EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is
made and entered into as of August 1, 1998, by and among THE ENTERTAINMENT
INTERNET, INC., a Nevada corporation ("EINI"), THE ENTERTAINMENT INTERNET,
INC., and California Corporation, dba XXXXXXX.xxx., a wholly owned subsidiary
of EINI ("CASTNET"), and ONLY MULTIMEDIA NETWORK INCORPORATED, a California
corporation ("OMNI"), with reference to the following facts:
RECITALS
A. WHEREAS, OMNI is a privately held California corporation
engaged in the business of providing internet casting services and EINI is a
Nevada corporation not currently engaged in any active business, which is
qualified to trade on the NASD Bulletin Board pursuant to a currently effective
Rule 15(c)(2)(11) filing with the Securities and Exchange Commission; and
B. WHEREAS, the Board of Directors of OMNI believes it would
be beneficial to OMNI's ability to finance its business to merge into a publicly
traded shell corporation such as EINI; and
C. WHEREAS, EINI received cash compensation of $125,000 (which
was paid out pursuant to a Consulting Agreement by EINI to Xxxxx Xxxxxx or his
affiliates) as otherwise described herein, and the acquisition of an operating
business to enhance the trading market and value of its shares;
D. WHEREAS, the parties have determined it will be in the best
interest of the merged entity to be operated as a wholly owned subsidiary of
EINI; and
E. WHEREAS, subject to the terms and conditions of this
Agreement, OMNI will merge with and into CASTNET which will be the surviving
corporation (the "Merger"); and
F. WHEREAS, each outstanding option, warrant, convertible
note, and share of common and preferred stock of OMNI will be converted on a
one-for-one basis into an equal number options, warrants, convertible notes, and
shares of Rule 144 restricted common and preferred stock of EINI upon
consummation of the Merger; and
G. WHEREAS, the Boards of Directors of OMNI and EINI, deeming
the above described merger as desirable in the best interest of their respective
shareholders, have approved and authorized this merger subject to the terms and
conditions herein;
1
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing facts and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
(INTENTIONALLY OMITTED)
DEFINITIONS
ARTICLE 2
THE MERGER
2.1 The Merger .
(a) As of the date of this Agreement, EINI has outstanding 9,600,000 shares
of common stock held by approximately 35 shareholders. One of the shareholders
of EINI is Bristol Asset Management IV, LLC ("Bristol") which acquired (i)
2,400,000 shares of common stock from the pre-existing shareholders of EINI and
(ii) 3,000,000 restricted shares of common stock in contemplation of the merger
for consideration in the amount of $125,000 to EINI. EINI then paid $125,000 as
a fee to Xxxxx Xxxxxx for services provided in contemplation of the merger.
(b) In connection with the formation of CASTNET, EINI will issue 8,852,279
shares of EINI Common Stock, 5,400 shares of EINI Preferred Stock to CASTNET and
warrants, option and convertible notes, convertible into 5,854,721 shares of
EINI Common Stock (the "New EINI Shares"). The New EINI Shares will be issued as
private placement shares subject to Regulation D as a private placement of
unregistered shares, and subject to legend and resale restrictions under Rule
144. The 8,852,279 shares of EINI Common Stock and 5,400 shares of EINI
Preferred Stock held by CASTNET, upon completion of the Merger, will be
exchanged for each share of OMNI Common Stock and OMNI Series B Preferred Stock
on a one-for-one basis as of the Effective Time.
(c) In connection with the Merger, each holder of warrants, options or
convertible notes of OMNI will receive an identical instrument in EINI, in terms
of all rights preferences and privileges, and CASTNET will be operated as a
wholly owned subsidiary of EINI, which shall own all of the issued and
outstanding shares of CASTNET. All debts, liabilities, obligations, contracts
and assets of OMNI will, by operation of law as of
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the Effective Time, become the debts, obligations, contracts, liabilities and
assets of CASTNET.
2.2 Certificate of Merger. A certificate of merger, (the
"Certificate of Merger"), shall be prepared, executed and delivered to the
Secretary of State of the State of California (the "California Secretg[y") for
filing on the Closing Date in accordance with the General Corporation Law of
the State of California (the "Corporation Law").
2.3 Effective Time. The Merger shall become effective upon
the filing of the Certificate of Merger with the California Secretary in
accordance with the provisions of the Corporation Law. The date and time of the
filing with the California Secretary is referred to herein as the "Effective
Time."
2.4 Tax-Free Merger. The parties intend that the Merger will
be treated as a tax-free reorganization and nonrecognition transaction under
Section 368 of the Internal Revenue Code of 1986, as amended.
ARTICLE 3
EFFECT OF THE MERGER
3.1 General. At the Effective Time, the separate existence of
OMNI shall cease and CASTNET shall continue as the surviving corporation,
subject to Section 3.6 (CASTNET sometimes is referred to hereinafter as the
"Surviving Corporation"), and shall possess all the rights, privileges, powers,
immunities and franchises, of a public as well as a private nature, of OMNI
(referred to hereinafter as the "Disappearing Corporation"); all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions for shares stock options and warrants, and all choices in action,
and all and every interest, of or belonging to or due the Disappearing
Corporation shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in the Disappearing Corporation shall
not revert or be in any way impaired by reason of the Merger. From and after the
Effective Time, the Surviving Corporation shall be responsible and liable for
all the liabilities and obligations of the Disappearing Corporation so merged,
and any claim existing or Action or proceeding pending by or against the
Disappearing Corporation may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in its place. The Surviving
Corporation shall have all the rights, privileges, immunities and powers and
shall be subject to all the duties and liabilities of a corporation organized
under the Corporation Law, and neither the rights of creditors nor any Liens
upon the property of the Disappearing Corporation shall be impaired by the
Merger, all with the effect set forth in the Corporation Law.
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3.2 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of any Party or the
holder of any of the following securities:
(a) Each share of OMNI Common Stock issued and
outstanding immediately prior to the Effective Time and owned beneficially or of
record by OMNI shareholders shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, $.01 par value per
share, of EINI (the "New EINI Shares") in a 1: 1 exchange ratio.
(b) Each share of OMNI Common Stock issued and
outstanding immediately prior to the Effective Time and held by OMNI (including
shares held as treasury stock) or owned beneficially or of record by EINI or any
direct or indirect subsidiary of EINI shall be canceled and no consideration
shall be delivered in exchange therefor.
(c) Each share of OMNI Series B Preferred Stock
outstanding immediately prior to the Effective Time and owned beneficially or of
record by OMNI shareholders shall be converted into and become one validly
issued, fully paid and nonassessable share of EINI Series B Preferred Stock,
$500 par value per share (the "EINI Preferred Shares ").
(d) Each option, warrant, and convertible note of
OMNI outstanding immediately prior to the Effective Time shall be assumed by
EINI and shall be deemed to constitute an option, warrant or convertible note,
as the case may be, to acquire, on the terms and conditions as were applicable
under such option, warrant, or convertible note, the same number of EINI common
stock as the holder of such option, warrant or convertible note would have been
entitled to receive pursuant to the Merger had such holder exercised such option
or warrant, or converted such convertible note, in full immediately prior to the
Effective Time (not taking into account whether such option, warrant or
convertible note was in fact exercisable or convertible at such time). As soon
as practicable after the Effective Time, EINI shall deliver to each holder of an
OMNI option, warrant and convertible note an instrument in EINI, in
substantially identical terms of all rights, preferences and privileges as the
OMNI option, warrant and convertible note, as the case may be.
3.3 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, dissenting shares as defined in the Corporation Law
("Dissenting Shares") shall not be converted into the right to receive the New
EINI Shares at or after the Effective Time unless and until the holder of such
Dissenting Shares withdraws his or her demand for payment of the fair value of
such shares in accordance with Article 13 of the Corporation Law or becomes
ineligible for such payment. If a holder of Dissenting Shares shall withdraw his
or her demand for payment of the fair value of such shares in accordance with
Article 13 of the Corporation Law or shall become ineligible to receive such
payment, then, as of the later of the Effective Time or the occurrence of such
event, such holder's Dissenting Shares shall be automatically converted into and
represent the right to receive the New EINI Shares. OMNI
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shall give EINI prompt notice of any notices of intent to assert dissenters
rights and to demand payment or withdrawals of notices of intent to assert
dissenters rights and to demand payment and will not, except with the prior
written consent of EINI, settle or compromise or offer to settle or compromise
any such notices, voluntarily make any payment with respect to any notice of
intent to demand payment for shares of OMNI Common Stock or Series B Preferred
Stock or approve any withdrawal of any such notice. Each holder of Dissenting
Shares shall have only such rights and remedies as are granted to such holder
under the Corporation Law.
