience in the industry or the issue which is
the subject matter of the dispute. The two arbitrators shall
then meet to agree upon a third arbitrator within twenty (20)
business days of their appointment, and if no such agreement
can be reached, then any party hereto may petition the
Superior Court for Suffolk County in Boston, Massachusetts to
appoint a third arbitrator. Within twenty (20) business days
following the appointment of all three arbitrators, the
arbitrators shall call a pre-trial meeting among the parties
and their representatives to establish a briefing schedule and
trial procedure. Such meeting and all evidentiary hearings
shall be held at a place convenient to the arbitrators but
located in Boston, Massachusetts. The arbitrators may
determine such rules of evidence as they may wish to apply or
not apply in conducting such hearings. After reviewing the
submissions of the parties and hearing any evidence which the
parties deem appropriate, the arbitrators shall render a
decision as soon as practicable, which may be filed in the
Superior Court of Suffolk County and an action for the entry
of an award with respect thereto be maintained by any party.
(vii) The costs and expenses of the arbitration shall be
shared equally by the parties, unless the arbitrators shall
have determined that all or a substantial portion of the
position of one of the parties was frivolous, wholly
unsubstantial, advanced in bad faith or advanced for the
purposes of delay or harassment, in which case all costs of
the arbitration shall be borne by the losing party and the
prevailing party shall be entitled to receive all of its costs
and expenses, including reasonable counsel fees and reasonable
fees of any experts, from the losing party.
(viii) If the parties are able consensually to resolve
such dispute then they shall jointly give notice to the Escrow
Agent as to the number of Earn-Out Shares to be distributed to
the CSTM Stockholders and the number of CSTM Shares to be
returned to OMG, and he shall be obligated promptly to comply
with such joint instruction. Alternatively, if the matter has
been resolved by a final and non-appealable order of the
Suffolk Superior Court, then either party may give notice to
the Escrow Agent of such decision, and such Escrow Agent shall
thereupon calculate the number of Earn-Out Shares to be
distributed to the CSTM Stockholders and to be returned to OMG
in accordance with such order and the provisions of this
37
Agreement, and the Escrow Agent shall then give notice thereof
to the CSTM Representative and to OMG. Ten days after such
notice, the Escrow Agent shall then distribute such Earn-Out
Shares in accordance with his notice, unless the Escrow Agent
shall have received notice prior to such time as to any error
or mistake in his calculation, in which case the Escrow Agent
shall, if he believes such position to have been accurate, in
whole or in part, he shall reissue such ten day notice. All
parties shall be conclusively barred from bringing any claim
against the Escrow Agent for miscalculation of the amount of
Earn-Out Shares to be delivered unless the Escrow Agent shall
have received notice from such party of any such claim as
herein provided. In the event the Escrow Agent is unable to
resolve competing claims of the parties, the Escrow Agent
shall submit the matter for determination by the Suffolk
Superior Court in Boston, Massachusetts, whose final and
non-appealable determination shall be binding on all parties.
The Escrow Agent shall also have such additional time to make
delivery of the Earn-Out Shares as may be necessary in order
for him properly to hypothecate the certificate or
certificates escrowed with him to those who are entitled to
portions thereof. Notwithstanding anything in this section to
the contrary, however, in the event there is a dispute as to
more than one OMG Claim remaining unresolved after the
Delivery Date, then the Escrow Agent shall not be required to
distribute any Earn-Out Shares relating from a resolved or
finally determined dispute unless and until the Escrow Agent
shall be satisfied that the amount of Earn-Out Shares
remaining with him after the resolution of such dispute shall
be sufficient in amount to cover OMG Claims for Damages for
all disputes which still remain unresolved or not finally
determined.
9.04. Limitation of Liability; Exclusivity of Remedy. Notwithstanding any
other provision of this Agreement, any Ancillary Agreement or any certificate or
other document delivered pursuant hereto or thereto, the liabilities of CSTM and
its officers, directors, shareholders and the successors of any of them to West,
OMG and the successors of any of them with respect to this Agreement, any
Ancillary Agreement or any certificate or other writing delivered in connection
herewith or therewith (including, without limitation, any representations,
warranties and covenants contained herein or therein and any of the matters
covered by Section 9.02(a) hereof), shall be limited to their rights and
remedies under this Article IX and such rights and remedies shall be their
exclusive rights and remedies with respect to such matters; provided that this
Section 9.04 shall not apply to any representations, warranties or covenants of
any CSTM Stockholder set forth in the Registration Rights Agreement or of ▇▇.
▇▇▇▇▇ ▇▇▇▇▇ set forth in the Employment Agreement and provided that there shall
be no limitations whatsoever for Damages which are the result of such party's
intentional misrepresentation or fraud.
9.05. Representative. CSTM and the CSTM Stockholders agree, and OMG and
West acknowledge that the CSTM Representative shall have full power and
authority to represent
38
CSTM and all the CSTM Stockholders and their successors with respect to all
matters arising under this Article IX and all actions taken by the CSTM
Representative hereunder shall be binding upon CSTM and all such CSTM
Stockholders and their successors as if expressly confirmed and ratified in
writing by each of them. Without limiting the generality of the foregoing, the
CSTM Representative shall have full power and authority to interpret all the
terms and provisions of this Article IX and to consent to any amendment hereof
and thereof on behalf of CSTM and all such CSTM Stockholders and such
successors. All actions to be taken by the CSTM Representative hereunder shall
be taken by or at his written direction or pursuant to such other method as the
CSTM Representative, by written notice to West and OMG, shall designate.
The CSTM Representative may act upon any instrument or other writing
believed by him in good faith to be genuine and to be signed or presented by the
proper person and shall not be liable in connection with the performance by him
or his duties pursuant to the provisions of this Article IX, except for his own
willful default or gross negligence.
The CSTM Representative, or any successor to him hereafter
appointed, may resign and shall be discharged of his duties hereunder upon the
appointment of a successor CSTM Representative as hereinafter provided. In case
of such resignation, or the death or inability to act of the CSTM
Representative, a successor or successors shall be named by the CSTM
Stockholders owning in excess of 50 percent of the CSTM shares outstanding
immediately prior to the effective time of the Merger. Each successor CSTM
Representative shall have all the power, authority, rights and privileges hereby
conferred upon the original CSTM Representative, and the term "CSTM
Representative" as used herein shall be deemed to include such successor CSTM
Representative.
ARTICLE X
TERMINATION
10.01. Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:
(i) by written agreement of all parties;
(ii) by any party if the Effective Date shall not have
occurred on or before February 28, 1997; or
(iii) by any party if there shall be any law or regulation
that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction.
39
The party desiring to terminate this Agreement pursuant to clauses (ii) or
(iii) shall give notice of such termination to the other parties.
10.02. Effect of Termination. If this Agreement is terminated as permitted
by Section 10.01, such termination shall be without liability of either party
(or any shareholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful failure of any party to
perform a covenant of this Agreement or from a willful breach by any party to
this Agreement, such party shall be fully liable for any and all Damages
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Sections 7.01 and 11.03 shall survive any termination hereof
pursuant to Section 10.01.
ARTICLE XI
MISCELLANEOUS
11.01. Notices. All notices and other communications which by any
provision of this Agreement are required or permitted to be given shall be given
in writing and shall be (a) mailed by first-class or express mail, postage
prepaid, (b) sent by telex, telegram, telecopy or other form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or (c) personally delivered to the receiving party (which if other
than an individual shall be an officer or other responsible party of the
receiving party). All such notices and communications shall be mailed, sent or
delivered as follows:
if to West or OMG to:
Omni MultiMedia Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇, Executive Vice President
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire
▇▇▇▇▇▇ & Wise
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
40
if to the CSTM Representative, to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
c/o Omni Resources Corporation - West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices shall be deemed duly delivered one business day after being sent via a
reputable nationwide express mail service. Notices delivered via any other means
shall be deemed duly delivered upon actual receipt by the individual for whom
such notice is intended.
11.02. Amendments; No Waivers. (a) Any provision of this Agreement may be
amended or waived prior to the Closing Date if, and only if, such amendment or
waiver is in writing and signed by all parties.
(b) No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
11.03. Expenses. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense; provided,
however, that if the Closing shall occur all such costs and expenses incurred by
CSTM in excess of $35,000 shall be paid for or reimbursed by CSTM's
shareholders.
11.04. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of his or its rights or obligations under this Agreement without
the consent of the other parties hereto, except that no consent shall be
necessary for transfers (a) pursuant to any and all laws governing descent and
distribution, (b) pursuant to any other testamentary bequest, (c) to immediate
family members of any CSTM Stockholder, (d) pursuant to gifts to entities having
status under Section 501(c)(3) of the Code, or (e) to any trust of which the
CSTM Stockholder or any of his or her heirs, executors, administrators or
permitted donees (hereunder) is the primary beneficiary.
41
11.05. Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the Commonwealth of Massachusetts, without regard to
the conflicts of law rules of such state.
