Exhibit 1(f)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this __ day
of December, 1996 by and among AMERICAN UNITED GLOBAL, INC., a Delaware
corporation ("AUGI"), having its principal offices at 00000 XX 00xx Xxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000; ARCADIA CONSULTING SERVICES, INC., a Delaware
corporation (the "Corporation"); and XXXXX X. XXXXXX (the "Stockholder").
W I T N E S S E T H:
WHEREAS, the Stockholder is the record and beneficial owner of one hundred
percent (100%) of the issued and outstanding shares of the capital stock of the
Corporation, on a fully-diluted basis, after giving effect to: (a) the exercise
of all outstanding options and warrants to purchase capital stock of the
Corporation, (b) the conversion into common stock of all convertible notes,
convertible debentures, shares of convertible preferred stock of all series, or
other securities convertible into shares of capital stock of the Corporation,
and (c) the exercise of all other rights and privileges to receive or acquire
shares of common stock of the Corporation; and (d) there being no other capital
stock of the Corporation issued or outstanding other than the common stock of
the Corporation; and (e) there being no options, warrants, subscription rights,
rights of first refusal, convertible securities, or other rights to purchase or
receive shares of any of the securities referred to in (a), (b), (c), or (d)
preceding (collectively, the "Fully Diluted Equity"); and
WHEREAS, on the "Closing Date" (as herein defined) the Corporation will
merge with and into AUGI (the "Merger"); the effect of which Merger is to enable
AUGI to acquire all of the shares of capital stock of the Corporation as shall
represent the Fully Diluted Equity of the Corporation as at the effective date
of the Merger (hereinafter, referred to as the "Stock") pursuant to the Merger
and for the consideration hereinafter provided for; and
WHEREAS, the Stockholder, the Board of Directors of the Corporation, AUGI,
and the Board of Directors of AUGI, have all authorized and approved the Merger
and the consummation of the other transactions contemplated by this Agreement,
all on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and agree
as follows:
1. The Merger.
1.1 The Merger.
(a) At the time of the Closing on the Closing Date (as such
terms are hereinafter defined) and in accordance with the provisions of this
Agreement and the applicable
provisions of the Delaware General Corporation Law ("Delaware Law"): (i) the
Corporation shall be merged into AUGI; and AUGI will be the surviving
corporation of the Merger. The Merger shall be in accordance with the terms and
conditions of this Agreement and certificates of merger in substantially the
form of Exhibit A annexed hereto (the "Certificate of Merger"), with AUGI as the
surviving corporation of the Merger (AUGI being hereinafter sometimes referred
to as the "Surviving Corporation"). Thereupon, the separate existence of the
Corporation shall cease, and AUGI as the Surviving Corporation of the Merger,
shall continue its corporate existence under Delaware Law.
1.2 Effectiveness of the Merger. As soon as practicable upon or
after the satisfaction or waiver of the conditions precedent set forth in
Section 7 below, the Corporation and AUGI will execute the Certificate of Merger
(subject to such revisions as to form (but not substance) as may be required by
the relevant provisions of Delaware Law), and shall file or cause to be filed
such Certificate of Merger with the Secretary of State of Delaware; and the
Merger shall become effective as of the date of the filing of such Certificate
of Merger, which shall occur on the "Closing Date" (as hereinafter defined), and
the Closing shall be deemed to occur as of such Closing Date in accordance with
Section 10 hereof.
1.3 Effect of the Merger. Upon the effectiveness of the Merger: (a)
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of the Corporation, and all obligations owed to,
belonging to or due to the Corporation, all of which shall be vested in the
Surviving Corporation pursuant to Delaware Law without further act or deed, and
(b) the Surviving Corporation shall be liable for all claims, liabilities and
obligations of the Corporation, all of which shall become and remain the
obligations of the Surviving Corporation pursuant to Delaware Law without
further act or deed.
1.4 Status and Conversion of Securities. At the Closing Date and
upon the effectiveness of the Merger:
(a) Treasury Stock. Each share of capital stock of the
Corporation held by the Corporation as treasury stock immediately prior to the
effectiveness of the Merger shall be canceled and extinguished, and no payment
or issuance of any consideration shall be payable or shall be made in respect
thereof;
(b) Options and Warrants. As of the date of this Agreement
there are, and at the Closing Date there shall be, no options, warrants, rights,
or other agreements to acquire any securities of the Corporation, or any
securities directly or indirectly convertible into or exchangeable for or
exercisable to acquire the same, and no agreements to issue or acquire or
dispose of any of the foregoing.
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(c) Treatment of Fully Diluted Equity. Each share of the Stock
of the Corporation outstanding immediately prior to the effectiveness of the
Merger, representing: (i) the Fully Diluted Equity of the Corporation; and (ii)
all other securities of the Corporation exercisable, convertible or exchangeable
for shares of Fully Diluted Equity, shall be canceled and extinguished and
converted into the right to receive a proportionate amount of the Merger
Consideration payable pursuant to Section 2 below. Such Merger Consideration
shall be paid and delivered to the holders of the outstanding Stock upon
surrender to the Surviving Corporation of the certificates representing such
shares of outstanding Stock (all of which shall be delivered free and clear of
any and all pledges, Liens (as such term is hereinafter defined), claims,
charges, options, calls, encumbrances, restrictions and assessments whatsoever,
except any restrictions which may be created by operation of state or federal
securities laws) at the time and place of the Closing as provided in Section 10
below.