3.4 Exchange of Certificates and EINI Exchange Fund.
(a) Prior to the Closing Date, EINI shall appoint its transfer agent to act
as exchange agent (the "Exchange Agent") in the Merger.
(b) Not later than five (5) business days prior to the Effective Time, EINI
shall deposit, or cause to be deposited, with the Exchange Agent, for exchange
in accordance with this Section 3.4, the requisite number of EINI Shares to be
exchanged equally for the Outstanding Shares (the "EINI Exchange Fund").
(c) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record a certificate or certificates which
represent Outstanding Shares (the "Certificates"), a letter of transmittal (the
"Letter of Transmittal") for use in effecting the surrender of the Certificates
in exchange for the EINI Shares. Upon surrender of a Certificate to the Exchange
Agent and a duly executed and completed Letter of Transmittal, the holder of
such Certificate (the "Holder") shall be entitled to receive in exchange
therefor as soon as practicable one share of EINI stock equivalent to the class
or series of OMNI Stock represented by the Certificate being surrendered. Each
Certificate surrendered shall forthwith be canceled. At the Effective Time, the
Holder of a Certificate shall have no rights with respect to shares of OMNI
Common Stock other than to surrender such Certificate pursuant to this Section
3.4 or, if the Holder holds Dissenting Share, to demand payment of the fair
value thereof pursuant to Article 13 of the Corporation Law or to exercise any
other rights under the Corporation Law.
(d) The Exchange Agent shall follow the same procedure with respect to
lost, stolen or mutilated Certificates as OMNI followed with respect to lost,
stolen or mutilated certificates prior to the Effective Time.
(e) Neither EINI, CASTNET nor any other Party hereto shall be liable to a
holder of OMNI Common Stock/Shares for any certificates delivered to a
Governmental Authority pursuant to applicable abandoned property, escheat and
other Laws.
3.5 No Transfers of Stock After Effective Time. After the
Effective Time, there shall be no transfers of any shares of OMNI Shares on the
stock transfer books of the Surviving Corporation. If, after the Effective Time,
Certificates are presented to the
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Surviving Corporation, they shall be forwarded to the Exchange Agent and
exchanged in accordance with Section 3.4(c), subject to applicable law in the
case of Dissenting Shares.
3.6 Certificate of Incorporation and Bylaws.
(a) The Articles of Incorporation of CASTNET in effect at the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of CASTNET in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation.
ARTICLE 4
PROXY STATEMENT PROSPECTUS
4.1 Notice to OMNI Shareholders. OMNI shall, in accordance
with the Corporation Law and the Articles of Incorporation and Bylaws of OMNI,
give notice of the Merger and solicit the consent of its Shareholders to the
Merger by Written Consent of its shareholders as soon as practicable after the
date hereof (and in any event on or before February 26, 1999) for the purpose of
considering and taking action upon the approval of this Agreement and the
Merger. The notice to the OMNI Shareholders shall state that shareholders of
OMNI are entitled to assert dissenters' rights under Article 13 of the
Corporation Law. OMNI will include in the notice the recommendation of the Board
of Directors of OMNI that shareholders of OMNI consent to the approval of this
Agreement and the Merger by written consent in lieu of a special meeting. OMNI
will inform the shareholders that Bristol holds majority voting power of the
OMNI and EINI shares and that it intends to consent to the approval of this
Agreement and the Merger. OMNI will take all other actions reasonably necessary
to secure the approval of the Merger and this Agreement by OMNI's shareholders
under the Corporation Law.
4.2 EINI Shareholders' Consent.
EINI Shareholders Meeting. EINI shall, in accordance
with the corporation laws of the State of Nevada and the Articles of
Incorporation and Bylaws of EINI, solicit the consent of its shareholders (the
EINI Shareholder's Consent") as soon as practicable after the date hereof(and in
any event on or before February 26, 1999) for the purpose of considering and
taking action upon amendment to the Articles of Incorporation of EINI to
authorize the exchange of the new EINI Shares for the OMNI Exchangeable Shares,
the Merger and such other matters as may be deemed necessary or appropriate by
the Board of Directors of EINI.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OMNI
As a material inducement to EINI and CASTNET to enter into
this Agreement and to consummate the transactions contemplated hereby and
except as otherwise set forth in the OMNI Disclosure Schedules to be delivered
by OMNI to EINI and CASTNET, OMNI represents and warrants to EINI and CASTNET
as follows:
5.1 Organization and Qualification.
(a) OMNI is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to carry on its business as it is now being
conducted.
(b) OMNI (i) does not, directly or indirectly, own any interest in any
corporation, partnership, joint venture, limited liability company, or other
Person and (ii) is not subject to any obligation or requirement to provide funds
to or to make any investment (in the form of a loan, capital contribution or
otherwise) in or to any Person.
(c) OMNI is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
properties owned or leased by it makes such qualification or licensing
necessary.
(d) OMNI has provided or will provide to EINI access to true and correct
copies of (i) the Articles of Incorporation and Bylaws and (ii) the complete
minute book and stock records of OMNI.
5.2 Capitalization
(a) The authorized capital stock of OMNI consists of (i) 60,000,000 shares
of stock ("OMNI Common Stock"), of which 8,852,279 shares are issued and
outstanding, and 5,854,721 shares are reserved for issuance upon the exercise of
outstanding options and warrants and conversion of preferred stock and notes,
and (ii) 1,000,000 shares of preferred stock, of which 5,400 shares are issued
and outstanding ("OMNI Series B Preferred"). All issued and outstanding shares
of OMNI Common Stock are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights. Other than such shares, options,
warrants, convertible preferred stock and convertible notes set forth above,
there are no shares of capital stock or other equity securities of OMNI
outstanding and no outstanding options, warrants, subscription rights (including
any preemptive rights), or commitments of any character whatsoever to which OMNI
is a party or is bound, requiring or which could require the issuance or sale by
OMNI of any shares of capital stock of OMNI or
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any securities convertible into or exchangeable or exercisable for, or rights
to purchase or otherwise acquire, any shares of capital stock of OMNI.
5.3 Authority.
(a) OMNI has the requisite corporate power and authority to enter into each
OMNI Document, to perform its obligations thereunder, and to consummate the
transactions contemplated thereby. Except for the approval of shareholders of
OMNI, the execution and delivery of the OMNI Documents by OMNI and the
consummation by OMNI of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of OMNI. Each OMNI
Document has been duly executed and delivered by OMNI and constitutes a legal,
valid and binding obligation of OMNI, enforceable against OMNI in accordance
with its terms.
(b) Consent, approval, order or authorization of, notice to, registration
or filing with any Governmental Authority is necessary in connection with the
execution and delivery of the OMNI Documents by OMNI or the consummation by OMNI
of the transactions contemplated by the OMNI Documents.
5.4 Audited Financial Statement. The audited financial
statements of OMNI at December 31, 1997 (the " 1997 Financial Statements") were
prepared in accordance with GAAP and present fairly the financial position,
results of operations and changes in financial position of OMNI as of the dates
and for the periods indicated. Except as noted in the footnotes contained in the
Financial Statements, such Financial Statements and footnotes were rendered
without qualification or exception and were not subject to any contingency. The
Financial Statements reflect, as of the date thereof, the interest in the
assets, liabilities and operations of OMNI.
5.5 Intentionally Omitted.
5.6 Labor Matters. There are no present or, to the knowledge
of OMNI, threatened Actions or work stoppages relating to any OMNI Personnel.