11.06. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
11.07. Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter hereof No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person any rights or remedies hereunder,
other than the parties hereto and the CSTM Stockholders and their respective
heirs, successors, executors, administrators and permitted assigns. In the event
of any conflict between the terms of this Agreement and the terms of the
Agreement of Merger, the terms of this Agreement shall prevail.
11.08. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
11.09. Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the Commonwealth of
Massachusetts, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any obligation to venue laid therein. Process in any such
action or proceeding may be served on any party anywhere in the world, whether
within or without the Commonwealth of Massachusetts.
42
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
ATTEST: (seal) OMNI RESOURCES CORPORATION - WEST
_____________________________ By: ______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
By: ______________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Treasurer
ATTEST: (seal) CUSTOM SOFTWARE TURNKEY
MANUFACTURING, INC.
_____________________________ By: ______________________________
▇▇▇▇▇ ▇▇▇▇▇, Secretary ▇▇▇▇▇ ▇▇▇▇▇, President
By: ______________________________
▇▇▇▇▇ ▇▇▇▇▇, Treasurer
ATTEST: (seal) OMNI MULTIMEDIA GROUP, INC.
_____________________________ By: ______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
By: ______________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Treasurer
43
Exhibit A-1
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
OF
CUSTOM SOFTWARE TURNKEY MANUFACTURING, INC.
a California corporation
▇▇▇▇▇ ▇▇▇▇▇ certifies that:
1. He is the President and the Secretary of CSTM, a California corporation
(the "Corporation").
2. The Agreement of Merger attached hereto and the merger contemplated by
such agreement (the "Merger") were duly approved by the Board of Directors and
shareholders of the Corporation.
3. The Corporation has only one class of stock (Common Stock) and the
number of shares of such stock outstanding is 6,458,382. The number of shares
voting to approve the Merger, 6,458,382 shares, constitutes 100% of the shares
outstanding.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: February ______, 1997 _________________________________
▇▇▇▇▇ ▇▇▇▇▇, President
Exhibit A-2
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
OF
OMNI RESOURCES CORPORATION - WEST
(A MASSACHUSETTS CORPORATION)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ certifies that:
1. He is the President and the Secretary of Omni Resources Corporation -
West, a Massachusetts corporation (the "Corporation").
2. The Agreement of Merger in the form attached hereto and the merger
contemplated by such agreement (the "Merger") were duly approved by the Board of
Directors and the sole stockholder of the Corporation.
3. The Corporation has only one class of stock (Common Stock) and the
number of shares of such stock outstanding is 1,000. The number of shares voting
to approve the Merger, 1,000 shares, constitutes 100% of the shares outstanding.
4. Omni MultiMedia Group, Inc., a Delaware corporation ("OMG"), the sole
stockholder of the Corporation, shall issue shares of its common stock in the
Merger. The Board of Directors of OMG duly approved such issuance, and a vote of
the stockholders of OMG was not required to approve the issuance.
I further declare under penalty of perjury under the laws of the State of
Massachusetts that the matters set forth in this certificate are true and
correct of my own knowledge.
Date: February______, 1997 ________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and Secretary
Exhibit B
to Agreement and Plan of Merger
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of March 1, 1997 (the "Merger
Agreement"), is made and entered into by and among OMNI RESOURCES CORPORATION -
WEST, a Massachusetts corporation (herein, "West"), CUSTOM SOFTWARE TURNKEY
MANUFACTURING, INC., a California corporation (herein,"CSTM"), and OMNI
MULTIMEDIA GROUP, INC., a Delaware corporation (herein, "OMG"). CSTM and West
are collectively referred to as the "Constituent Corporations".
RECITALS
A. OMG is the beneficial and record owner of all of the outstanding shares
of the capital stock of West.
B. Prior to the execution of this Merger Agreement, the Constituent
Corporations, and OMG entered into an Agreement and Plan of Merger dated as of
March 1, 1997 (the "Agreement and Plan of Merger") providing for certain
representations, warranties, and agreements in connection with the transactions
contemplated.
C. The Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of the Constituent Corporations and in the
best interests of the shareholders of the Constituent Corporations that CSTM be
acquired by OMG through a merger of West into CSTM (the "Merger").
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
ARTICLE I
THE CONSTITUENT CORPORATIONS
Section 1.1
a. CSTM was incorporated under the laws of the State of California on
September 22, 1993.
b. CSTM is authorized to issue an aggregate of 20,000,000 shares of Common
Stock, at no par value ("CSTM Stock").
c. On the business day immediately preceding the date hereof an aggregate
of 6,458,382 shares of the common capital stock of CSTM were issued and
outstanding.
Section 1.2
a. West was incorporated under the laws of the Commonwealth of
Massachusetts on January 17, 1997.
▇. ▇▇▇▇ is authorized to issue an aggregate of 200,000 shares of common
stock, no par value, ("West Stock").
c. On the date hereof, an aggregate of 1,000 shares of West Stock were
issued and outstanding.
ARTICLE 2
THE MERGER
Section 2.1
a. The Merger shall become effective on the latter of the date and time
("Effective Time") that (i) this Agreement and officers' certificates of each
Constituent Corporation are filed with the Secretary of State of California
pursuant to Section 1103 of the California General Corporation Law, and (ii)
certain Articles of Merger are filed with the Secretary of State of
Massachusetts.
b. At the Effective Time, West shall be merged into CSTM and the separate
corporate existence of West shall thereupon cease. CSTM, as it exists from and
after the Effective Time, is sometimes referred to as the "Surviving
Corporation," and the separate corporate existence of CSTM, with all its
purposes, objects, rights, privileges, powers, immunities, and franchises, shall
continue unaffected and unimpaired by the Merger.
Section 2.2
a. The Surviving Corporation shall succeed to all of the rights,
privileges, powers, immunities, and franchises of West, all of the properties
and assets of West, and all of the debts, choses in action, and other interests
due or belonging to West, and shall be subject to and responsible for all of the
debts, liabilities, and obligations of West with the effect set forth in the
California General Corporation Law.
b. If, at any time after the Effective Time, the Surviving Corporation
considers or is advised that any deeds, bills of sale, assignments, assurances,
or any other actions or things are necessary or desirable to vest, perfect, or
confirm of record or otherwise in the Surviving Corporation its right, title, or
interest in, to, or under any of the rights, properties, or assets of West
acquired or to be acquired by Surviving Corporation as a result of, or in
connection with, the Merger or to otherwise carry out this Merger Agreement, the
officers and directors of Surviving Corporation shall and will be authorized to
execute and deliver, in the name and on
2
behalf of the Constituent Corporations or otherwise, all such deeds, bills of
sale, assignments, and assurances, and to take and do, in the name and on behalf
of the Constituent Corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect, or confirm any and all right,
title and interest in, to, and under such rights, properties or assets in
Surviving Corporation or to otherwise carry out this Merger Agreement.
ARTICLE 3
ARTICLES OF INCORPORATION, BY-LAWS,
OF
THE SURVIVING CORPORATION
Section 3.1 Article First of the Articles of Incorporation of the
Surviving Corporation shall be amended as of the Effective Date to read in its
entirety as follows:
The name of this corporation is Omni Resources Corporation - West.
Section 3.2 The Articles of Incorporation of CSTM in effect immediately
prior to the Effective Time, amended as described in Section 3.1, above, shall
be the Articles of Incorporation of the Surviving Corporation unless and until
amended as provided by law and such Articles of Incorporation.
Section 3.3 The Bylaws of West in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation unless and until
amended or repealed as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
ARTICLE 4
MANNER AND BASIS OF CONVERTING SHARES
OF THE CONSTITUENT CORPORATIONS
Section 4.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
CSTM Stock:
a. Capital Stock of West. Each share of West Stock which is outstanding
immediately prior to the Effective Time shall be converted into one share of the
capital stock of the Surviving Corporation, no par value per share.
b. Conversion of CSTM Stock. Each holder of CSTM Stock shall have the
right to receive their pro rata share (based on the number of shares held by
them to the total number of shares outstanding) (herein, the "Conversion
Percentage") of 100,000 shares of OMG's stock (herein, the "Minimum Stock") and
their Conversion Percentage of Earn-Out Stock (hereinafter defined), and the
right to receive their applicable share of Additional Stock (hereinafter
defined) or cash in lieu thereof. (All of such shares and payments being
referred to collectively as the "Merger Price"), except that in the case of any
fractional shares of OMG Stock, such fraction
3
shall, in each case, be rounded down to the largest whole number of OMG Shares
then to be delivered.