1.5 Books and Records. On the Closing Date, the Corporation shall
deliver to AUGI all of the stock books, records and minute books of the
Corporation, all financial and accounting books and records of the Corporation
and, except as may otherwise be agreed by the parties to this Agreement at the
Closing, all referral, client, customer and sales records of the Corporation.
2. Merger Consideration.
2.1 Merger Consideration. As the record owner of all
outstanding Fully Diluted Equity of the Corporation, the Stockholder shall
receive the following (collectively, the "Merger Consideration"):
(a) On the Closing Date, an aggregate of One Hundred and
Ninety Two Thousand and Seven Hundred and Fifty Four (192,754)
shares of Class A voting common stock, $0.01 par value per share, of
AUGI (the "AUGI Merger Stock"); and
(b) On January 2, 1997, the sum of Two Hundred and Twenty
Thousand ($220,000) Dollars, payable by wire transfer of immediately
available funds to bank accounts designated by the Stockholder (the
"Downpayment").
2.2 Non-Refundable Downpayment. The Downpayment is deemed to be a
non-refundable deposit and Downpayment which shall be forfeited by AUGI if the
transactions contemplated by this Agreement are not consummated on or before
June 30, 1997 for any reason other than a breach by the Stockholder of any of
his material covenants and agreements contained in this Agreement, the
Consulting Agreement or the Registration Rights Agreements hereinafter
described.
3. REGISTRATION OF SHARES OF AUGI MERGER STOCK.
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In addition to, and not in lieu of, the other conditions precedent
to the Stockholder's obligations to consummate the Merger, the Stockholder has
requested that all of the shares of the AUGI Merger Stock shall be registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a registration statement on Form X-0, X-0 or other appropriate form of
registration of securities (the "Registration Statement") which shall have been
declared effective by the Securities and Exchange Commission ("SEC"). AUGI has
agreed to undertake to register the AUGI Merger Stock under the Securities Act,
all upon the terms and subject to the conditions hereinafter set forth.
3.1 Best Efforts to Effect Public Sale. AUGI hereby covenants and
agrees:
(a) as soon as practicable following the date of execution of
this Agreement, to file a Registration Statement with the SEC which
shall include therein the registration of the AUGI Merger Stock
issuable hereunder under the Securities Act; and
(b) to use its best efforts (without warranting the outcome of
such efforts) to assist the Stockholder in causing such Registration
Statement to be declared effective by the SEC as promptly as
possible but in no event later than June 30, 1997.
3.2 Registration Rights Agreement. Simultaneous with the execution
and delivery of this Agreement, each of the Stockholder and AUGI shall have
executed and delivered a Registration Rights Agreement in the form annexed
hereto as Exhibit "B" and made a part hereof. Pursuant to the terms of such
Registration Rights Agreement, the Stockholder shall have, inter alia,
covenanted and agreed not to effect any public or private sale, transfer,
pledge, hypothecation or assignment of more than Eighty Two Thousand Eight
Hundred Eighty Four (82,884) of his shares of AUGI Merger Stock for a period of
not less than twelve (12) months following the Closing Date, and thereafter only
in accordance with the terms and conditions of the Registration Rights
Agreement.
3.3 Closing Subject to Effective Registration Statement. It is
hereby expressly understood and agreed by and among the parties hereto that the
consummation of the Merger on the Closing Date shall be expressly made subject
to the effectiveness of the Registration Statement referred to in Section 3.1
hereof, and that no stop order from the SEC suspending the effectiveness of such
Registration Statement shall have been issued. In the event and to the extent
that the Registration Statement shall, for any reason (other than by reason of a
breach by the Stockholder of any of his material covenants and agreements
contained in this Agreement, the Consulting Agreement or the Registration Rights
Agreement), not have been declared effective by June 30, 1997, the Stockholder
shall have the right at the Stockholder's election, upon ten (10) days written
notice to AUGI, to adopt one of the following alternatives:
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(a) terminate this Agreement, ab initio, in which event:
(i) the Consulting Agreement annexed hereto as Exhibit C and
made a part hereof, shall, at the Stockholder's election, remain in
full force and effect in accordance with its terms or be terminated;
(ii) the Downpayment shall be retained by the Stockholder as
full liquidated damages for AUGI's inability to satisfy the
covenants and agreements set forth in this Section 3, and
(iii) all other Exhibits hereto, including without limitation,
the Employment Agreement and the Non-Competition and Non-Disclosure
Agreement shall be rendered null and void and without further force
or effect; or
(b) consummate the transactions contemplated by this Agreement and
the Transaction Documents, in which event:
(i) the Stockholder shall accept the AUGI Merger Stock despite
such shares not having been registered pursuant to Section 3.1 and
Section 3.2 hereof;
(ii) the Stockholder shall retain the Downpayment; and
(iii) all other Exhibits hereto, including without limitation,
the Employment Agreement and the Non-Competition and Non-Disclosure
Agreement shall be executed by the appropriate parties thereto and
shall become effective and enforceable in accordance with their
respective terms; or
(c) extend the time for performance by AUGI for a reasonable period
subsequent to June 30, 1997; provided, that such extension shall not
be longer than October 31, 1997 without the prior written consent of
AUGI; or
(d) seek an order of specific performance of AUGI's obligations set
forth in in this Section 3 and in the Registration Rights Agreement;
or
(e) defer the consummation of the merger contemplated by the Merger
Agreement until the Merger Stock is registered, retain the
Downpayment and enter into the Employment Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
The Stockholder hereby represents and warrants to AUGI and Mergerco
as follows, it being understood and agreed that AUGI and Mergerco will not be
required to undertake any independent investigation to determine the truth,
accuracy and completeness of the representations and warranties made by the
Stockholder in this Agreement, and it being
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further understood and agreed that the survival of each such representation and
warranty shall be as set forth in Section 12.2(d) of this Agreement:
4.1 Ownership of the Stock.
(a) The number of shares of outstanding Stock, the record
owners thereof, and the record addresses and social security number or tax
identification number of each of the Stockholder, are as set forth on Schedule
4.1 annexed hereto. The Stockholder is the legal and beneficial owner of such
Stockholder's shares of the Stock enumerated next to such Stockholder's name on
Schedule 4.1 hereto, free and clear of all pledges, Liens, claims, charges,
options, calls, encumbrances, restrictions and assessments whatsoever, except
any restrictions which may be created by operation of state or federal
securities laws (which restrictions are set forth on such Schedule 4.1. For
purposes of this Agreement, a "Lien" shall mean any mortgage, deed of trust,
trust, pledge, vendors' or other lien or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature of any of the foregoing, any claim,
security interest, assignment, or encumbrance of any kind, any negative lien and
the filing of or agreement to give any financing statement or similar notice of
security interest.
(b) Schedule 4.1 accurately sets forth the number of shares of
Stock owned of record and beneficially by the Stockholder, and all of the Stock
has been duly authorized and validly issued, and is fully paid and
non-assessable.
4.2 Valid and Binding Agreement.
(a) The execution, delivery and performance by the Stockholder
and the Corporation of this Agreement, the Registration Rights Agreement, the
Non-Competition and Non-Disclosure Agreement, Consulting Agreement, the
Employment Agreement, the Subscription Agreement (as such terms are hereinafter
defined), and the other instruments, agreements and written undertakings of the
Corporation and the Stockholder, and each of them, which are executed in
connection therewith (collectively, the "Transaction Agreements") and the
consummation of the Merger and the other transactions contemplated hereby by the
Stockholder and the Corporation, have been duly and validly authorized by the
Board of Directors of the Corporation and the Stockholder, and the Corporation
has the full corporate right, power and authority to execute and deliver this
Agreement and the Transaction Agreements to which it is a party, to perform his
or its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the Transaction Agreements to which the Corporation and
Stockholder are parties, will constitute, the legal, valid and binding
obligation of the Corporation and of the Stockholder, enforceable against the
Corporation and the Stockholder in accordance with its and their respective
terms, except to the extent limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors rights generally, and except with respect to
remedies, the enforcement of which vests in the discretion of courts of
equitable jurisdiction.
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(b) The Stockholder has full legal right, power and authority
to execute and deliver this Agreement and the Transaction Agreements to which he
is a party, and to consummate the transactions contemplated hereby and thereby.
This Agreement and, when executed and delivered by such Stockholder, the
Transaction Agreement to which such Stockholder is a party, constitutes and will
constitute the legal, valid and binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their respective terms,
except to the extent limited by bankruptcy, insolvency, reorganization and other
laws affecting creditors rights generally, and except with respect to remedies,
the enforcement of which vests in the discretion of courts of equitable
jurisdiction.
4.3 Organization, Good Standing and Qualification; Ownership of
Assets of Business.
(a) The Corporation: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) has all necessary corporate power and authority to carry on its business
and to own, lease and operate its properties; and (iii) is not required, by the
nature of its properties or business, to be qualified to do business as a
foreign corporation in any other foreign jurisdiction in which the failure to be
so qualified would have a material adverse effect on the Corporation, its
properties or assets, its business, or its condition (financial or otherwise).
(b) The Corporation has no subsidiary corporations.
(c) True and complete copies of the Certificate of
Incorporation and By-Laws of the Corporation (including all amendments thereto),
and a correct and complete list of the officers and directors of the
Corporation, are annexed hereto as Schedule 4.3.
(d) The Corporation owns all of its assets, if any, including
Intellectual Property (as that term is hereinafter defined), used in connection
with the operation of the business of the Corporation as presently conducted.
4.4 Capital Structure; Stock Ownership.
(a) The authorized and outstanding shares of capital stock of
the Corporation, and the record owners of such shares of capital stock, and all
outstanding options, warrants and other securities convertible, exchangeable or
exercisable for shares of common stock of the Corporation, if any, are as set
forth on Schedule 4.4 annexed hereto. Other than as set forth on Schedule 4.4,
no other shares of capital stock of the Corporation are issued or outstanding.
(b) Except as set forth in Schedule 4.4 annexed hereto (all of
which agreements and commitments will be terminated and canceled as of the
Closing Date, without any payment by the Corporation, if there are any at the
date hereof), there are no outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or calls,
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demands or commitments: (i) obligating the Corporation to issue, transfer or
purchase any shares of its capital stock, or (ii) obligating either of the
Stockholder or any other stockholder of the Corporation to transfer any shares
of the Stock owned by such stockholder. Other than in respect of the stock
purchase rights described in Schedule 4.4 (all of which shall be terminated and
canceled as of the Closing Date, without any payment by the Corporation, if
there are any at the date hereof), no shares of capital stock of the Corporation
are reserved for issuance pursuant to stock options, warrants, agreements or
other rights to purchase capital stock.