OMNI is not a party to any collective bargaining agreement with respect to
employees and, to the Knowledge of OMNI, there are no activities of any labor
union seeking to represent or organize the employees of OMNI. No unfair labor
practice, or race, sex, age, disability or other discrimination, complaint is
pending, nor is any such complaint, to the Knowledge of OMNI, threatened against
OMNI before the National Labor Relations Board, Equal Employment Opportunity
Commission or any other Governmental Authority, and no grievance is pending, nor
is any grievance, to the knowledge of OMNI, threatened against OMNI.
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5.7 Employee Benefit Plans. Since the date of the OMNI
Financial Statements, there has not been any adoption or amendment in any
material respect by OMNI of any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of OMNI or any person affiliated with
OMNI under Section 414(b), (c), (m) or (o) of the Code (collectively, "OMNI
Benefit Plans"). All OMNI Benefit Plans, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of ERISA, are in compliance
with all applicable requirements of law, including ERISA and the Code, and OMNI
has no liabilities or obligations with respect to such OMNI Benefit Plan,
whether accrued, contingent or otherwise (other than obligations to make
contributions and pay benefits and administrative costs incurred in the ordinary
course), nor to the knowledge of OMNI are any such liabilities or obligations
expected to be incurred.
5.8 Transactions with Certain Persons. To the knowledge of
OMNI, no current OMNI Personnel, or any member of the immediate family of any
current OMNI personnel or any other Affiliate of OMNI is presently a party to
any material agreement, arrangement or other transaction with OMNI, other than
employment agreements or independent contractor agreements made available to
EINI and CASTNET, or has an interest in any party to such contracts.
5.9 Payments. OMNI has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official, governmental authority
or other person, in the United States or any other country, which is in any
manner related to the business or operations of OMNI which OMNI knows or has
reason to believe to have been illegal under any federal, state or local Law of
the United States or the laws of any other country having jurisdiction; and OMNI
has not participated, directly or indirectly, in any boycotts or other similar
practices affecting any of its actual or potential customers or which violate
any applicable law.
5. 10 Board Actions. The Board of Directors of OMNI (at a
meeting duly called and held) has resolved to recommend approval of this
Agreement by the shareholders of OMNI.
5. 11 Required Vote. Approval of the Merger and this Agreement
by shareholders of OMNI will require (a) the approval of a majority of the
outstanding shares of OMNI Common Stock and (b) the approval of a majority of
the outstanding shares of OMNI Preferred Stock.
5.12 Disclosure. The representations and warranties of OMNI
herein, or in any document, exhibit, statement, certificate or schedule
furnished by or on behalf of OMNI to EINI and CASTNET as required by this
Agreement, do not contain and will not contain any untrue statement of a
material fact and do not omit and will not omit to state any material fact
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necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. To the knowledge of
OMNI, there are no material facts or circumstances relating to OMNI which have
not been disclosed herein to EINI and Castnet. There is no fact known to OMNI
that has specific application to OMNI (other than .general economic or industry
conditions) and that materially adversely affects or, as far as OMNI can
reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of OMNI (on a consolidated basis)
that has not been set forth in this Agreement or the schedules hereto.
The foregoing notwithstanding, OMNI makes no representations or warranties
regarding the impact or effect of any actions which EINI or CASTNET may take
before or after the Closing or which OMNI may take after the Closing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF EINI
6.1 Organization and Qualification
(a) EINI is a corporation duly organized, validly existing and in good
standing under the laws of the state of Nevada and has the requisite corporate
power and authority to carry on its business as it is now being conducted.
(b) Except for CASTNET, EINI (i) does not, directly or indirectly, own any
interest in any corporation, partnership, joint venture, limited liability
company, or other Person and (ii) is not subject to any obligation or
requirement to provide funds to or to 0 make any investment (in the form of a
loan, capital contribution or otherwise) in or to any Person.
(c) EINI is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
properties owned or leased by it makes such qualification or licensing
necessary, except for any such jurisdiction where the failure to so qualify or
be licensed, individually and in the aggregate for all such jurisdictions, would
not reasonably be expected to have a Material Adverse Effect.
(d) EINI has provided or will provide to OMNI access to true and correct
copies of the Articles of Incorporation and Bylaws and complete minute book.
6.2 Capitalization.
(a) The authorized capital stock of EINI consists of (i) 50,000,000 shares
of Common Stock, $0.01 par value per share, of which 9,600,000 shares are issued
and outstanding not including shares issued to CASTNET and no shares are
reserved for issuance
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upon the exercise of outstanding options and warrants, and (ii) 10,000,000
shares of Preferred Stock, of which 5,400 shares are issued and outstanding and
held by CASTNET. All issued and outstanding shares of EINI Common Stock and
EINI Preferred Stock are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights. Other than such shares, options
and warrants listed on above, there are no shares of capital stock or other
equity securities of EINI outstanding and no outstanding options, warrants,
subscription rights (including any preemptive rights), calls, or commitments,
or convertible notes or instruments of any character whatsoever to which EINI
is a party or is bound, requiring or which could require the issuance, sale or
transfer by EINI of any shares of capital stock of EINI or any securities
convertible into or exchangeable or exercisable for, or rights to purchase or
otherwise acquire, any shares of capital stock of EINI. There are no stock
appreciation rights relating to EINI.
(b) The authorized capital of CASTNET consists of (i) 50,000,000 shares of
common stock, $.01 par value per share, of which 1,000,000 shares are issued and
outstanding and held by EINI. There are no classes of preferred stock or
outstanding options or warrants in CASTNET.
(c) Upon completion of the Merger the outstanding common stock of EINI
shall be held as follows: 3,600,000 to the pre-existing shareholders of EINI;
3,600,000 shares of restricted common stock to Bristol in consideration for a
payment of $125,000; 2,400,000 shares of restricted common stock acquired by
Bristol from the pre-existing shareholders of EINI, and 8,852,279 shares of
restricted common stock issued to the former common shareholders of OMNI and
5,400 shares of preferred stock issued to the former preferred shareholders of
OMNI. In addition, there shall be 5,854,721 shares reserved for issuance upon
the exercise of outstanding options and warrants on the same terms and
conditions as held by the former holders of such rights in OMNI.
6.3 Authority.
(a) EINI has the requisite corporate power and authority to enter into this
Agreement, to perform its obligations thereunder, and to consummate the
transactions contemplated thereby. The execution and delivery of this Agreement
by EINI and the consummation by EINI of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of EINI.
This Agreement has been duly executed and delivered by EINI and constitutes a
legal, valid and binding obligation of EINI, enforceable against EINI in
accordance with its terms.
(b) The execution and delivery by EINI of this Agreement does not, and the
consummation of the transactions contemplated thereby will not, (i) conflict
with, or result in a violation of, any provision of bylaws or other charter
documents of EINI, (ii) constitute or result in a breach of or default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or result in the termination or suspension of, or accelerate the
performance required by, or result in a right of termination, cancellation or
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acceleration of any obligation or a loss of a benefit under, any note, bond,
mortgage, indenture, deed of trust, lease, permit, concession, franchise,
license, agreement or other instrument or obligation to which EINI is a party
or to which the properties or assets of EINI are subject, except for such
violations, conflicts, breaches, defaults, terminations or accelerations which
would not, individually or in the aggregate, have a material adverse effect,
(iii) create any lien upon any of the properties or assets of EINI, or (iv)
constitute, or result in, a violation of any law applicable to EINI or any of
the properties or assets of EINI.
(c) No consent, approval, order or authorization of, notice to,
registration or filing with any governmental authority or other person is
necessary in connection with the execution and delivery of this Agreement by
EINI or the consummation by EINI of the transactions contemplated by this
Agreement.
6.4 Financial Statements and Report. Since December 1, 1997,
EINI has timely filed all registrations, forms, reports, statements, notices,
schedules and documents required to be filed with the Commission, and all
amendments or supplements to any of the above (collectively, the "EINI
Reports"). Each of the EINI Reports, as of their respective filing dates,
complied in all material respects with the Securities Act and the Exchange Act.