Section 4.2 Payment of Merger Price. The Merger Price shall be as follows:
a. The Minimum Stock, which shall be delivered at the Closing.
b. A number of shares of Earn-Out Stock initially equal to 200,000 times a
fraction based on the Net Sales of the Surviving Corporation during the twelve
month period commencing March 1, 1997 and expiring on February 28, 1998 (herein,
the "Earn-Out Period"). The numerator of this fraction shall be the lesser of
(y) $3,000,000 or (z) the amount by which Net Sales during the Earn-Out Period
exceeded Net Sales of CSTM for the period March 1, 1996 through February 28,
1997; and the denominator of which shall be $3,000,000.
c. On or before the tenth (10th) business day following receipt by OMG of
the calculation by its certified independent public accountants of the fraction
applicable to Earn-Out Shares described in subpart (ii), above, (herein, the
"Delivery Date"), OMG shall calculate the number of shares of Earn-Out Stock
then due to the CSTM Stockholders. In addition, OMG shall, within such period,
deliver to each of the CSTM Stockholders who shall theretofore have surrendered
their certificates representing the number of shares of CSTM Stock held by them
and who shall have executed and delivered a copy of the Registration Rights
Agreement such CSTM Stockholder's Conversion Percentage of Earn-Out Stock then
due to such CSTM Stockholder, registered in the name of such stockholder
(rounded in each case down to the largest whole number of Earn-Out Shares.
d. The number of shares of Earn-Out Stock determined in accordance with
the provisions of subsection (ii) above, shall be reduced by a number calculated
by (y) dividing the total dollar amount of all OMG Claims (as defined in the
Agreement and Plan of Merger) for which a right of indemnification has properly
been asserted as of the Delivery Date, if any, by the greater of six dollars
($6.00) or the average closing price of OMG's stock during the twenty (20)
trading days first following the expiration of the Earn Out Period (the greater
of such numbers being referred to herein as the "Indemnification Price"), and
(z) rounding such dividend down to the nearest whole integer.
e. With respect to and only with respect to each CSTM Stockholder who has
not sold or transferred any of the OMG Shares delivered to them pursuant to this
Section as of February 28, 1999 (except for transfers (a) pursuant to any and
all laws governing descent and distribution, (b) pursuant to any other
testamentary bequest, (c) to immediate family member of any CSTM Stockholder (d)
pursuant to gifts to entities having status under Section 501(c)(3) of the Code,
or (e) to any trust of which the CSTM Stockholder of any of his or her heirs,
executors, administrators or permitted donees (hereunder), is the primary
beneficiary, (herein, a "Participating Stockholder"), each such Participating
Stockholder shall have the right to receive additional consideration in
connection with the Merger, if the average closing price for OMG
4
stock during the first ten (10) trading days of March, 1999 (herein, the "Target
Price") is less than six dollars ($6.00) per share (adjusted for any stock
dividends, stock splits and similar events) prior to April 1, 1999, calculated
as follows: An amount equal to $6.00 minus the Target Price shall be multiplied
by the total number of OMG Shares owned by each, such Participating Stockholder,
and this resulting sum shall then be divided by the Target Price. This final
number so calculated shall be the number of additional shares of stock to which
such Participating Stockholder shall be entitled (herein, the "Additional
Stock"). Certificates for Shares of all Additional Stock shall be delivered to
each Participating Stockholder on or before April 30, 1999.
f. OMG shall have the right to replace all or a portion of the Additional
Stock to be delivered to each Participating Stockholder with the contemporaneous
delivery of the sum of six dollars ($6.00) for each share not so delivered, by
complying with the following conditions: (a) Notice of such election and of the
percentage of Additional Stock to be replaced with money shall be given to the
CSTM Stockholders on or before April 15, 1999; (b) the ratio of Additional Stock
to money to be delivered to each Participating Stockholder shall be the same;
and (c) OMG shall deliver to the CSTM Stockholders, contemporaneously with its
April 15, 1999 notice of election to replace the number of shares of Additional
Stock with money, an opinion of OMG's regular tax counsel to the effect that the
payment of money in lieu of shares of Additional Stock as elected by OMG will
not cause the Merger to lose its status as a reorganization under Section
368(a)(1)(A) of the Code.
4.3 Definitions: Capitalized terms not otherwise defined herein shall have
the same meanings assigned to such terms in the Agreement and Plan of Merger.
ARTICLE 5
TERMINATION AND AMENDMENT
Section 5.1 Notwithstanding the approval of this Merger Agreement by the
shareholders of CSTM and West, this Merger Agreement may be terminated at any
time prior to the Effective Time by mutual agreement of the Boards of Directors
of CSTM and West.
Section 5.2 Notwithstanding the approval of this Merger Agreement by the
shareholders of CSTM and West, this Merger Agreement shall terminate forthwith
in the event that the Agreement and Plan of Merger shall be terminated as
therein provided at any time prior to the Effective Time.
Section 5.3 In the event of the termination of this Merger Agreement as
provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of West or CSTM or their respective officers
or directors, except as otherwise provided in the Agreement and Plan of Merger.
5
Section 5.4 This Merger Agreement may be amended by the parties hereto at
any time before or after approval hereof by the shareholders of either CSTM or
West but, after any such approval, no amendment shall be made which by law
requires the further approval of the shareholders of either CSTM or West without
obtaining such further approval. This Merger Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement
as of the date first written above.
OMNI RESOURCES CORPORATION - WEST CUSTOM SOFTWARE TURNKEY
(a Massachusetts corporation) MANUFACTURING, INC.
(a California corporation)
By: ___________________________ By:_________________________________
Name & Title: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Name & Title: ▇▇▇▇▇ ▇▇▇▇▇, President
President
OMNI MULTIMEDIA GROUP, INC.
(a Delaware corporation)
By: ___________________________
Name & Title: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
6
Exhibit C -
to Agreement and Plan of Merger
Exhibit D
to Agreement and Plan of Merger
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of March 1, 1997 between OMNI MULTIMEDIA GROUP, INC., a
Delaware corporation (herein, the "Company") and the Stockholder or Stockholders
of the Company listed on the signature pages hereto (individually, "Stockholder
and collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of
October 1, 1996, (herein, the "Merger Agreement"), among the Company, Omni
Resources Corporation - West, a Massachusetts corporation (herein, "West"),
and Custom Software Turnkey Manufacturing, Inc. (herein, "CSTM"), West is
merging into CSTM; and
WHEREAS, in connection therewith, each Stockholder is acquiring
unregistered shares of Common Stock of the Company (the "Shares"); and
WHEREAS, the Company and the Stockholders wish to set forth certain rights
and obligations with regard to the registration of the Shares;
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Shares" shall mean the shares of Common Stock of the Company issued to
the Stockholders pursuant to the Merger Agreement.
"Common Stock" shall mean, subject to Section 11, the Common Stock, $.01
par value, of the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Shares.
"Registration Expenses" shall mean the expenses so described in Section 8.
"Registration Statement" means a shelf registration statement of the
Company pursuant to the provisions of Section 6 hereof filed with the Commission
which covers some or all of the Shares, as applicable, on an appropriate form
under Rule 415 under the Securities Act, or any similar rule that may be adopted
by the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
2. Compliance with Securities Laws. Each Stockholder represents and
warrants that he or she:
(a) has paid no brokerage or similar commissions in connection with
the acquisition of such Shares.
(b) is acquiring such Shares solely for his or her own account.
(c) has provided such information as may reasonable have been
requested by the Company in order for the Company or its counsel to evaluate the
availability of an exemption under the Securities Act for the issuance of the
Shares to such Stockholder.
3. Securities Act Matter. Each Stockholder acknowledges and agrees that
the Shares have not been registered under the Securities Act or under the
securities laws of any state, in reliance upon certain exemptive provisions of
such statutes. Each Stockholder recognizes and acknowledges that such claims of
exemption are based, in part, upon each Stockholder's representations contained
in this Agreement. Each Stockholder further recognizes and acknowledges that,
because the Shares are unregistered under federal and state laws, they are not
presently eligible for public resale, and may only be resold in the future
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws, or pursuant to a valid exemption from such
registration requirements. Each Stockholder recognizes and acknowledges that
Rule 144 or any other exemption promulgated under the Securities Act (which
facilities routine sales of securities in accordance with the terms and
conditions of that Rule, including a holding period requirement) is not now
available for resale of the Shares, and each
2
Stockholder recognizes and acknowledges that, in the absence of the
availability of Rule 144 or any other exemption under the Securities Act, a sale
pursuant to a claim of exemption from registration under the Securities Act
would require compliance with some other exemption under the Securities Act,
none of which may be available for resale of the Shares. Each stockholder
recognizes and acknowledges that, except as set forth in this Agreement, the
Company is under no obligation to register the Shares, either pursuant to the
Securities Act or the securities laws of any state.
4. Restrictive Legend. Each certificate representing Shares shall, except
as otherwise provided in this Section 4 or in Section 5, be stamped or otherwise
imprinted with a legend substantially in the following form:
"The Securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of except in accordance with the terms thereof and
unless registered with the Securities and Exchange Commission of the
United States and the securities regulatory authorities of certain states
or unless an exemption from such registration is available."
Such certificates shall not bear such legend if in the opinion of counsel
reasonably satisfactory to the Company the securities being sold thereby may be
publicly sold without registration under the Securities Act or if such
securities have been sold pursuant to Rule 144, any other exemption under the
Securities Act or an effective registration statement. In addition, each
Stockholder shall have the right to request that the Company remove any legend
three years after the issuance of any securities (or such shorter period as may
then be applicable under Rule 144(k)), provided that the Stockholder certifies
in form and substance reasonably acceptable to the Company that he or she is not
an affiliate of the Company.