4.5 Investments. The Corporation does not own, directly or
indirectly, any stock or other equity securities of any corporation or entity,
or has any direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business, other than the businesses
conducted by the Corporation.
4.6 Financial Information.
(a) Except as expressly set forth in the Schedules to this
Agreement, or arising in the normal course of the Corporation's business or
incurred in connection with the Merger since its inception, there are as at the
date hereof, no liabilities or obligations (including, without limitation, any
tax liabilities or accruals) of the Corporation, whether absolute, accrued,
contingent or otherwise and whether due or to become due, that are, singly or in
the aggregate, material.
4.7 No Material Changes. Except as and to the extent described in
Schedule 4.7 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement which
has heretofore been delivered to AUGI), since inception, the business of the
Corporation has continued to be operated only in the ordinary course, and there
has not been:
(a) Any material adverse change in the condition (financial or
otherwise), operations, business, properties, or prospects of the Corporation,
or any material transaction or commitment effected or entered into outside of
the normal course of the Corporation's business or otherwise in connection with
the Merger;
(b) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, condition (financial or otherwise), or prospects of the
Corporation;
(c) Any declaration, setting aside or payment of any dividend
or other distribution with respect to the Stock, any other payment of any kind
by the Corporation to any of its stockholders or any of their respective
affiliates outside of the ordinary course of business, any forgiveness of any
debt or obligation owed to the Corporation by any of its stockholders or any of
their respective affiliates, or any direct or indirect redemption, purchase or
other acquisition by the Corporation of any capital stock of the Corporation; or
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(d) Any other event or condition arising from or out of or in
connection with the operation of the Corporation which has materially and
adversely affected, or may reasonably be expected to materially and adversely
affect, the Corporation, its assets or properties, its business, condition
(financial or otherwise), or prospects.
4.8 Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule 4.8
annexed hereto: (i) on the date hereof, all foreign, federal, state, and local
tax returns and tax reports required to be filed by the Corporation on or before
the date of this Agreement have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, except for such prior failures to file in timely fashion
as have been subsequently followed by complete and proper filing and payment of
all amounts due in respect thereof, including interest and penalties, if any;
(ii) all foreign, federal, state, and local income, franchise, sales, use,
property, excise, and other taxes (including interest and penalties and
including estimated tax installments where required to be filed and paid) due
from or with respect to the Corporation as of the date hereof have been fully
paid, and appropriate accruals shall have been made on the Corporation's books
for taxes not yet due and payable; (iii) as of the date hereof, all taxes and
other assessments and levies which the Corporation is required by law to
withhold or to collect on or before the date hereof have been duly withheld and
collected, and have been paid over to the proper governmental authorities to the
extent due and payable on or before the date hereof; (iv) there are no
outstanding or pending claims, deficiencies or assessments for taxes, interest
or penalties with respect to any taxable period of the Corporation, except
claims for taxes not yet due and payable; and (v) no tax Liens have been filed
on the Corporation's assets. At and after the Closing Date, the Corporation will
have no liability for any foreign, federal, state, or local income tax with
respect to any taxable period ending on or before the Closing Date, except as
and to the extent disclosed in Schedule 4.8, if any.
(b) There are no audits pending or, to the knowledge of the
Corporation and the Stockholder, threatened, with respect to any foreign,
federal, state, or local tax returns of the Corporation, and no waivers of
statutes of limitations have been given or requested with respect to any tax
years or tax filings of the Corporation. No presently pending assessments of tax
deficiencies have been made against the Corporation or with respect to its
income, receipts or net worth, and no extensions of time are in effect for the
assessment of deficiencies against the Corporation. The Corporation has not
received notice of any claim by any authority in a jurisdiction in which the
Corporation does business and does not file tax returns that the Corporation or
its income, receipts or net worth may be subject to tax in that jurisdiction.
The Corporation is not a party to any tax-sharing or allocation agreement, nor
does the Corporation owe any amount under any tax-sharing or allocation
agreement. The Corporation has no liability for unpaid taxes because it once was
a member of an "affiliated group" within the meaning of Section 1502 of the
Code.
4.9 Personal Property; Liens. The Corporation has and owns good and
marketable title to all of its personal property, if any, including without
limitation, all computer
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software, database and other intellectual property, free and clear of all Liens
whatsoever, except for: (a) Liens securing the Corporation's indebtedness for
money borrowed, if any, pursuant to the security agreements listed in Schedule
4.9 annexed hereto; (b) Liens securing the deferred purchase price of machinery,
equipment, vehicles and/or other fixed assets, if any, as reflected in the
Financial Statements or as incurred after the date thereof in the ordinary
course of business of the Corporation, pursuant to security agreements listed in
Schedule 4.9; (c) materialmen's, workmen's and other similar statutory liens
arising in the ordinary course of business, none of which are material singly or
in the aggregate, (d) Liens for taxes not yet due and payable, and (e) other
Liens which individually or in the aggregate are immaterial in amount and
character (each of the Liens described in clauses (a) through (e) of this
sentence being hereinafter referred to as "Permitted Liens"). The aggregate book
value of all items of machinery, equipment, vehicles, and other fixed assets
owned or leased by the Corporation, if any, does not exceed $25,000, and all of
such fixed assets are in good operating condition and repair (reasonable wear
and tear excepted) and are adequate for their use in the Corporation's
businesses as presently conducted.