As of their respective dates, the EINI Reports did not contain any 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, in the light of the
circumstances under which they were made, not misleading. The audited financial
statements of EINI included or incorporated by reference in the EINI Reports
(the "EINI Financial Statements") were prepared in accordance with GAAP and
present fairly the financial position, results of operations and changes in
financial position of EINI as of the dates and for the periods indicated. Except
as noted in the footnotes contained in the EINI Financial Statements, such EINI
Financial Statements and footnotes were rendered without qualification or
exception and were not subject to any contingency. No event has occurred since
the preparation of the EINI Financial Statements that would require a
restatement of the EINI Financial Statements under GAAP other than by reason of
a change in GAAP. EINI has heretofore furnished to OMNI a complete and correct
copy of all amendments and modifications which have not been filed with the
Commission to all agreements, documents and other instruments which have been
previously filed by EINI with the Commission and which are in effect on the date
hereof.
6.5 Absence of Undisclosed Liabilities. EINI does not have any
liability or obligation (absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected on a corporate balance sheet or disclosed in
the notes thereto, except liabilities (a) stated or adequately reserved against
in the EINI Financial Statements or disclosed in the footnotes thereto; or (b)
(i) incurred after January 1, 1998, in the ordinary course of business
consistent with past practices, (ii) not prohibited by this Agreement and (iii)
not reasonably expected to have a material adverse effect.
SLE LADOCSU"1261 13 60004 0001 01/20/99 -12-
6.6 Absence of Certain Changes or Events. Except to the
extent not material to EINI or in connection with the transactions contemplated
hereby, since January 1, 1998, there has not been any of the following:
(a) any event, damage, destruction or loss, whether covered by insurance or
not, which has had a material adverse effect;
(b) any entry by EINI into a commitment or transaction material to EINI,
which is not in the ordinary course of business consistent with prior practice;
(c) any change by EINI in accounting principles, methods or practices,
except insofar as may have been required by a change in GAAP;
(d) except as required by its terms, any declaration, payment or setting
aside for payment of any dividends or distributions in respect to shares of
capital stock of EINI, or any redemption, purchase or other acquisition of any
shares of capital stock of EINI;
(e) any cancellation of any debts or waiver or release of any right or
claim of EINI individually or in the aggregate material to EINI, whether or not
in the ordinary course of business;
(f) any revaluations by EINI of any of its assets or liabilities, including
without limitation, writing off notes or accounts receivable;
(g) other than in the ordinary course of business consistent with prior
practice, any increase in the rate or terms of compensation payable or to become
payable by EINI to its personnel; any bonus, incentive compensation, service
award or other benefit granted, made or accrued, contingently or otherwise, for
or to the credit of personnel of EINI; employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by EINI for
its personnel except for contributions in accordance with prior practice made
to, and payments made to employees under, plans and arrangements existing on
January 1, 1998;
(h) any Tax election or settlement or compromise by EINI of any federal,
state, local or foreign Tax liability;
(i) any adoption of a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or other reorganization of EINI,
other than in connection with the transactions contemplated hereby;
(j) any purchase, acquisition or sale by EINI of any assets, other than in
the ordinary course of business consistent with prior practice;
SLE LADOCSUM1261 13 60004 000101/20/99 -13-
(k) any amendment, cancellation or termination of any material contract,
including, without limitation, any license or sublicense, or other instrument to
which EINI is a party or to which EINI or any of the assets of EINI is bound;
(1) any failure to pay when due any material obligation of EINI;
(m) any failure to operate the business of EINI in the ordinary course with
an effort to preserve the business intact, to keep available to EINI the
services of its personnel, and to preserve for EINI the goodwill of its
customers and others having business relations with EINI;
(n) any commitment to borrow money entered into by EINI, or any loans made
or agreed to be made by EINI, involving more than $10,000;
(o) any liabilities incurred by EINI involving $10,000 or more, other than
liabilities incurred in the ordinary course of business consistent with past
practices;
(p) any payment, discharge or satisfaction of any liabilities of EINI or
any capital expenditure of EINI, other than (i) the payment, discharge or
satisfaction in the ordinary course of business consistent with prior practice
of liabilities reflected or reserved against in the EINI Financial Statements or
incurred in the ordinary course of business consistent with prior practice since
January 1, 1998 and (ii) any capital expenditures involving $10,000 or less,
other than in the ordinary course of business consistent with prior practice;
(q) any expenditures in excess of $10,000 made by EINI which are not
reflected as an asset in EINI's balance sheet accounts or are not deductible for
Federal income tax purposes other than in the ordinary course of business
consistent with prior practice;
(r) other than in the ordinary course of business consistent with prior
practice (i) any agreement, commitment or other transaction entered into by
EINI, other than any agreements involving an expenditure by EINI of not more
than $10,000 entered into in the ordinary course of business consistent with
past practices or (ii) any agreement or commitment entered into by EINI
involving more than $10,000 that, pursuant to its terms, is not cancelable
without penalty on less than thirty days' notice;
(s) other than in the ordinary course of business consistent with prior
practice any agreement by EINI to do any of the things described in the
preceding clauses (a) through (r) of this Section 6.6, other than as expressly
contemplated or provided for herein.
6.7 Title to Personal Properties. EINI has good and marketable
title to, or a valid and effective right to use, all of its respective personal
properties, including all personal properties reflected on the EINI Financial
Statements or acquired since the date of the EINI
SLE LAI)OCS\2"1261 13 60004 000101/20/99 -14-
Financial Statements (except property disposed of subsequent to that date in
the ordinary course of business and except other immaterial items). Such assets
and properties are not subject to any mortgage, pledge, lien, claim,
encumbrance, charge, security interest or title retention or other security
arrangement except for liens for the payment of federal, state and other taxes,
the payment of which is neither delinquent nor subject to penalties, and except
for other liens and encumbrances incidental to the conduct of the business of
EINI or the ownership of their assets or properties, which were not incurred in
connection with the borrowing of money or the obtaining of advances and which
do not in the aggregate materially detract from the value of the assets or
properties of EINI or materially impair the use thereof in the operation of
their respective businesses. All leases pursuant to which EINI leases any
substantial amount of personal property are valid and effective in accordance
with their respective terms.
6.8 Contracts and Commitments.
(a) Except as reflected in the EINI Financial Statements or incurred since
the date thereof in the ordinary course of business consistent with past
practice, no EINI Entity is a party to or subject to:
(i) any agreement or other commitment, except agreements or other
commitments which involve payments to or by EINI of $25,000 or less;
(ii) any agreement or other commitment with any Person containing
covenants limiting the freedom of EINI to compete in any line of business
or with any Person or in any geographic location or to use or disclose any
information in their possession;
(iii) any license agreement (as licensor or licensee);
(iv) any agreement of indemnification, other than indemnification
rights granted in the Bylaws of EINI;
(v) any agreement that contains a fixed penalty or liquidated damages
clause for late performance or other default by EINI;
(vi) any agreement or undertaking pursuant to which EINI is: (A)
borrowing or is entitled to borrow any money; (B) lending or has committed
itself to lend any money; or (C) a guarantor or surety with respect to the
obligations of any Person;
(vii) any agreement with any personnel of EINI (other than agreements
with former employees under which EINI has no obligations);
(viii) any powers of attorney granted by EINI; and
(ix) any leases of real property.
SLE LADOCSU"1261 13 60004 0001 01/20/99 _15-
(b) EINI is not in violation or breach of any material contract. There does
not exist any event or condition that, after notice or lapse of time or both,
would constitute an event of default or breach under any material contract on
the part of EINI or, to the knowledge of EINI, any other party thereto or would
permit the modification, cancellation or termination of any material contract or
result in the creation of any lien upon, or any person acquiring any right to
acquire, any assets of EINI. To the knowledge of EINI, no other party to any
material contract is in default thereunder or breach thereof. EINI has not
received in writing any claim or threat that EINI has breached any of the terms
and conditions of any material contract.
(c) The consent of, or the delivery of notice to or filing with, any party
to a material contract is not required for the execution aid delivery by EINI of
this Agreement or the consummation of the transactions contemplated under the
Agreement.
6.9 Brokers: Finder's Fee. Other than the $125,000 fee
payable to Xxxxx Xxxxxx or an affiliate, EINI has not entered into any
agreement/arrangement/understanding which will result in the obligation to pay
or finder's or other fee or commission (other than attorneys' accountants' and
investment bankers' fees) in connection with the transactions contemplated by
this Agreement.