5. Notice of Proposed Transfer. Prior to any proposed voluntary transfer
of any Shares required to bear the restrictive legends set forth under Section 4
(except any such transfer pursuant to an effective Registration Statement, Rule
144 or upon death or by gift), each Stockholder shall give written notice to the
Company of his or her intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel satisfactory to the Company to the
effect that the proposed transfer may be effected without registration under the
Securities Act, whereupon the Stockholder shall be entitled to transfer such
security in accordance with the terms of his or her notice. Each certificate for
such Shares transferred as above provided shall bear the legend set forth in
Section 4, except that such certificate shall not bear such legend if (i) such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act), (ii) or
pursuant to any effective Registration Statement or (iii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act.
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6. Required Registration. The Company agrees to use commercially
reasonable efforts to (i) cause a Registration Statement on Form S-3 or any
successor thereto or such other form as then may be available to the Company
under Rule 415 under the Securities Act for a public offering of all (but not
less than all) of the Shares from time to time issued pursuant to the terms of
the Merger Agreement to be filed with the Securities Exchange Commission prior
to or promptly after the issuance thereof and (ii) cause the Registration
Statement to be effective as soon as practicable. The Company will use
commercially reasonable efforts to cause each Registration Statement to remain
effective in order to permit the Prospectus forming part thereof to be used by
holders of Shares for the public resale of such shares until the earlier of (i)
three (3) years (or such shorter period as may then be applicable under Rule
144(k)) after the original issuance of the Shares covered thereby; or (ii) the
sale of all Shares covered thereby (the "Effectiveness Period"). Anything to the
contrary herein notwithstanding, the Company may suspend sales at any time under
any Registration Statement immediately upon notice to the Stockholder at his or
her last known address, for any of the reasons and for the time period set forth
in Section 8. The parties acknowledge that pursuant to the terms of this
Registration Rights Agreement, separate Registration Statements will be filed
from time to time as Shares are required to be issued pursuant to the terms of
the Merger Agreement. The terms of this Registration Rights Agreement shall
apply to each such Registration Statement and the corresponding Prospectuses.
7. Registration Procedures. If and whenever the Company is required by the
provisions of Section 6 hereof to use commercially reasonable efforts to effect
the registration of Shares under the Securities Act, the Company will, as
expeditiously as possible:
(a) take such action as may be necessary so that (i) any
Registration Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto (and each report or other
document incorporated therein by reference in each case) complies in all
material respects with the Securities Act and the Exchange Act and the
respective rules and regulations thereunder, (ii) any Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading;
(b) furnish to each Stockholder such number of copies of the
Registration Statement and each such amendment and supplement thereto (in each
case including exhibits) and each amendment or supplement, if any, to the
Prospectus included therein as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Shares covered by the
Registration Statement as well as such other filings as they may, from time to
time, request;
4
(c) use commercially reasonable efforts to register or qualify the
Shares covered by the Registration Statement under the securities or "blue sky"
laws of such jurisdictions as the Stockholders reasonably shall request
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(d) use commercially reasonable efforts to have the Shares covered
by the Registration Statement subject to quotation on the American Stock
Exchange;
(e) promptly notify each Stockholder (at their last known addresses)
(i) of the effective date and the date when any post-effective amendment to the
Registration Statement becomes effective, (ii) of any stop order or notification
from the Commission or any other jurisdiction as to the suspension of the
effectiveness of the Registration Statement, (iii) of the beginning and end of
any suspension under Section 8, or (iv) at any time the Registration Statement
does not meet the standards under Sections 11, 12(2), and Rule 10b-5 of the
Securities Act;
(f)(1) The Company shall advise the Stockholders and, if requested
by the Stockholders, shall confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement included therein or for additional
information.
(2) The Company shall advise the Stockholders and, if requested by
any such Stockholder, confirm such advice in writing of:
(i) the issuance by the Commission of any stop order
suspending effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation of any proceeding for
such purpose; and
(iii) the happening of any event that requires the making of
any changes in the Registration Statement or the Prospectus so that, as of such
date, the Registration Statement and the Prospectus do not contain an untrue
statement of a material fact and do not omit to state a material fact required
to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not
misleading
5
(which advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(g) The Company shall use all commercially reasonable efforts to
prevent the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time.
(h) Upon the occurrence of any event contemplated by Section
7(f)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement to the
related Prospectus or file any other required document so that, as thereafter
delivered to purchasers of the Shares included therein, the Prospectus will not
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If the Company notifies the
Stockholders of the occurrence of any event contemplated by Section
7(f)(2)(iii), the holders shall suspend the use of the Prospectus until the
requisite changes to the Prospectus have been made.
(i) The Company shall use all commercially reasonable efforts to
take all other steps necessary to effect the registration, offering and sale of
the Shares covered by any Registration Statement contemplated hereby.
8. Suspension. The rights of the Stockholders to distribute the Shares
pursuant to any Registration Statement may be suspended up to 90 days in any 12
month period by the Company giving notice of such suspension to the
Stockholders, if and only so long as there then exists material, non-public
information relating to the Company which, in the good faith determination of
its management or Board of Directors, would not be appropriate for disclosure
during that time and compliance with its obligations under Section 7(h) would
otherwise require disclosure of such information.
9. Expenses. All expenses incurred by the Company in complying with
Sections 6 and 7, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses incurred in connection
with complying with state securities or "blue sky" laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, and costs of issuance, but excluding any Selling Expenses, are
called "Registration Expenses". All underwriting discounts (if any) and selling
commissions applicable to the sale of the Shares covered by the Registration
Statement are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with the
preparation and filing of the Registration Statement. Any and all Selling
Expenses shall be borne by the Stockholders in proportion to the number of
Shares sold by each. The Company shall not be obligated to pay any Registration
Expenses in connection with the preparation and filing of the
6
Registration Statement if the Registration Statement is withdrawn, delayed or
abandoned for any reason by the Stockholders.
10. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Stockholders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation thereunder that may at any time
permit a Stockholder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) maintain registration of its Common Stock under Section 12 of
the Exchange Act;
(c) file in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(d) furnish to any Stockholder, so long as the Stockholder owns any
Shares, forthwith upon reasonable request: (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company; and (iii) such other information
as may be reasonably requested in availing any Stockholder of any rule or
regulation under the Securities Act which permits the selling of any such
securities without registration or pursuant to such form.
11. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Shares as so changed or augmented.
12. Stockholders' Conduct. With respect to any sale of Shares covered by
the Registration Statement, each Stockholder understands and agrees as follows:
(a) Each Stockholder will carefully review the information
concerning him or her contained in the Registration Statement and will promptly
notify the Company if such information is not complete and accurate in all
material respects, including having properly disclosed any position, office or
other material relationship within the past three years with the Company or its
affiliates;
(b) Each Stockholder agrees to sell Shares only in the manner set
forth in the Registration Statement (which shall include any reasonable manner
requested in advance and in writing by the Stockholders);
7
(c) Each Stockholder agrees to comply with the anti-manipulation
rules under the Exchange Act in connection with purchases and sales of
securities of the Company during the time the Registration Statement remains
effective;
(d) Each Stockholder agrees to comply with the prospectus delivery
requirements of the Exchange Act;
(e) Each Stockholder agrees to suspend sales during the periods when
sales are to be suspended pursuant to Section 8.
(f) In connection with the registration of the Shares, each
Stockholder will furnish to the Company in writing such information requested by
the Company with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with federal and
applicable state securities laws.
13. Indemnification.
(a) In connection with any Registration Statement, the Company shall
indemnify and hold harmless each Stockholder and each of their respective
directors, officers, employees, trustees and agents, as follows:
against any and all loss, liability, claim, damage and expense
whatsoever, including any amounts paid in settlement of any investigation,
litigation, proceeding or claim, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto),
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made; provided, that the Company shall
not be liable under this clause for any settlement of any action effected
without its written consent, which consent shall not be unreasonably
withheld;
provided that this indemnity shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Stockholder in writing
expressly for use in the Registration Statement (or any amendment thereto) (or
any amendment or supplement thereto). Any amounts advanced by the Company to an
indemnified party pursuant to this Section 5 as a result of such losses shall be
returned to the Company if it shall be finally determined by such a court in a
judgment not subject to appeal or final review that such indemnified party was
not entitled to indemnification by the Company.
8
(b) Each Stockholder shall agree, severally and not jointly, to indemnify
and hold harmless the Company, and the other Stockholders and each of their
respective directors, officers (including each officer of the Company who signed
the Registration Statement), employees, trustees and agents and each person, if
any, who controls the Company or any underwriter, from and against any and all
loss, liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 13(a), as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Stockholder expressly for use in
the Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto); provided, however, that, no such Stockholder
shall be liable for any claims hereunder in excess of the amount of gross
proceeds received by such Stockholder from the sale of Shares pursuant to the
Registration Statement.