4.10 Real Property.
(a) The Corporation neither owns nor has any interest of any
kind (whether ownership, lease or otherwise) in any real property except to the
extent of the Corporation's leasehold interests under the leases for its
business premises, if any, true and complete copies of which leases (including
all amendments thereto) are annexed hereto as Schedule 4.10 (the "Leases").
(b) The Corporation and, to the Corporation's and the
Stockholder knowledge, the landlords thereunder are presently in compliance in
all material respects with all of their respective obligations under the Leases,
and the premises leased thereunder are in good condition (reasonable wear and
tear excepted) and are adequate for the operation of the Corporation's current
business.
(c) The Corporation is in actual possession of the properties
demised under the Leases. The Leases are free and clear of any Lien or any
sublease or right of occupancy granted by the Corporation, except as set forth
on Schedule 4.10 hereto, if at all.
(d) The Corporation has the right of ingress and egress
through a public road or street, to and from the properties demised under the
Leases.
(e) The properties demised under the Leases and the
improvements thereon constitute all of the real property and leases currently
used exclusively or materially for the business of the Corporation and are
adequate and sufficient for the current operations of the Corporation and its
business.
(f) To the knowledge of the Corporation and the Stockholder,
there is no pending proceeding for the taking or condemnation of all or any
portion of the properties
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demised under the Leases or pending taking or condemnation proceeding which
would result in a termination of any Lease of real property, and none of the
same is threatened.
(g) There are no material items of maintenance that have been
materially deferred with respect to any of the improvements on the real property
demised under the Leases.
(h) The Corporation has received no uncured notice from
applicable governmental authorities of any outstanding violations of any
building or zoning laws, codes or regulations, or governmental or judicial
orders issued pursuant thereto, with respect to the real property and the
improvements thereon demised under the Leases, and there are no such violations.
4.11 Intentionally omitted.
4.12 Inventories. All supplies and other inventories, if any, now
owned and all inventories thereafter acquired by the Corporation prior to the
Closing Date, have been and will be valued at the lower of cost or market, and
consisted and will consist of items which are of a quality and quantity which
are useable in the ordinary course of the Corporation's business for customary
commercial purposes, and are substantially at the Corporation's normal working
levels of the same in the current conduct of its businesses in the ordinary
course.
4.13 Insurance Policies. Schedule 4.13 annexed hereto contains a
true and correct schedule of all insurance coverages held by the Corporation
concerning its businesses and properties (including but not limited to
professional liability insurance). All such policies are in full force and
effect and the Corporation is not in default thereunder in any material respect.
To the knowledge of the Stockholder, such policies provide adequate insurance
coverage for the Corporation, its properties and businesses, as presently
conducted.
4.14 Permits and Licenses; Consents. The Corporation possesses and
is in material compliance with every "Permit" (as hereinafter defined) of any
Governmental Authority (as such term is hereinafter defined) having jurisdiction
over the Corporation, or its businesses, properties, or assets, necessary in
order to operate its businesses in the manner presently conducted; all of the
Corporation's Permits are valid, current and in full force and effect; and none
of such Permits will be voided, revoked or terminated, or are voidable,
revocable or terminable, upon and by reason of the Merger and the change of
ownership of the Corporation pursuant to this Agreement. Schedule 4.14 hereto
lists all of the Permits of or in respect of any Governmental Authority or any
other Person (as such term is hereinafter defined) which are required for the
execution or delivery by the Corporation and the Stockholder of this Agreement
and the consummation of the transactions contemplated hereby. For purposes of
this Agreement: (i) the term "Governmental Authority shall mean any nation or
government, foreign or domestic, and any territory, possession, protectorate,
province, state, county, parish, regional authority, metropolitan authority,
city, town, village, other locality, or other political subdivision or agency,
regulatory body, or other authority, commission, tribunal, representative or
official thereof, and any Person (as such term is hereinafter defined)
exercising executive, legislative,
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judicial, regulatory or administrative functions of or pertaining to government;
(ii) the term "Person" shall mean any natural person, corporation, partnership,
joint venture, trust or unincorporated organization, joint stock company or
other similar organization, Governmental Authority or any other legal entity,
whether acting in an individual, fiduciary or other capacity; and (iii) the term
"Permit" shall mean any license, permit, franchise, clearance, waiver,
certificate, registration, order, authorization, consent, approval,
administrative finding or directive of, or release by any Governmental
Authority, except for such, the failure to have, maintain or continue in force
(including by reason of the Merger), has not and is not expected to have, a
material adverse effect on the Corporation and its properties, assets or
businesses.