6. 10 Litigation. There are no legal actions (a) pending or,
to the Knowledge of EINI, threatened against EINI or the transactions
contemplated by this Agreement or (b) pending or, to the Knowledge of EINI,
threatened against any current personnel of EINI. EINI is not subject to any
order, judgment, writ, injunction or decree of any governmental authority.
6. 11 xxx. EINI has timely filed all material Tax Returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a governmental entity having authority to do so). Each such
Tax Return is true, correct and complete in all material respects. EINI has
paid, within the time and manner prescribed by law, all material Taxes that are
due and payable.
6.12 Proprietary Rights. EINI has provided or will provide
OMNI with a true, accurate and complete list of all proprietary rights which are
owned or used by EINI. To the Knowledge of EINI, the use of the proprietary
rights by EINI has not infringed, is not infringing upon and is not otherwise
violating the rights of any Person in or to such proprietary rights or the
asserted proprietary rights of others. No notices have been received by EINI
that the use of the proprietary rights by EINI infringes upon or otherwise
violates any rights of a Person in or to such proprietary rights or the
proprietary rights of others. To the Knowledge of EINI, no person is infringing
on the proprietary rights owned by EINI.
6.13 Labor Matters. There are no present or, to the knowledge
of EINI, threatened Actions or work stoppages relating to any EINI Personnel.
EINI is not a party to any collective bargaining agreement with respect to
employees, and, to the Knowledge of
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EINI, there are no activities of any labor union seeking to represent or
organize the employees of EINI. No unfair labor practice, or race, sex, age,
disability or other discrimination, complaint is pending, nor is any such
complaint, to the knowledge of EINI, threatened against EINI before the
National Labor Relations Board, Equal Employment Opportunity Commission or any
other Governmental Authority, and no grievance is pending, nor is any
grievance, to the Knowledge of EINI, threatened against EINI.
6.14 Employee Benefit Plans. Since the date of the EINI
Financial Statements, there has not been any adoption or amendment in any
material respect by EINI of any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of EINI or any person affiliated with
EINI under Section 414(b), (c), (m) or (o) of the Code (collectively, "EINI
Benefit Plans"). Except as would not have any EINI Material Adverse Effect, (A)
all EINI Benefit Plans, including any such plan that is an "employee benefit
plan" as defined in Section 3(3) of ERISA, are in compliance with all applicable
requirements of law, including ERISA and the Code, and (B) EINI has no
liabilities or obligations with respect to such EINI Benefit Plan, whether
accrued, contingent or otherwise (other than obligations to make contributions
and pay benefits and administrative costs incurred in the ordinary course), nor
to the knowledge of EINI are any such liabilities or obligations expected to be
incurred.
6.15 Transactions with Certain Persons. To the knowledge of
EINI, no current EINI Personnel, or any member of the immediate family of any
current EINI personnel or any other Affiliate of EINI is presently a party to
any material agreement, arrangement or other transaction with EINI, other than
employment agreements or independent contractor agreements made available to
OMNI, or has an interest in any party to a material contract.
6.16 Payments. EINI has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official, governmental authority
or other person, in the United States or any other country, which is in any
manner related to the business or operations of EINI which EINI knows or has
reason to believe to have been illegal under any federal, state or local Law of
the United States or the Laws of any other country having jurisdiction; and EINI
has not participated, directly or indirectly, in any boycotts or other similar
practices affecting any of its actual or potential customers or which violate
any applicable Law.
6.17 Board Actions. The Board of Directors of EINI (at a
meeting duly called and held) has resolved to recommend approval by the
shareholders of EINI of: (i) this Agreement, and (ii) amendment of the Articles
of Incorporation of EINI designating a series of EINI Preferred Stock with the
same rights, preferences and privileges as those incident to the OMNI Series B
Preferred Stock.
SLE LADOCSU"1261 13 60004 000101/20/99 -17-
6.18 Disclosure. The representations and warranties of EINI
herein, or in any document, exhibit, statement, certificate or schedule
furnished by or on behalf of EINI to OMNI as required by this Agreement, do not
contain and will not contain any untrue statement of a material fact and do not
omit and will not omit to state any material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading. To the Knowledge of EINI, there are no material
facts or circumstances relating to EINI which have not been disclosed herein to
OMNI. There is no fact known to EINI that has specific application to EINI
(other than general economic or industry conditions) and that materially
adversely affects or, as far as EINI can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or results of
operations of EINI that has not been set forth in this Agreement or the
schedules hereto.
6.19 Real Property and Certain Other Matters.
(a) EINI has made or will make available to OMNI lists of all real property
owned by EINI. With respect to each such parcel of owned real property, except
for matters which would not have a material adverse effect:
(i) the owner has good and marketable title to the parcel of real
property, free and clear of any security interest, mortgage, deed of trust,
lien, claim, encumbrance, easement, covenant, or other restriction, except
for installments of special assessments not yet delinquent, recorded
easements, covenants, and other restrictions, and utility easements,
building restrictions, zoning restrictions, and other easements and
restrictions existing generally with respect to properties of a similar
character;
(ii) there are no outstanding options or rights of first refusal to
purchase the real property.
(b) EINI has made or will make available to OMNI lists of all real property
leased or subleased to EINI. Each lease and sublease listed is legal, valid,
binding, enforceable, and in full force and effect, except where the illegality,
invalidity, nonbinding nature, unenforceability, or ineffectiveness would not
have a material adverse effect.
(c) EINI has not received written notice from any landlord that EINI is in
default of any material terms, conditions", or provisions of any lease relating
to any property leased by EINI (other than written notices received in the past
as to alleged defaults which have been cured, waived or otherwise resolved). The
leases represent the entire agreement between EINI and the respective landlords
relating to the properties leased by EINI. EINI uses each such property in
accordance with its authorized use.
(d) The buildings and material equipment, fixtures, furniture, furnishings
and office equipment (and other material tangible personal assets and
properties) of
SLE LADOCSU"1261 13 60004 000101/20/99 -18-
EINI presently used in their respective businesses are in good operating
condition and in a state of reasonable maintenance and repair, normal wear and
tear excepted. The equipment, fixtures and other tangible personal assets and
properties located in the properties leased by EINI are sufficient to operate
the business of EINI as currently operated.
6.20 Bonds. EINI has made available to OMNI all bonds,
guaranties, comfort letters and similar instruments currently maintained by or
on behalf of EINI.
6.21 Minute Books. The minute books of EINI accurately record
all material actions taken by its shareholders and directors.
6.22 Rule 504 Sales. From and after the date of this
Agreement, but prior to the Effective Date, EINI has issued press releases
regarding the proposed merger with OMNI. Share trading has taken place on the
open market in contemplation of such merger being consummated. In addition,
EINI has conducted sales of securities pursuant to Rule 504 in the approximate
amount of $700,000 at prices from 171/2 cents to 55 cents per share. Any such
share trading activity after the date of this Agreement shall not effect any of
the terms and conditions referenced in this Agreement.
6.23 Form l5c-2(11). The Form 15c-2(l1) provided by EINI to
OMNI and is currently on file and effective with the SEC.
ARTICLE 7
PRE-CLOSING COVENANTS
7.1 Operation of OMNI Business.
(a) Except as specifically provided in this Agreement between the date of
this Agreement and the Effective Time, OMNI shall:
(i) use all reasonable efforts to preserve intact its business
organization and existing relationships with suppliers, employees, agents
and any other Persons having business relations with it;
(ii) maintain its books of account and records in the usual and
ordinary manner, and in conformity with its past practices;
(iii) pay accounts payable and other obligations when they become due
and payable in the ordinary course of business consistent with past
practices except to the extent disputed in good faith;
SLE LADOCSU441261 13 60004 000101/20/" 19-
(iv) conduct its business in the ordinary course consistent with past
practices, or as required by this Agreement;
(v) pay all Taxes when due and file all Tax Returns on or before the
due date therefor except to the extent disputed in good faith;
(vi) make appropriate provisions in its books of account and records
for Taxes relating to its operations during such period (regardless of
whether such Taxes are required to be reflected in a tax return having a
due date on or prior to the Closing Date);
(vii) take no action that would have the effect of deferring any
liability for taxes to any taxable period ending after Effective Time
except in the usual and ordinary manner, in conformity with past practices;
and
(viii) withhold all taxes required to be withheld and remitted by or
on behalf of OMNI in connection with amounts paid or owing to any OMNI
Personnel or other person, and pay such taxes to the proper governmental
authority or set aside such taxes in accounts for such purpose.