(c) Each indemnified party shall give prompt notice to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, enclosing a copy of all papers served on such indemnified
party, but failure to so notify an indemnifying party shall not relieve it of
any liability which it may have to the indemnified party otherwise than on
account of this indemnify agreement. An indemnifying party may participate at
its own expense in the defense of any such action. If an indemnifying party so
elects within a reasonable time after receipt of such notice, such indemnifying
party, jointly with any other indemnifying party, may assume the defense of such
action with counsel chosen by it and approved by the indemnified party or
parties defendant in such action, provided that if any such indemnified party
reasonably determines that there may be legal defenses available to such
indemnified party which are different from or in addition to those available to
such indemnifying party or that representation of such indemnifying party and
any indemnified party by the same counsel would present a conflict of interest,
then such indemnifying party or parties shall not be entitled to assume such
defense. If an indemnifying party is not entitled to assume the defense of such
action as a result of the proviso to the preceding sentence, counsel for such
indemnifying party shall be entitled to conduct the defense of such indemnified
party or parties. If an indemnifying party assumes the defense of an action in
accordance with and as permitted by the provisions of this paragraph, such
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action. In
no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from its own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
14. Representations and Covenants. Each Stockholder hereby represents and
warrants to the Company as follows:
(a) EACH STOCKHOLDER UNDERSTANDS THAT HIS OR HER INVESTMENT IN THE
SHARES INVOLVES RISK.
9
(b) EACH STOCKHOLDER HAS CONSULTED HIS OR HER OWN ATTORNEY,
ACCOUNTANT OR INVESTMENT ADVISOR WITH RESPECT TO THE INVESTMENT CONTEMPLATED
HEREBY AND ITS SUITABILITY FOR SUCH STOCKHOLDER. ANY SPECIFIC ACKNOWLEDGMENT SET
FORTH BELOW WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE
STOCKHOLDERS SHALL NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION
AND WARRANTY.
(c) The Company has made available to each Stockholder, during the
course of this transaction and prior to the consummation thereof, the
opportunity to ask questions of and receive complete and correct answers from
representatives of the Company concerning the terms and conditions of the Shares
and to obtain any additional information relating to the financial condition and
business of the Company.
(d) Each Stockholder understands that he or she must bear the
economic risk of this investment until such time as the Shares are registered;
that the Shares are not currently registered under the Securities Act, and,
therefore, cannot be resold unless they are subsequently registered under the
Securities Act or unless an exemption from such registration is available; that
such Stockholder is purchasing the Shares with no present view toward resale or
other distribution thereof, and that each Stockholder agrees not to resell or
otherwise dispose of all or any part of the Shares, except as permitted by law,
including, without limitation, any and all applicable provisions of the Merger
Agreement and this Agreement and any regulations under the Securities Act and
applicable state securities laws.
(e) Each Stockholder has adequate means of providing for his or her
current needs and personal contingencies and has no need for liquidity in
connection with this investment in the Shares.
(f) Each Stockholder's overall commitment to investments which are
not readily marketable is not disproportionate to his or her net worth and each
Stockholder's investment in the Shares will not cause such overall commitment to
become excessive. The acquisition of the Shares by each Stockholder is
consistent with his or her general investment objectives.
(g) Each Stockholder has such knowledge and experience in financial
and business matters that he or she is capable of evaluating the merits and
risks of the investment in the Shares.
(h) Each Stockholder received an offer concerning the Shares and
first learned of this investment in the state or other jurisdiction listed in
such Stockholder's residence address on the signature page hereto, and intends
that the state securities laws of that state or other jurisdiction alone govern
this transaction.
10
(i) Each Stockholder hereby acknowledges receipt of the documents
described in Section 5.07 of the Merger Agreement which documents each
Stockholder has reviewed. Each Stockholder further acknowledges and warrants
that, prior to the execution of this Agreement, he or she has had the
opportunity to ask questions and receive answers from the Company and her
counsel concerning the terms and conditions of the transactions contemplated by
the Merger Agreement and the issuance of the Shares, and concerning any of the
documents identified above, and to obtain such additional further information
from the Company and her counsel as he or she has deemed necessary to verify the
accuracy of the information contained in the documents identified above or any
other information furnished to the Stockholders.
(j) Each Stockholder understands that the representations,
warranties and covenants set forth herein will be relied upon by the Company,
the stockholders of the Company and their respective counsel and accounting
firms.
15. Miscellaneous.
(a) With respect to any Shares required to bear the restrictive
legend set forth in Section 4 hereof, all covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Shares, provided, that such
transferee executes a counterpart signature page to this Agreement), whether so
expressed or not.
(b) All notices and other communications which by any provision of
this Agreement are required or permitted to be given shall be given in writing
and shall be (a) mailed by first-class or express mail, postage prepaid, (b)
sent by telex, telegram, telecopy or other form of rapid transmission, confirmed
by mailing (by first class or express mail, postage prepaid) written
confirmation at substantially the same time as such rapid transmission, or (c)
personally delivered to the receiving party (which if other than an individual
shall be an officer or other responsible party of the receiving party). All such
notices and communications shall be mailed, sent or delivered as follows:
if to the Company, at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇;
if to any other party hereto, at the address of such party set
forth on the signature page hereto;
if to any subsequent Stockholder of Shares, to it at such
address as may have been furnished to the Company in writing by such
Stockholder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a Stockholder) or to the Stockholders
(in the case of the Company) in accordance with the provisions of this
paragraph.
11
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be amended or modified, and provisions hereof
may be waived, with the written consent of the Company and the holders of at
least a eighty percent (80%) of the outstanding Shares (excluding any Shares no
longer required to bear the restrictive legend set forth in Section 4 hereof).
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
OMNI MULTIMEDIA GROUP, INC.
By: _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Executive Vice President
STOCKHOLDER:
_____________________________________________
[You must complete pages 13 and 14 of this Agreement]
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Principal Residence Address:
Note: Non-principal residence addresses and post office boxes cannot be
accepted.
__________________________________________
(Number and Street)
__________________________________________
(City, State) (Zip Code)
__________________________________________
(Residence Telephone)
Mailing Address (if different from above):
__________________________________________
(Number and Street)
__________________________________________
(City, State) (Zip Code)
Citizenship:______________________________
Social Security or
Taxpayer I.D. No.:________________________
13
If the Stockholder is a natural person and is an accredited investor
described by category 12 or 13 (or both) set forth on the attached Exhibit A,
please check this box.
|_|
If the Stockholder has not checked the box above, please check this box if
at least one of the categories set forth on the attached Exhibit A describes
you.
|_|
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Exhibit A
to Registration Rights Agreement
1. A bank (as defined in Section 3(a)(2) of the Securities Act) or a
savings and loan association or other institution (as defined in Section
3(a)(5)(A) of the Securities Act), whether acting in regard to this investment
in its individual or a fiduciary capacity.
2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934.
3. An insurance company (as defined in Section 2(13) of the Securities
Act).
4. An investment company registered under the Investment Company Act.
5. A business development company (as defined in Section 2(a)(48) of the
Investment Company Act).
6. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 3 01 (c) or (d) of the Small Business Investment
Act of 1958.
7. A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if the plan has total assets in
excess of $10,000,000.
8. An employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (an "ERISA Plan") whose decision to
purchase the Interest was made by a plan fiduciary (as defined in Section 3 (21)
of ERISA), which is either a bank, savings and loan association, insurance
company or registered investment adviser.
9. An ERISA Plan with total assets in excess of $1,000,000 or, if a
self-directed ERISA Plan, with investment decisions made solely by persons that
are "accredited investors."
10. A private business development company (as defined in Section
202(a)(22) of the Investment Advisers Act of 1940).
11. An organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring the Interest,
with total assets in excess of $10,000,000.
12. A natural person whose net worth (either individually or jointly with
such person's spouse) at the time of the Closing exceeds $1,000,000.
1
13. A natural person who had an individual income in excess of $200,000 or
joint income with such person's spouse in excess of $250,000 in each of the last
two calendar years and who reasonably expects to reach the same income level in
the current calendar year.
14. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Interest, whose purchase of the Interest is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the
Securities Act.
15. An entity in which all of the equity owners fit into at least one of
the categories listed under paragraphs 1-14 above.
2
Exhibit E
to Agreement and Plan of Merger
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the first day of
March, 1997, by and between OMNI RESOURCES CORPORATION - WEST, a California
corporation having a usual place of business in San Jose, California
(hereinafter referred to as the "Corporation") and ▇▇▇▇▇ ▇▇▇▇▇ of ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "the Employee").