4.15 Contracts and Commitments.
(a) Schedule 4.15 annexed hereto lists all material contracts,
leases, commitments, technology agreements, software development agreements,
software licenses, indentures and other agreements to which the Corporation is a
party (collectively, "Material Contracts") including, without limitation, the
following: (i) any contract for the purchase of equipment, supplies, other
materials, or other inventory items other than purchase orders for supplies
entered into in the ordinary course of business; (ii) any contract related to
the purchase or lease of any capital asset involving aggregate payments of more
than $5,000 per annum that is not cancelable by the Corporation on less than
thirty (30) days notice; (iii) all technology agreements, software development
agreements and software licenses (except for pre-printed licenses for
commercially available and non-custom software applications) involving the
Corporation or any Affiliate, regardless of the duration thereof or the amount
of payments called for or required thereunder; (iv) any guarantee, make-whole
agreement, or similar agreement or undertaking to support, directly or
indirectly, the financial or other condition of any other person or entity; (v)
each contract for or relating to the employment of any officer, employee,
technician, agent, consultant, or advisor to or for the Corporation that is not
cancelable by the Corporation without penalty, premium or liability (for
severance or otherwise) on less than thirty (30) days' prior written notice;
(vi) license, royalty, franchise, distributorship, dealer, manufacturer's
representative, agency and advertising agreements; (vii) any contract with any
collective bargaining unit; (viii) any mortgage of real property; (ix) any
factoring agreement with respect to the accounts receivable of the Corporation;
(x) any pledge or other security agreement by the Corporation other than
guaranties entered into in the ordinary course of business which are not
material to the Corporation, (xi) any joint venture agreement or similar
arrangement; (xii) any non-competition agreement or similar arrangement; and
(xiii) any contract, lease, commitment, indenture, or other agreement to which
the Corporation is a party that may not be terminated without penalty, premium
or liability by the Corporation on not more than thirty (30) days' prior written
notice. The term "Material Contract" shall not include any contract or
agreement, the failure of which to maintain, perform or continue in effect
(including by reason of the Merger) has not and is not reasonably expected to
adversely affect the Corporation and its assets, properties, businesses or
financial condition.
(b) Except as set forth in Schedule 4.15: (i) all Material
Contracts are in full force and effect; (ii) the Corporation and, to the
knowledge of the Corporation and the
12
Stockholder, the other parties thereto, each are in compliance with all of their
respective obligations under the Material Contracts in all material respects,
and are not in breach or default thereunder, nor has there occurred any
condition or event which, after notice or lapse of time or both, would
constitute a default thereunder; and (iii) none of the Material Contracts will
be voided, revoked or terminated, or voidable, revocable or terminable, in whole
or in part, upon and by reason of the Merger and the change of ownership of the
Corporation pursuant to this Agreement.
(c) No purchase commitment by the Corporation is in excess of
the normal, ordinary and usual requirements of the business of the Corporation.
(d) There is no outstanding power of attorney granted by the
Corporation to any person, firm or corporation for any purpose whatsoever,
except which may be included as part of the terms of a security agreement or
other Material Contract entered into by the Corporation in connection with a
financing or otherwise in the ordinary course of its businesses.
4.16 Customers and Suppliers. Neither the Stockholder nor the
Corporation has actual knowledge of any existing, announced or anticipated
changes in the policies of, or the relationships with, or the business of, any
material clients, customers, or suppliers of the Corporation which will
materially adversely affect the Corporation or its condition, financial or
otherwise, business, or prospects.
4.17 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 4.17 annexed hereto, the
Corporation is not a party to any agreement with respect to the employment or
compensation of any non-hourly and/or non-union employee(s). The Corporation is
not now, nor has it ever been, a party to or subject to any collective
bargaining agreement or other labor agreement. Schedule 4.17 sets forth the
amount of all compensation or remuneration (including any discretionary bonuses)
paid by the Corporation during the 1995 calendar year or to be paid by the
Corporation during the 1996 calendar year to employees or consultants who
presently receive aggregate compensation or remuneration at an annual rate in
excess of $35,000.
(b) No union is now certified or, to the best of the knowledge
of the Corporation and the Stockholder, claims to be certified as a collective
bargaining agent to represent any employees of the Corporation, and there are no
labor disputes existing or, to the best of the knowledge of the Corporation and
the Stockholder, threatened, involving strikes, slowdowns, work stoppages, job
actions or lockouts of any employees of the Corporation.
(c) There are no unfair labor practice charges or petitions
for election pending or being litigated before the National Labor Relations
Board or any other federal or state labor commission relating to any employees
of the Corporation. Except as set forth on Schedule 4.17, the Corporation has
not received any written notice of any actual or alleged
13
violation of any law, regulation, order or contract term affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee health, safety, welfare, or wages and hours.
(d) The Corporation has not, at any time, been and is not now
required to make contributions to, be a party to or covered by (or had any of
its employees covered by), and has not withdrawn from (partially or otherwise),
and has not had and does not have any obligations to or in respect of any
"multiemployer plan" (as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")).
(e) Except as disclosed in Schedule 4.17, the Corporation does
not maintain, or have any liabilities or obligations of any kind with respect
to, any bonus, commission, deferred compensation, excess benefits, pension,
thrift, savings, employee ownership, salary continuation, severance, profit
sharing, retirement, supplemental retirement, or other such benefit plan, and
does not have any potential or contingent liability in respect of any actions or
transactions relating to any such plan other than to make contributions thereto
if, as, and when due in respect of periods subsequent to the date hereof.