(b) Without the prior written consent of EINI, between the date of this
Agreement and the Effective Time (or termination of this Agreement), OMNI shall
not:
(i) issue any capital stock (except for the issuance of OMNI Common
Stock upon the exercise of outstanding options, warrants or other
convertible instruments) or any options, warrants or other rights to
subscribe for or purchase any capital stock or any securities convertible
into or exchangeable or exercisable for, or rights to purchase or otherwise
acquire, any shares of the capital stock of OMNI;
(ii) directly or indirectly redeem, purchase, sell or otherwise
acquire any capital stock of OMNI;
(iii) grant any increase in the compensation payable, or to become
payable, to any OMNI Personnel or enter into any bonus, insurance, pension,
severance, change- in-control or other benefit plan, payment, agreement or
arrangement for or with any OMNI Personnel, except as consistent with past
practices in the ordinary course of business;
(iv) borrow or agree to borrow any funds, incur any indebtedness or
directly or indirectly guarantee or agree to guarantee the obligations of
others, or draw or borrow on any lines of credit that may be available to
OMNI other than in the ordinary course of business consistent with past
practices;
SLE LAI)OCS\2"1261 13 60004 000101/20/" -20-
(v) enter into any agreement, contract, lease or other commitment,
other than in the ordinary course of business consistent with past
practices;
(vi) place or allow to be placed a lien on any of the assets of OMNI
other than in the ordinary course of business consistent with past
practices;
(vii) cancel, discount or otherwise compromise any indebtedness owing
to OMNI or any claims which OMNI may possess or waive any rights of
material value, except in the ordinary course of business consistent with
past practices;
(viii) sell or otherwise dispose of any assets of OMNI, except in the
ordinary course of business consistent with past practices;
(ix) commit any act or omit to do any act which will cause a breach of
this Agreement or any other material agreement, contract, lease or
commitment;
(x) violate any law or governmental approval;
(xi) make any loan, advance, distribution or payment of any type or to
any OMNI personnel or any member of the immediate family of OMNI personnel
or any Affiliate of OMNI, except as regular compensation for services
actually rendered;
(xii) amend its Articles of Incorporation or Bylaws;
(xiii) merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire
any business or any Person or division thereof;
(xiv) make any tax election or settle or compromise any Tax liability
other than in the ordinary course of business consistent with past
practices; or
(xv) purchase any material amount of assets or properties other than
in the ordinary course of business consistent with past practices.
7.2 Operation of EINI Business.
(a) Except as specifically provided in this Agreement between the date of
this Agreement and the Closing Date, EINI shall:
(i) use all reasonable efforts to preserve intact its business
organization and existing relationships with suppliers, employees, agents
and any other Persons having business relations with it;
SLE LADOCS\2"1261 13 60004 000101/20/99 -21-
(ii) maintain its books of account and records in the usual and
ordinary manner, and in conformity with its past practices;
(iii) maintain its present insurance in full force and effect, with
policy limits and scope of coverage not less than is now provided by its
present insurance;
(iv) conduct its business in the ordinary course consistent with past
practices, or as required by this Agreement;
(v) pay all taxes when due and file all Tax Returns on or before the
due date therefor except to the extent disputed in good faith;
(vi) withhold all taxes required to be withheld and remitted by or on
behalf of each EINI in connection with amounts paid or owing to any
personnel of any EINI Entity or other Person, and pay such taxes to the
proper Governmental Authority or set aside such Taxes in accounts for such
purpose.
(b) Without the prior written consent of OMNI, between the date of this
Agreement and the Effective Time (or termination of this Agreement), EINI shall
not:
(i) issue any capital stock (except for the issuance of EINI shares to
be exchanged for OMNI Exchangeable Shares or any options, warrants or other
rights to subscribe for or purchase any capital stock or any securities
convertible into or exchangeable or exercisable for, or rights to purchase
or otherwise acquire, any shares of the capital stock of EINI or Rule 504
sales referenced herein).
(ii) grant any increase in the compensation payable, or to become
payable, to any personnel of EINI or enter into any bonus, insurance,
pension, severance, change- in-control or other benefit plan, payment,
agreement or arrangement for or with any personnel of EINI, except as
consistent with past practices in the ordinary course of business;
(iii) borrow or agree to borrow any funds, incur any indebtedness or
directly or indirectly guarantee or agree to guarantee the obligations of
others, or draw or borrow on any lines of credit that may be available to
EINI other than in the ordinary course of business consistent with past
practices or in connection with the funding of the transactions
contemplated hereby;
(iv) cancel, discount or otherwise compromise any indebtedness owing
to EINI or any claims which EINI may possess or waive any rights of
material value, except in the ordinary course of business consistent with
past practices;
(v) sell or otherwise dispose of any assets of EINI except in the
ordinary course of business consistent with past practices;
SLE 1,AIWS\2"1261 13 60004 000101120/99 -22-
(vi) commit any act or omit to do any act which will cause a breach of
this Agreement or any other material agreement, contract, lease or
commitment;
(vii) violate any law or governmental approval;
(viii) make any loan, advance, distribution or payment of any type or
to any personnel of EINI or any member of the immediate family of any
personnel of EINI or any Affiliate of EINI, except as regular compensation
for services actually rendered;
(ix) amend its Articles of Incorporation or Bylaws;
(x) make any tax election or settle or compromise any tax liability
other than in the ordinary course of business consistent with past
practices; or
(xi) purchase any material amount of assets or properties other than
in the ordinary course of business consistent with past practices.
For the purposes of this Section 7.2(b), whether a change has a material and
adverse impact on EINI shall be determined by EINI and OMNI or, if they are
unable to agree, by an independent investment banker reasonably acceptable to
OMNI and EINI, the cost of which shall be borne by EINI.
7.3 No Other Bids. OMNI agrees that neither OMNI nor any of
its officers, directors, Affiliates, representatives or agents will directly or
indirectly solicit, contact, encourage or provide information to, or cooperate
in any manner with, any Person (other than EINI) regarding any Competing
Transaction or act in a manner which would have the effect, directly or
indirectly, of frustrating the completion of the Merger on the terms hereof;
provided, however, should OMNI receive an unsolicited offer or inquiry regarding
a Competing Transaction ("Unsolicited Offer") in spite of the agreement in this
Section and the Board of Directors of OMNI is advised in good faith by outside
legal counsel (which may be OMNI's regularly engaged legal counsel) that their
fiduciary duty requires consideration of such Unsolicited Offer, then OMNI may
consider such Unsolicited Offer and provide the offeror information. Upon
receipt of any Unsolicited Offer, OMNI will immediately notify EINI orally and
in writing that an Unsolicited Offer was made and, unless OMNI is advised in
good faith in writing by counsel that to do so would be a breach of duty under
law, provide to EINI a copy of the Unsolicited Offer.
SLE X.XX)OCSU441261 13 60004 0001 01/20/99 -23-
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Access to Information.
(a) From the date hereof to the Effective Time, OMNI shall afford, and
shall cause its officers, directors, employees, representatives and agents to
afford, to EINI and to the officers, employees and agents of EINI reasonable
access during normal business hours to OMNI's officers, employees, agents,
representatives, properties, books, records and contracts, and shall furnish to
EINI all financial, operating and other data and information as EINI, through
its agents, officers, employees or other representatives, may reasonably
request.
(b) From the date hereof to the Effective Time, EINI shall afford, and
shall cause its officers, directors, employees, representatives and agents to
afford, to OMNI and to the officers, employees and agents of OMNI reasonable
access during normal business hours to EINI's officers, employees, agents,
representatives, properties, books, records and contracts, and shall furnish to
OMNI all financial, operating and other data and information as OMNI, through
its agents, officers, employees or other representatives, may reasonably
request.
(c) No investigation pursuant to Section 8. 1 (a) shall affect any
representations or warranties of the Parties herein or the conditions to the
obligations of the Parties,
8.2 Expenses and Taxes. The Parties shall each pay their
respective costs incurred in connection with the preparation, negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the fees of
their respective attorneys, accountants and advisors.