W I T N E S S E T H :
WHEREAS, the Corporation is engaged in the business of designing,
fabricating and selling discs, diskettes, and packaging and manuals therefor,
and mastering, replicating and duplicating, computer software programs of third
parties and providing general fulfillment services for third parties (herein,
the "Products"); and
WHEREAS, the Corporation desires to engage the Employee, and the Employee
desires to be engaged by the Corporation on the basis and subject to the terms
hereinafter set forth; and
WHEREAS, the parties hereto desire to set forth various terms and
conditions relating to the engagement of the Employee and to be bound by such
terms and conditions;
NOW, THEREFORE, in consideration of the foregoing premises and the
undertakings and covenants of the parties contained hereinbelow, the Corporation
and the Employee hereby agree as follows:
1. Term.
a. Original: The Corporation agrees to employ the Employee and the
Employee agrees to work for the Corporation, upon the terms and conditions
hereinafter contained, for an original term (hereinafter referred to as the
"Original Term") commencing as of the date hereof and ending upon February 28,
1998; subject, however, to extension and subsequent termination as hereinafter
provided.
b. Extensions: The Corporation shall have the sole option to extend the
Original Term hereof for an additional period of two (2) years, commencing March
1, 1998 and expiring on February 28, 2000, upon all of the terms and conditions
herein by giving notice to the Employee in writing of its election so to extend
the Term prior to the first anniversary hereof. Thereafter, the Corporation and
the Employee may, by an agreement in writing, elect, prior to the third
anniversary of this Agreement and prior to each anniversary thereafter, further
to extend the term hereof upon such terms, conditions and provisions as they
shall mutually agree. Notwithstanding the foregoing, the Employee shall have the
right conclusively to terminate any
right of the Corporation to extend the Original Term hereof by delivering notice
that the Employee desires the Term of this Agreement to come to an end at the
expiration of the Original Term, on or before November 30, 1997. If the
Corporation receives such notice from the Employee on or before November 30,
1997 then it is expressly understood and agreed that this Employment Agreement
shall conclusively come to an end on February 28, 1998 and the Corporation shall
have no rights of extension as set forth in this Section 1.b. However, the
Employee expressly understands and agrees that any such purported notice
endeavoring to bring the Original Term of this Agreement to an end shall be
null, void and of no force and effect if such notice is delivered to the
Corporation at any time after October 31, 1998.
2. Services of Employee.
Subject to the terms of this Agreement, the Employee shall serve the
Corporation as its President and Chief Operating Officer and shall not be
subject to demotion from that office throughout the effective term of this
Agreement. In such capacity, will be responsible for all aspects relative to the
operation of the Corporation, including developing marketing, sales and
development strategies and implementing the same, overseeing all operational
aspects, and determining all financial and administrative matters relative to
the Corporation's business. In addition, the Employee shall perform such duties
as are generally required of his position with the Corporation. The Employee's
duties are subject to the supervision and discretion of the Chief Executive
Officer and the Board of Directors of the Corporation, whose determination shall
be final. All activities and services performed by the Employee for the
Corporation shall be rendered in a faithful, responsible and competent manner,
consistent with standards that may reasonably be established and maintained by
the Corporation from time to time.
3. Exclusivity of Service.
During the Term, the Employee shall devote his full time best efforts,
attention and interest to the business and affairs of the Corporation and shall
not, directly or indirectly, engage in or be associated with, either alone or as
a partner, officer, director, stockholder or employee, any business activity
which is in violation of the Non-Disclosure and Non-competition Agreement
annexed hereto so long as he shall be employed by the Corporation. Further, for
so long as the Employee may be employed by the Corporation, the Employee shall
be forbidden to own greater than 1% of any publicly traded class of securities
of any business entity which is primarily engaged in the business of the
Corporation as described in the recitals of this Agreement.
4. Compensation.
a. As total compensation for his services for the Corporation, the
Employee shall receive the following:
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i. Base Salary: The Corporation shall pay the Employee a base salary
at the rate of $150,000 per year, payable in arrears, in equal installments as
may be the Corporation's then practice, generally, but no less frequently than
monthly.
ii. Bonus Compensation: In addition to amounts required in 4.a.i.,
hereof, the Corporation shall pay the Employee an annual bonus (calculated as at
the end of each fiscal year of the Corporation during the Term hereof), equal to
the lesser of (a) One Hundred Fifty Thousand Dollars ($150,000) or (b) five
percent (5%) of the net pretax profit of the Corporation earned during such
fiscal year. It is agreed that for purposes of this computation, "net pretax
profit" shall (a) be calculated prior to the determination of the bonus
compensation due to the Employee for any fiscal year and (b) be increased by the
salaries and all other related costs (such as benefits, perquisites and the
like) incurred in association with the employment of any employees on the
Corporation's payroll employed at the request of the Corporation's Chief
Executive Officer, but who, in the Employee's good faith judgment, are not
necessary or desirable for the operations of the Corporation, and with respect
to whom the Corporation has received written notice of any such objection
promptly following the Employee having notice that such person was an employee
of the Corporation. The Corporation shall instruct its then independent
Certified Public Accountants (herein, the "Auditors") to make such calculation
and certify the same to the Corporation and to the Employee as soon as
practicable following the close of each fiscal year, but in all events no later
than ninety (90) days following the close of each, such fiscal year. The
Auditor's determination of the amount of net pretax profit shall be conclusive
and binding on the Corporation and the Employee. The Corporation shall then pay
the amount of Bonus Compensation due to the Employee within twenty (20) business
days following its receipt of the requisite certification from the Auditors with
respect to the amount of the annual, net pretax profit.
iii. Insurance: During the Term hereof, the Corporation will cause
the Employee and his family to be covered under the then health and disability
insurance plans including, such medical, dental, vision, disability and other
plans which the Corporation may, from time to time, make available, generally,
to other similarly situated employees, , provided that the Employee pays for his
share of such plans as the Corporation charges to other participants in the Plan
(as such payment requirement may change from time to time).
iv. Motor Vehicle Allowance: The Corporation shall, during the Term
of this Agreement, pay the Employee an allowance of $500.00 per month in
addition to his other compensation hereunder in reimbursement of all motor
vehicle costs incurred by him from time to time in pursuing the Corporation's
business.
v. Life Insurance: During the Term of this Agreement, the
Corporation agrees to provide and pay for term life insurance in the face amount
of $1,000,000, such policy to be owned by and payable to such person or persons
as the Employee may, from time to time, elect by prior written notice to the
Corporation. The Corporation's obligation hereunder shall be null
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and void if at any time the Employee shall cease to be insurable at generally
prevailing rates and terms generally applicable to individuals of sound health
of the same age.
vi. Stock Options: From the employee stock option plan established
by the Corporation's parent corporation, Omni MultiMedia Group, Inc., a Delaware
corporation, (herein, "OMG"), the Corporation agrees to have issued options to
purchase 5,000 shares of OMG's stock, at a strike price equal to the closing
price on the American Stock Exchange of OMG's stock as of the date of the
execution and delivery of this Agreement (or if the date of the execution and
delivery of this Agreement shall not be a trading day, then the first trading
day preceding such execution and delivery). Such options shall be fully and
immediately vested and shall be delivered to the Employee promptly after the
execution hereof.
5. Reimbursement of Expenses:
The Employee shall be entitled to receive from the Corporation
reimbursement for out of pocket expenses actually incurred by the Employee in
the furtherance of the business of the Corporation, provided that such expenses
are reasonable and customary, or have been approved, in advance, by the Chief
Executive Officer or Board of Directors of this Corporation. As a condition to
the Employee being entitled to receive such reimbursement, the Employee shall
provide such receipts, and fill out such reports and informational returns as
from time to time reasonably requested by the Corporation.
6. Status as President:
The Employee shall have access to the Corporation's facilities, including
an office and secretarial support commensurate with his title and
responsibilities and in the same general area where other executives of the
Corporation have their offices, during the Term of this Agreement.
7. Early Termination of Contract:
In addition to the provisions concerning termination of the Employee's
employment hereunder set forth in paragraph 1, above, this Agreement and the
Employee's employment hereunder shall terminate:
(a) Upon the removal of the Employee for "just cause" at any time at the
election of the Board of Directors of the Corporation; provided, however, that a
removal for just cause shall not be effected unless a hearing shall be held
before the Board of Directors of the Corporation and at which hearing the
Employee, on at least seven (7) days' prior notice, shall have been afforded an
opportunity to appear and be heard; or
(b) for "substantial disability".
As used in this section "just cause" means:
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(a) gross insubordination, malfeasance or misconduct, or
(b) infidelity, dishonesty or misrepresentation by the Employee with his
dealings with or on behalf of the Corporation; or
(c) the incurring of material obligations by the Employee or behalf of the
Corporation which have not been authorized by the Corporation (it being
expressly understood and agreed that the Employee's incurring of normal costs
and expenses, and entering into normal purchase orders and the like which are
relative to the routine, day-to-day operation of the business are not intended
to be within the definition of "material obligations" for which the Employee
must have prior authorization from the Corporation); or
(d) the unauthorized disclosure to any competitor or potential competitor
of any trade secret or confidential business information of the Corporation; or
(e) the failure or refusal of the Employee to perform the functions or
covenants required hereunder or under the agreement annexed hereto as Exhibit I;
or
(f) the conviction of the Employee of a felony involving moral turpitude
with all appeals period with respect to such conviction having expired or with
any final appeals having been pursued unsuccessfully to conclusion; or
(g) the certification by a doctor licensed to practice in the Commonwealth
of Massachusetts or the State of California that the Employee is an alcoholic or
habitual user of illegal drugs; or
(h) the repeated failure of the Employee to comply with the material
provisions of this Agreement, or with written directives of the Board of
Directors of the Corporation consistent herewith; or
(i) any pattern of prolonged absence by the Employee without satisfactory
explanation or the reason therefor.