Without limitation of the foregoing, (i) the Corporation has made all required
contributions to or in respect of any and all such benefit plans, (ii) no
"accumulated funding deficiency" (as defined in Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code")) has been incurred in respect of
any of such benefit plans, and the present value of all vested accrued benefits
thereunder does not, on the date hereof, exceed the assets of any such plan
allocable to the vested accrued benefits thereunder, (iii) there has been no
"prohibited transaction" (as defined in Section 4975 of the Code) with respect
to any such plan, and no transaction which could give rise to any tax or penalty
under Section 4975 of the Code or Section 502 of ERISA, and (iv) there has been
no "reportable event" (within the meaning of Section 4043(b) of ERISA) with
respect to any such plan. All of such plans which constitute, are intended to
constitute, or have been treated by the Corporation as "employee pension benefit
plans" or other plans within Section 3 of ERISA have been determined by the
Internal Revenue Service to be "qualified" under Section 401(a) of the Code, and
have been administered and are in compliance with ERISA and the Code; and the
Stockholder has no knowledge of any state of facts, conditions or occurrences
such as would impair the "qualified" status of any of such plans.
(f) Except for the group insurance programs listed in Schedule
4.17, the Corporation does not maintain any medical, health, life, dental,
short- or long-term disability, hospitalization, accident, death benefits, or
other employee benefit insurance programs, or sick leave or vacation or holiday
or leave policies, or any welfare plans (within the meaning of Section 3(1) of
ERISA) for the benefit of any current of former employees, and, except as
required by law, the Corporation has no liability, fixed or contingent, for
health or medical benefits to any former employee.
14
4.18 No Breach of Statute, Decree or Other Instrument.
(a) Except as set forth in Schedule 4.18 annexed hereto and as
otherwise would not have a material adverse effect on the existing businesses,
assets, financial condition or prospects of the Corporation: (i) neither the
execution and delivery of this Agreement by the Corporation and/or the
Stockholder, nor the performance of, or compliance with, the terms and
provisions of this Agreement on the part of the Corporation and/or the
Stockholder, will violate or conflict with any term of the Certificate of
Incorporation or By-Laws of the Corporation or, to the knowledge of the
Corporation and the Stockholder, any statute, law, rule or regulation of any
governmental authority affecting the existing businesses of the Corporation, or
will cause or permit the material modification of the effect of, the imposition
of any Lien in respect of, or the acceleration of any obligations or terms or
the termination of any rights or imposition of any burdens under, or conflict
with, result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of any judgment, order, award, injunction or decree, or
any of the material terms, conditions or provisions of any contract, lease,
agreement, indenture or other instrument to which the Corporation or the
Stockholder is a party or by which the Corporation or the Stockholder is bound;
and (ii) no consent, authorization or approval of or filing with any
governmental authority or agency, or any third party, will be required on the
part of the Corporation or the Stockholder as conditions precedent to the
consummation of the transactions contemplated hereby, or result in the
cancellation of any Permits presently held by the Corporation which are required
for the operation of its businesses as conducted on the date hereof.
(b) In connection with and as respects the Merger, the
Corporation and the Stockholder of the Corporation have waived any and all
rights which it or any such Stockholder may have (by way of right of first
refusal, right of first offer, or otherwise) to purchase any of the Stock by
reason of the proposed disposition thereof by the Stockholder pursuant to the
Merger.
15
4.19 Compliance with Laws.
(a) Except as set forth in Schedule 4.19 to this Agreement,
the Corporation has been, and is now in compliance (except to the extent,
disclosed on Schedule 4.19, that incidental and non-material non-compliance has
not had and can not reasonably be expected to have a material adverse effect on
the Corporation, its properties or assets, its businesses, its condition
(financial or otherwise), or its prospects) with each of the following which is
applicable to or binding upon or affecting the Corporation or its property,
assets, or business, or to which the Corporation, or its property, assets, or
business are subject: every statute, ordinance, code or other law, treaty, rule,
regulation, order, technical or other standard, requirement or procedure
existing, enacted, adopted, administered, enforced, or promulgated, by any
Governmental Authority (each of the foregoing, a "Law"), and every Permit, and
every order, judgment, writ, injunction, award, decree, demand, assessment or
determination of any arbitrator and of every Governmental Authority (each of the
foregoing, an "Order"; each Law, Permit, and Order being sometimes hereinafter
referred to as a "Requirement of Law"). Neither the Corporation nor its
properties, assets, or business are subject to or directly affected by any
Requirement of Law of any Governmental Authority, other than those similarly
affecting similar enterprises engaged in a material way in the same business
activities.
(b) The Corporation has not, at any time, to the knowledge of
the Stockholder: (i) acquired, handled, utilized, stored, generated, processed,
transported, or disposed of any hazardous or toxic substances, whether in
violation of any foreign, federal, state, or local environmental or occupational
health and safety laws or regulations or otherwise, (ii) otherwise committed any
material violation of any foreign, federal, state, or local environmental or
occupational health and safety laws or regulations (including, without
limitation, the provisions of the Environmental Protection Act and other
applicable environmental statutes and regulations) or any violation of the
Occupational Safety and Health Act, or (iii) been in violation of any material
requirements of its insurance carriers from time to time.
(c) Neither the Corporation nor any of its directors, officers
or employees has received any written notice of default or violation, nor, to
the best of the knowledge of the Corporation and the Stockholder, is the
Corporation or any of its directors, officers or employees in default or
violation, with respect to any judgment, order, writ, injunction, decree, demand
or assessment issued by any court or any federal, state, local, municipal, or
other governmental agency, board, commission, bureau, instrumentality or
department, domestic or foreign, relating to any aspect of the Corporation's
business, affairs, properties, or assets. Neither the Corporation nor any of its
directors, officers or employees, has received written notice of, been charged
with, or, to its or their knowledge, is under investigation with respect to, any
violation of any provision of any federal, state, local, municipal, or other law
or administrative rule or regulation, domestic or foreign, relating to any
aspect of the Corporation's business, affairs, properties or assets, which
violation would have a material adverse effect on the Corporation, its
properties or assets, its businesses, its condition (financial or otherwise), or
its prospects.