8.3 News Releases. Except as provided by , any news releases
or other public disclosure pertaining to the transactions contemplated hereby
shall be reviewed and approved in writing by both EINI and OMNI or their
respective representatives, and shall be acceptable to them prior to the
dissemination thereof.
8.4 Additional Agreements. Subject to the terms and conditions
of this Agreement, each Party agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law to consummate and make
effective the transactions contemplated by this Agreement. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Constituent Corporations, the proper officers and directors of
each such corporation shall take all such necessary or desirable action.
SLE LADOCSU"1261 13 60004 0001 01/20/99 -24-
8.5 Notification of Certain Matters.
(a) OMNI shall give prompt notice to EINI of (i) any material inaccuracy in
any representation or warranty made by it herein, or (ii) any material failure
of OMNI to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by OMNI under this Agreement; provided, however, that
no such notification shall affect the representations or warranties or covenants
or agreements of OMNI or the conditions to the obligations of EINI hereunder.
(b) EINI shall give prompt notice to OMNI of (i) any material inaccuracy in
any representation or warranty made by it herein, or (ii) any material failure
of EINI to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations or warranties or covenants
or agreements of EINI or the conditions to the obligations of OMNI hereunder.
(c) OMNI and EINI shall each promptly advise the other orally and in
writing of any change or event having, or which, insofar as can reasonably be
foreseen, in the future would have, a material adverse effect.
8.6 Confidentiality.
(a) Each Party shall hold, and shall cause its officers, employees, agents
and representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain such information to hold, in
confidence, and not use for any purpose other than evaluating the transactions
contemplated by this Agreement, any confidential information of another Party
obtained through the investigations permitted hereunder, which for the purposes
hereof shall not include any information which (i) is or becomes generally
available to the public other than as a result of disclosure by a Party or one
of its Affiliates in violation of its obligations under this subsection, (ii)
becomes available to a Party on a nonconfidential basis from a source, other
than the Party which alleges the information is confidential or its Affiliates,
which has represented that such source is entitled to disclose it, or (iii) was
known to a Party on a nonconfidential basis prior to its disclosure to such
Party hereunder. If this Agreement is terminated, at the request of a Party, the
other Party shall deliver, and cause its officers, employees, agents, and
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain confidential information of the
requesting Party pursuant to investigations permitted hereunder, to deliver to
the requesting Party all such confidential information that is written
(including copies or extracts thereof).
(b) If a Party or a Person to whom a Party transmits confidential
information of another Party is requested or becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
criminal or civil investigative demand or similar process) to disclose any of
such confidential information, such
SLE LADOCS\2441261 13 60004 000101/20/99 -25-
Party or other Person will provide the other Party with prompt written notice
so that such Party may seek a protective order or other appropriate remedy or
waive compliance with Section 8.6(a). If such protective order or other remedy
is not obtained, or if the applicable Party waives compliance with Section
8.6(a), the Party or Person subject to the request will furnish only that
portion of such confidential information which is legally required and will
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such confidential information.
8.7 Consents and Filing . The Parties shall, promptly after
execution of this Agreement, make all required filings and submissions with
respect to the Merger. Each Party will take all reasonable actions to obtain any
other consent, authorization, order or approval of, or any exemption by, any
Person required to be obtained or made in connection with the Merger and the
other transactions contemplated by this Agreement. Each Party will cooperate
with and promptly furnish information to the other Party in connection with
obtaining such consents or making any such filings and will promptly furnish to
the other Party a copy of all filings made with a Governmental Authority.
8.8 EINI SEC Filing . Between the date hereof and the Closing
Date, OMNI shall cooperate with EINI in connection with the preparation and
filing of, and provide to EINI for inclusion or incorporation by reference in,
any reports, filings, schedules or registration statements (including any
prospectus contained in any such registration statement) to be filed by EINI
with the Commission (the "EINI Filings"). Without limiting the foregoing, OMNI
shall take all reasonable actions requested by EINI to enable EINI to include or
incorporate by reference in the EINI Filings any Financial Statement of OMNI,
including, without limitation, all documents required for listing on the NASD
bulletin board and any auditors' report thereon.
8.9 Contemplated Post-Effective Management Structure. The
officers and directors of CASTNET shall consist of the same persons as EINI.
Each of the directors and officers shall hold office until the next scheduled
annual meeting of shareholders of EINI, scheduled for September 15, 1999.
ARTICLE 9
SECURITIES LAW MATTERS
9.1 Disposition of Shares. The New EINI Shares are being
acquired hereunder pursuant to a private placement under Regulation D, and
therefore, such securities shall not be sold or otherwise disposed of, except
(a) pursuant to an exemption from the registration requirements under the
Securities Act, (b) in accordance with Rule 144 under the Securities Act, or (c)
pursuant to an effective registration statement filed by EINI with the SEC under
the Securities Act. To the extent the Shareholders comply with the provisions of
SLE LADOCSU"1261 13 60004 000101/20/99 -26-
Rule 144 under the Securities Act in effecting sales of the EINI Shares, EINI
agrees to provide its transfer agent with appropriate instructions and/or
opinions of counsel in order for the Shareholders to sell, transfer and/or
dispose of the EINI Shares in accordance with Rule 144.
9.2 Legend. The certificates representing the New EINI Shares
shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT-), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF BY THE HOLDER EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT.
AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO, (B) IN ACCORDANCE
WITH RULE 144 UNDER THE ACT, OR (C) IN ACCORDANCE
WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
EINI may, unless a registration statement is in effect covering such shares or
unless the proposed transfer comply with Rule 144, place stop transfer orders
with its transfer agent with respect to such certificates in accordance with
federal securities laws.
SLE LADOCSU"1261 13 60004 000101/20/99 -27-
ARTICLE 10
CLOSING
10. 1 Closing.
(a) Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to the provisions of
Section 11. 1, the closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Jeffer, Mangels, Xxxxxx &
Xxxxxxx LLP, 2121 Avenue of the Stars, 10th Floor, Los Angeles, California, or
such other place as shall be mutually agreed to by OMNI and EINI, on or before
February 26, 1999, or at such other place, time and date as the Parties may
mutually agree. The date and time of such Closing are herein referred to as the
"Closing Date." Notwithstanding the Closing Date, the Effective Time shall be
deemed to have occurred only when (i) the matters provided for in Sections 2.2
and 2.3 shall have occurred and (ii) all of the certificates and other documents
required to be delivered at the Closing have been delivered (or the requirement
therefor waived), as specified in Sections 10.2 and 10.3 hereof.
(b) Notwithstanding any approval of this Agreement by the shareholders of
OMNI, no agreement among the Parties to change the place, time or date of the
Closing shall require the approval of the shareholders of OMNI.
10.2 Documents to be Delivered by EINI. At the Closing, EINI
shall deliver to OMNI the following:
(a) A certificate, executed by an officer of EINI in such detail as OMNI
shall reasonably request, certifying that all representations, warranties and
covenants herein are true and correct as of the Effective Time. The delivery
of such certificate shall constitute a representation and warranty of EINI as to
the statements set forth therein.
(b) A copy of the resolutions adopted by the shareholders and Board of
Directors of EINI approving this Agreement and the Merger, certified by its
Secretary.
10.3 Documents to be Delivered by OMNI. At the Closing, OMNI
shall deliver to EINI the following:
(a) A certificate, executed by the President of OMNI, in such detail as
EINI shall reasonably request, certifying that all representations, warranties
and covenants herein are true and correct as of the Effective Time. The delivery
of such certificate shall constitute a representation and warranty of OMNI as to
the statements set forth therein.