As used in this Agreement "substantial disability" means the inability of
the Employee to render substantially all of the services required of him
hereunder for a period of three (3) months or more without interruption or for
an aggregate of four (4) months in any twelve (12) month period as a result of a
physical or mental ailment. For the purpose hereof, "interruption", as used in
the preceding sentence, shall mean a period of at least two (2) weeks of
full-time employment by the Employee. The existence of such physical or mental
ailment shall be determined by a physician reasonably acceptable to the Employee
and the Corporation, whose written opinion shall be conclusive as of its date,
absent fraud or manifest error. If the Corporation asserts that the Employee is
substantially disabled, the Employee shall cooperate fully with any physician to
5
permit an examination pursuant to this Agreement. During any disability of the
Employee and prior to the passage of such three (3) month period, the Employee
shall continue to receive the salary and other benefits hereunder. Subsequent to
the expiration of said three (3) month period, the Corporation may elect not to
terminate this Agreement but to suspend the payment and accrual of salary and
benefits due under section 4 hereunder during the continuation of the disability
of the Employee.
8. Representations of Employee:
The employee represents and warrants to the Corporation that he has no
contract, obligation or duty of any kind whatsoever which is inconsistent
herewith, and that he is under no disability of any kind to enter into and
perform this Agreement. The Employee agrees to indemnify, defend and hold
harmless the Corporation from and against any claims, suits, actions, expenses
or damages, including, without limitation, all attorneys' fees, which the
Corporation may incur or sustain as a result of any breach which the Corporation
may incur or sustain as a result of any breach of or inaccuracy in any of the
representations contained in this paragraph.
9. Services to Affiliates:
Upon the request of the Corporation, the Employee shall furnish services
to any related, affiliated, parent or subsidiary firm or corporation without
additional compensation so long as such services are within the scope of his
duties and obligations hereunder; provided, however, that the Employee shall not
be required or obligated to relocate his residence or to be away from his
residence for a time period in excess of thirty (30) continuous days, or for a
nonconsecutive total of sixty (60) days in any twelve month period.
10. Non-Disclosure and Non-Competition.
As a condition to the Employee's employment by the Corporation and in
order to assist the Corporation in preserving its proprietary information and
good will, the employee agrees to be bound by, and to execute separately, a
Non-Disclosure and Non-Competition Agreement in the form and substance of the
Agreement annexed hereto as Exhibit I.
11. Miscellaneous:
a. Captions:
The captions and headings of the various paragraphs and
subparagraphs of this Agreement are inserted for convenience or reference only
and shall not effect the construction or interpretation or this Agreement. In
addition, the Employee agrees to abide by the Corporation's "Statement of
Company Policy Regarding ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇."
b. Notices:
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Except as otherwise specifically provided herein to the contrary,
any notice required or permitted to be given to any party hereunder shall be
given in hand or sent postage prepaid by registered or certified mail, return
receipt requested, to such party at his last known place of address. Either
party may thereafter designate any other address by appropriate notice in
writing. Any notice shall be deemed to have been given fifteen (15) days after
it is mailed or, if delivered by hand, when received.
c. Binding Effect:
This Agreement shall be binding upon and enure to the benefit of the
Corporation, its successors and assigns, and upon and to the Employee, his heirs
and legal representatives; provided, however, that the Employee may not assign
either his obligations or benefits hereunder and any attempt at such assignment
shall be null and void.
d. Governing Law:
This Agreement is entered into and shall be construed and enforced
under and governed by the laws of the Commonwealth of Massachusetts, without
regard to principles of conflict of laws.
e. Integration:
This Agreement represents the entire understanding of the parties
with respect to its subject matter and supersedes all prior agreements and
letters of intent, written or oral, concerning the subject matter hereof and may
not be changed or modified in any regard except by a written statement signed by
the party against whom such change or modification is claimed or sought to be
enforced. No inference shall be drawn from any variance between this Agreement
and any prior drafts thereof.
f. Waiver and Delay:
No delay or omission by either party in enforcing any of the terms
or conditions of this Agreement shall be construed as or constitute a waiver
thereof or bar thereto, and no waiver of any breach hereunder shall be construed
as or constitute a waiver of any other or subsequent breach or a bar to the
enforcement of such terms or conditions on any future occasion.
g. Divisibility:
Whenever possible, each paragraph of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any paragraph or any provision thereof is unenforceable or invalid under
such law, then, if possible, such paragraph or provision shall be reformed in
order to conform with said applicable law so that it shall bind the parties
thereto. Alternatively, if such reformation is not possible, then such paragraph
or provision shall
7
be ineffective only to the extent of such enforceability and the balance of this
Agreement shall in such event continue to be binding and in full force and
effect.
8
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement to
take effect as a sealed instrument as of the day and year first above written.
OMNI RESOURCES CORPORATION - WEST
By: _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Executive Vice President
_____________________________________________
▇▇▇▇▇ ▇▇▇▇▇
9
EXHIBIT I
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
THIS NON-DISCLOSURE AND NON-COMPETITION AGREEMENT is made as of the first
day of March, 1997 by and between OMNI RESOURCES CORPORATION WEST, a California
corporation, having a usual place of business in San Jose, California
(hereinafter referred to as "the Corporation") and ▇▇▇▇▇ ▇▇▇▇▇ of ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter, the "Employee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Employment Agreement between the
Corporation and the Employee of even date, the Corporation agreed to employ the
Employee; and
WHEREAS, the Corporation is in the business of developing and formulating
Products, as hereinafter defined, and is in the business of selling the Products
in the Territory, as hereinafter defined; and
WHEREAS, the Corporation and its parent, affiliated and subsidiary
companies (the Corporation and its affiliated and subsidiary companies, both
those now existing and those hereafter created or acquired, being collectively
referred to herein as the "Companies") have expended and shall continue to
expend substantial sums of money and its officers and employees have invested
and shall continue to invest substantial time, effort and attention in
developing and perfecting the Confidential Materials and Information, as
hereinafter defined; and
WHEREAS, the Employee recognizes and acknowledges that in the course of
his employment, the Corporation may give him access to the Confidential
Materials and Information; and
WHEREAS, the Corporation may expend substantial time, effort and sums of
money to train the Employee and to develop the Employee's expertise and
knowledge of the various aspects of the Corporation's businesses and methods;
and
WHEREAS, the Employee acknowledges and recognizes that the Confidential
Materials and Information, as it may exist from time to time, is a valuable,
special and unique asset of the business of the Companies; and
WHEREAS, the Companies desire to protect, and the Employee desires to
assist the Companies in protecting, the Confidential Materials and Information
and to preserve and enhance the Companies' business prospects and the value of
the Companies' good will; and
WHEREAS, to accomplish the purposes set forth in the preceding paragraph,
the Employee is willing to agree with the Corporation not to disclose the
Confidential Materials and
Information and not to compete with the Corporation in the Territory or with its
customers, all as more particularly set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and in order to
induce the Corporation to employ the Employee as set forth in the Employment
Agreement of even date, the Employee hereby agrees with the Corporation as
follows:
1. Definitions:
As used herein, the terms listed below shall have the meanings assigned to
such terms as follows:
a. "Compete", "Competition" and all variations of the foregoing shall mean
the engagement or participation, or the furnishing aid or assistance in
connection with, the development, design, manufacture, distribution, sale or
marketing of the Products, whether or not for profit, within the Territory.
b. "Confidential Materials and Information" shall mean (i) all
confidential or secret processes, plans, formulae, data (including cost and
performance data), inventions, machinery, drawings, papers, writings,
specifications, manufacturing procedures and techniques, methods, technology,
know-how, programs, devices and materials relating to the business, products
(either existing or under development), services or activities of any of the
Companies, regardless of whether or not any or all of the foregoing are or may
be patented or copyrighted, (ii) any other information or aspect of or related
to any of the Companies' trade, businesses, products or activities which are
designated or treated by the Companies as confidential, secret or of a
proprietary nature, or (iii) any customer or supplier usages and requirements
and any of the Companies' lists of clients, customers, suppliers and business
contacts.
c. "Products" shall mean all services, catalogues and all computer
software copies, packaging, management, disks and diskettes, project management
and fulfillment services, of the type heretofore and hereafter provided,
produced, developed, manufactured, owned, licensed, or the like, by or for the
Company.
d. "Territory" shall mean the area comprised of the North American
continents.