SLE LAI)XXXXX0000 13 60004 0001 01/20/" -28-
(b) A copy of the resolutions adopted by the Shareholders and Board of
Directors of OMNI approving this Agreement and the Merger, certified by this
Secretary,
ARTICLE 11
TERMINATION
11.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual written consent of each of the Parties hereto at any time
prior to the Closing;
(b) by EINI in the event of a material breach by OMNI of any provision of
this Agreement which has not been cured within 30 days after notice of such
breach is delivered to the breaching party;
(c) by OMNI in the event of a material breach by EINI of any provision of
this Agreement which has not been cured within 30 days after notice of such
breach is delivered to the breaching party;
(d) by either EINI or OMNI if the Closing shall not have occurred by
February 26, 1999 (the "Termination Date"); provided, however, the right to
terminate this Agreement under this Section 11. 1 (a) shall not be available to
any party whose failure to fulfill any obligation hereunder has been the cause
of, or results in, the failure of the Closing to have occurred on or before the
Termination Date; or
11.2 Effect of Termination. Except for the provisions of
Section 8.6 hereof (Confidentiality), which shall survive any termination of
this Agreement, in the event of termination of this Agreement pursuant to
Section 11. 1, this Agreement shall forthwith become void and of no further
force and effect and the Parties shall be released from any and all obligations
hereunder; provided, however, that nothing herein shall relieve any Party from
liability for the breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SLE LADOCSU"1261 13 60004 000101/20/" -29-
ARTICLE 12
GENERAL PROVISIONS
12.1 Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the Parties.
12.2 Waiver. At any time prior to the Effective Time, whether
before or after approval of this Agreement and the Merger by OMNI's
shareholders, any Party may (a) extend the time for the performance of any of
the obligations or other acts of any other Party hereto or (b) waive compliance
with any of the agreements of any other Party or with any conditions to its own
obligations. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of the Party making the waiver or
granting the extension by a duly authorized officer. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
12.3 Assignment and Binding Effect. Neither this Agreement
nor any of the rights or obligations hereunder may be assigned by OMNI without
the prior written consent of EINI or assigned by EINI without the prior written
consent of OMNI; provided, however, EINI may assign any of its rights hereunder
to any direct or indirect wholly-owned subsidiary of EINI without the consent of
OMNI, although such assignment shall not release EINI of any of its obligations
hereunder. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, transferees
and assigns, and no other Person shall have any right, benefit or obligation
hereunder.
12.4 Governing Law. Except as to matters relating to the
internal laws of a jurisdiction, this Agreement shall be governed by, and
construed in accordance with, the law of the State of California, without regard
to the conflicts of law principles thereof.
12.5 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties with respect to the subject matter
hereof.
12.6 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
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12.7 Titles. The titles, captions or headings of the Articles
and Sections herein are for convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
12.8 Attorneys' Fees. Should any Party institute any Action
to enforce any provision of this Agreement, including, without limitation, an
Action for declaratory relief, damages by reason of an alleged breach of any
provision of this Agreement, equitable relief or otherwise in connection with
this Agreement, or any provision hereof, the prevailing Party shall be entitled
to recover from the losing Party or Parties reasonable attorneys' fees and costs
for services rendered to the prevailing Party in such Action.
12.9 Multiple Counterparts. This Agreement' may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
12.10 Notices. Unless applicable Law requires a different
method of giving notice, any and all notices, demands or other communications
required or desired to be given hereunder by any Party shall be in writing.
Assuming that the contents of a notice meet the requirements of the specific
Section of this Agreement which mandates the giving of that notice, a notice
shall be validly given or made to another Party if served either personally or
if deposited in the United States mail, certified or registered, postage
prepaid, or if transmitted by telegraph, telecopy or other electronic written
transmission device or if sent by overnight courier service, and if addressed to
the applicable Party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the Parties are as follows:
SLE LADOCS\2441261 13 60004 000101/20/99
If to OMNI:
Only Multimedia Network, Inc. 0000 Xxxxxxxx Xxxxxxxxx Xxxxx 000 Xxx
Xxxxxxx, Xxxxxxxxxx 00000 Fax: (000) 000-0000 Attn: Xxxx Xxxxxxx,
President
with a copy to:
Jeffer, Mangels, Xxxxxx & Marmaro LLP 2121 Avenue of the Stars 00xx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000 Fax: (000) 000-0000 Attention:
Xxxxxxx X. Xxxxxx, Esq.
If to EINI or Castnet:
The Entertairunent Internet, Inc. Xxxxxxx Xxxxxx 0000 Xxxx Xxxxxx Xxx
Xxxx Xxxxx 000 Xxx Xxxxx, Xxxxxx 00000
with a copy to:
Xxxxx X. Xxxxxxx, a P.C. 0000 X. Xxxxxx Xxx Xxxxx 000 Xxx Xxxxx,
Xxxxxx 00000 Fax: (000) 000-0000 Attention: Xxxxx X. Xxxxxxx, Esq.
Any Party may change such Party's address for the purpose of receiving notices,
demands and other communications as herein provided, by a written notice given
in the aforesaid manner to the other Parties.
12. 11 Incorporation by Reference. All Exhibits and Schedules
attached hereto or to be delivered in connection herewith are incorporated
herein by this reference.
SLE LADOCS\2"1261 13 60004 000101/20/99 -32-
IN WITNESS WHEREOF, each of EINI, Castnet and OMNI has caused
this Agreement to be executed as of the date first written above by its officer
thereunto duly authorized.
THE ENTERTAINMENT INTERNET, INC.
A Nevada Corporation
/s/ Xxxxx Xxxxxxxx
By:
Xxxxx Xxxxxxxx, President
/s/ Xxxxxxx Xxxxxx
By:
Xxxxxxx Xxxxxx, Secretary
ONLY MULTIMEDIA NETWORK, INC.
/s/ Xxxx Xxxxxxx
By:
Xxxx Xxxxxxx, Chairman
SLE LADOCSU"1261 13 60004 000101/20/99
OFFICERS' CERTIFICATE
THE ENTERTAINMENT INTERNET, INC.,
a California corporation
Xxxx Xxxxx and Xxxx Xxxxxxx do hereby certify that:
1. They are the duly elected and acting Vice-President and Secretary,
respectively, of The Entertainment Internet, Inc., a California corporation (the
"Corporation").
2. The Agreement of Merger in the form attached was duly approved on
behalf of the Corporation by its board of directors.
3. The principal terms of the Agreement of Merger in the form attached
were approved by the Corporation by the vote of a number of shares of each class
which equaled or exceeded the vote required, such classes, the total number of
outstanding shares of each class entitled to vote on the merger and the
percentage vote required of each class being as follows:
Total Number of
Outstanding Shares Percentage
Name of Class Entitled to Vote Vote Required
Common Stock 1,000 More than 50%
4. Equity securities of the Corporation's parent corporation, The
Entertainment Internet, Inc., a Nevada corporation, are to be issued in the
merger and the required vote of the shareholders of the parent corporation was
obtained.
Each of the undersigned further declares under penalty of perjury
under the laws of the State of California that he has read this Certificate and
knows the contents hereof and that the matters set forth in this Certificate are
true and correct of his own knowledge.
Dated: March 22, 0000
/x/ Xxxx Xxxxx
Xxxx Xxxxx, Xxxx President
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx, Secretary
[Corporate Seal]
[GRAPHIC OMITTED]
OFFICERS' CERTIFICATE
ONLY MULTIMEDIA NETWORK INCORPORATED,
a California corporation
than Mount and Xxxx Xxxxxxx do hereby certify that:
1. They are the duly elected and acting - Chairman and Secretary,
respectively, of Only Multimedia Network Incorporated, a California corporation
(the "Corporation").
2. The Agreement of Merger in the form attached was duly approved on
behalf of the Corporation by its board of directors.
3. The principal terms of the Agreement of Merger in the form attached
were approved by the Corporation by the vote of a number of shares of each class
which equaled or exceeded the vote required, such classes, the total number of
outstanding shares of each class entitled to vote on the merger and the
percentage vote required of each class being as follows:
Total Number
of Outstanding
Shares Entitled Percentage
Name of Class to Vote Vote Required
------------- ------- -------------
Common Stock 8,852,279 More than 50%
Preferred Stock 5,400 More than 50%
Each of the undersigned further declares under penalty of perjury under
the laws of the State of California that he has read this Certificate and knows
the contents hereof and that the matters set forth in this Certificate are true
and correct of his own knowledge.
Dated: March 22, 1999
/s/ Xxxx Xxxxx
Xxxx Xxxxx
Chairman of the
Board of Directors
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
Secretary