2. Confidentiality:
a. The Employee acknowledges and agrees that all Confidential Materials
and Information are, and shall remain, the sole and exclusive property of the
Companies, and the Employee acknowledges that he has no rights thereto or
interest therein. The Employee further acknowledges and agrees that the Employee
had none of the Confidential Materials and Information and no knowledge of or
information relating to the Confidential Materials and Information prior to the
commencement of Employee's employment with the Corporation.
2
b. Except as required in the course of Employee's employment with the
Corporation the Employee agrees that he shall not, during the Employee's
employment with the Corporation or at any time subsequent thereto, directly or
indirectly, copy or reproduce, cause to be copied or reproduced, divulge, use,
furnish, disclose or otherwise make known or accessible to anyone other than any
of the Companies or their respective officers, directors, employees and other
parties who reasonably require portions of such Confidential Materials and
Information to provide services or materials to the Corporation and who agree to
hold such Confidential Materials and Information in confidence, or cause to be
divulged, used, furnished, disclosed or otherwise made known or accessible to
anyone other than any of the Companies or their respective officers or
directors, any of the Confidential Materials and Information or any knowledge or
information with respect to the Confidential Materials and Information.
c. The Employee agrees that upon the Corporation's request or upon the
cessation of the Employee's employment with the Corporation, regardless of the
reason, all Confidential Materials and Information and all copies, records and
reproductions thereof which are in tangible form shall be forthwith returned to
the Corporation.
d. The Employee agrees not to use for any purpose, except on behalf of the
Corporation while the Employee is in the employ of the Corporation and only at
the request of an authorized officer of the Corporation, the name Omni or Omni
Resources or any other name or trade style now or hereafter used or adopted by
the Corporation or any of the Companies.
3. Trade Secrets, etc.:
The Employee agrees that:
(a) any and all inventions, processes, discoveries, know-how and
improvements (whether or not patentable or copyrightable);
(b) any and all patent rights, letters patent, programs, copyrights,
trademarks, trade names, and applications therefor, whether in the United
States or in any other country;
(c) any and all rights and interests in, to or under any of the
foregoing;
which are related to or affect, directly or indirectly, the business or affairs
of the Corporation as it may exist from time to time and which may be made,
acquired or possessed by the Employee, alone or with others, during the time
that the Employee is employed by the Corporation shall become the exclusive
property of the Corporation and shall at all times and for all purposes be
regarded as acquired and held by the Employee in a fiduciary capacity for the
sole benefit of the Corporation. In furtherance of the foregoing, if requested
by the Corporation, the Employee shall assign to the Corporation his rights to
any and all of items enumerated in phrases (a), (b) and (c) of this section 3
without further compensation. The Employee shall, upon request made by the
3
Corporation, promptly make all disclosures, execute all instruments and papers,
and perform all acts necessary or desired by the Corporation to vest and confirm
in the Corporation, its successors, assigns and nominees, fully and completely,
all rights created and contemplated by this section 3, and which may be
necessary or desirable to enable the Corporation, its successors, assigns or
nominees, to secure and enjoy the full benefits and advantages thereof, and,
without thereby limiting the generality of the foregoing, shall execute any and
all such applications, writings or other documents as may be necessary for the
Corporation to apply for and obtain, and for it to assign, any patent, trademark
or copyright.
4. Non-Competition:
a. The Employee agrees that while the Employee is employed by the
Corporation, the Employee shall not, directly or indirectly, as an individual
proprietor, partner, stockholder, agent, consultant, advisor, director, officer,
joint venturer or investor, or in any other capacity whatsoever, either (i)
engage in or in any manner be employed by or associated with any person,
company, association, partnership, trust, corporation, business or other entity
engaged in any business or enterprise (whether or not for profit) which competes
with the business of the Company as it is now operated and as it may be operated
in the future anywhere within the Territory. In addition, the Employee agrees
that for a period of two (2) years after the Employee's employment with the
Corporation terminates (unless such termination is solely due to the fact that
the Corporation elected not to offer the Employee continued employment with the
Corporation), the Employee shall not solicit, contact or otherwise seek to
obtain purchase orders for Products from those twenty (20) existing or potential
customers of the Corporation designated in writing by the Corporation no later
than thirty (30) days following the termination of the Employee's employment. It
is expressly understood and agreed that there shall be no non-competition
obligation on the Employee's part following the termination of his Employment if
such termination shall solely be a decision on the Corporation's part not to
offer the Employee continued employment other than there being the determination
on the Corporation's part that "just cause" exists for terminating the
Employee's employment arrangement with the Corporation.
b. The Employee further agrees that while the Employee is employed by the
Corporation and for a period of two (2) years after the Employee's employment
with the Corporation terminates (regardless of the reason), the Employee shall
not, directly or indirectly, whether alone or by any act in concert with others,
employ, attempt to employ, recruit or otherwise solicit or induce or influence
to leave his or her employment, any employee of the Corporation, for any purpose
which, directly or indirectly, would serve to compete with the Corporation.
4
5. Interpretation:
Notwithstanding anything in this Agreement to the contrary, in the event
there is any conflict between the terms of this Agreement and the terms of the
Employment Agreement, the terms and provisions of the Employment Agreement shall
govern.
5
6. Injunctive Relief:
The parties hereto recognize that because the subject matter of this
Agreement is special, unique and of an extraordinary nature, a breach by the
Employee of any of the Employee's obligations hereunder would result in the
Corporation's being severely damaged so that a legal remedy alone would not be
sufficient to protect the Corporation from such breach. Therefore, in addition
to and without limiting any other remedies available at law or hereunder, in the
event that the Employee breaches any of his obligations hereunder, or shall
threaten a breach of any of such obligations, then (i) to protect itself from
such breach the Corporation shall be entitled to obtain equitable remedies,
including specific performance and injunctive relief, without the necessity of
posting a bond, and (ii) so long as the Corporation prevails in any action, the
Corporation shall be entitled to recover any and all costs and expenses,
including reasonable attorneys' fees, in enforcing this Agreement and the
provisions of this section against the Employee.
7. Severability:
The Employee and the Corporation hereby recognize and agree that because
any breach of the provisions of this Agreement by the Employee would result in
irreparable harm and damage to the overall reputation of the Corporation and to
its business and affairs and because the Employee is being compensated therefor
under the Employment Agreement, the restrictions set forth in this Agreement by
which the Employee has agreed to be bound, are reasonable, both as to the
covenants of and the duties and restrictions accepted by the Employee herein,
including in terms of extent, time and geographic area. Therefore, whenever
possible, the Employee and the Corporation desire that each provision of this
Agreement be interpreted in such a manner as to be effective, valid and
enforceable under applicable law. However, if any of the covenants, duties or
restrictions which the Employee has accepted hereunder, or any other provisions
of this Agreement, would be deemed to be unreasonable (such as because any or
all of them may be too broad) so that they would be unenforceable or invalid
under such applicable law, then such paragraph, provision, covenant, duty or
restriction shall be reformed in order to conform with such applicable law so
that it shall bind the Employee and the Corporation; such reformation to be
effected to the extent, but only to the extent, so as to eliminate that portion
or the extent by which such provision shall be invalid or unenforceable, and the
remainder of such covenant, duty, restriction, provision or paragraph shall
continue to be binding and in full force and effect.
8. Miscellaneous:
a. This Agreement represents the entire understanding of the parties with
respect to its subject matter and supersedes all prior agreements, written or
oral, concerning the subject matter hereof, and may not be changed or modified
in any regard except by an instrument in writing and signed by a duly authorized
officer of the Corporation and by the Employee. No inferences shall be drawn
from any variance between this Agreement and any prior oral or written
negotiations or letters of intent with respect to, or drafts of, this Agreement.
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b. All terms and provisions of this Agreement shall be binding upon and
enure to the benefit of and be enforceable by the Corporation and its
successors, assigns and legal representatives. The rights and benefits of the
Corporation under this Agreement shall be transferable and assignable to any of
the Companies and to any business entity with which the Corporation may merge or
to which it may transfer all or a substantial part of its assets, and all of the
covenants and agreements hereunder shall enure to the benefit of and be
enforceable by the successors and assigns of any such transferee or assignee.
The obligations of the Employee hereunder shall be binding upon the Employee's
heirs, executors, administrators and legal representatives.
c. This Agreement may be executed in one or more counterparts, each one of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
d. No delay or omission by the Corporation in enforcing any of the terms
or conditions of this Agreement shall be construed as or constitute a waiver
thereof or bar thereto, and no waiver of any breach hereunder shall be construed
as or constitute a waiver of any other or subsequent breach or a bar to the
enforcement of such terms or conditions on any future occasion.
e. This Agreement has been entered into with and shall be deemed to be
made under the laws of the Commonwealth of Massachusetts, and for all purposes
shall be governed by, enforced under and construed in accordance with the laws
of said Commonwealth, without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Corporation and the Employee have caused this
Agreement to be executed to take effect as an instrument under seal as of the
day and year first above written.
Witness: OMNI RESOURCES CORPORATION - WEST
_________________________ By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Executive Vice President
Witness:
_________________________ ____________________________________________
▇▇▇▇▇ ▇▇▇▇▇
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