16
(d) Schedule 4.19 sets forth the date(s) of the last known
audits or inspections (if any) of the Corporation conducted by or on behalf of
the Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other Governmental Authority.
4.20 Litigation. Except as disclosed in Schedule 4.20 annexed
hereto, there are no private or governmental orders, claims, actions, suits,
arbitrations, investigations, administrative or other proceedings (including,
without limitation, any claim alleging the invalidity, infringement or
interference of any patent, patent application, software, technology or other
intellectual property rights owned or licensed by the Corporation)
(collectively, the "Actions") pending or, to the knowledge of the Corporation or
the Stockholder, are any Actions threatened, against the Corporation or relating
to its businesses or properties, at law or in equity or before or by any court
or any Governmental Authority. Except as disclosed in Schedule 4.20 annexed
hereto, neither the Corporation nor the Stockholder is aware of any state of
facts, events, conditions or occurrences which might properly constitute grounds
for or the basis of any meritorious Action against or with respect to the
Corporation, which would, if determined adversely, have a material adverse
effect on the Corporation, its business or any material portion of its assets,
or impair the ability of the Stockholder to deliver in the Merger all of his
respective shares of Stock free and clear of all pledges, Liens, claims,
charges, options, calls, encumbrances, restrictions and assessments whatsoever
(except any restrictions which may be created by operation of state or federal
securities laws).
4.21 Intellectual Property. Schedule 4.21 annexed hereto correctly
sets forth a list and brief description of the nature and ownership of: (a) all
patents, patent applications, copyright registrations and applications,
registered trade names, service marks, trademark registrations and applications,
both domestic and foreign, which are presently owned, filed or held by the
Corporation and/or any of its directors, officers, stockholders or employees and
which in any way relate to or are used in the business of the Corporation; (b)
all licenses, computer software licenses, and software access or joint
development agreements, both domestic and foreign, which are owned or controlled
by the Corporation and/or any of its directors, officers, stockholders or
employees and which in any way relate to or are used in the business of the
Corporation; and (c) all franchises, licenses and/or similar arrangements
granted to the Corporation by others and/or to others by the Corporation
(collectively, the "Intellectual Property"). None of the Intellectual Property
set forth or required to be set forth in Schedule 4.21 is subject to any pending
challenge known to the Stockholder, infringes on or misappropriates the rights
of any others, or is subject to loss or expiration in the near future (or the
threat of such loss or expiration). Except as set forth on Schedule 4.21, the
Corporation owns good and marketable title to the same free and clear of any
Liens.
4.22 Transactions with Affiliates. No material asset employed in the
business of the Corporation is owned by, leased from or leased to any of the
stockholders of the Corporation, any of their respective Affiliates, members of
their families or any partnership, corporation or trust for their benefit, or
any other officer, director or employee of the Corporation or any Affiliate of
the Corporation.
17
4.23 Bank Accounts. Annexed hereto as Schedule 4.23 is a correct and
complete list of all bank accounts and safe deposit boxes maintained by or on
behalf of the Corporation, with indication of all persons having signatory,
access or other authority with respect thereto.
4.24 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement (or taken
as a whole), as, to the extent, and subject to the qualifications and
limitations, set forth in such corresponding Section(s).
5. REPRESENTATIONS AND WARRANTIES OF AUGI.
AUGI hereby represents and warrants to the Stockholder, as follows,
it being understood and agreed that the Stockholder is not and will not be
required to undertake any independent investigation to determine the truth,
accuracy and completeness of the representations and warranties made by AUGI in
this Agreement:
5.1 Organization, Good Standing and Qualification. AUGI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all necessary power and authority to execute and
deliver this Agreement and the Transaction Agreements, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. True and complete copies of the Articles of
Incorporation and By-Laws of AUGI (including all amendments thereto), and a
correct and complete list of the officers and directors of AUGI, are annexed
hereto as Schedule 5.1.
5.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Transaction Agreements and the
consummation of the Merger and the other transactions contemplated hereby and
thereby by AUGI have been duly and validly authorized by the Board of Directors
of AUGI; and AUGI has the full corporate right, power and authority to execute
and deliver this Agreement and the Transaction Agreements, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. No further corporate authorization is necessary
on the part of AUGI to consummate the transactions contemplated hereby and
thereby.
5.3 Valid and Binding Agreement. This Agreement and the other
Transaction Agreements constitute the legal, valid and binding obligation of
AUGI, enforceable against AUGI in accordance with its and their terms, and, when
executed and delivered by AUGI, the other Transaction Agreements constitute, and
will constitute, the legal, valid and binding obligations of the Surviving
Corporation and AUGI (as the case may be), enforceable against the Surviving
Corporation and AUGI in accordance with its and their respective terms.
18
5.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement and the other Transaction Agreements by AUGI, nor
compliance with the terms and provisions of this Agreement or the other
Transaction Agreements on the part of AUGI, will: (a) violate any statute or
regulation of any Governmental Authority affecting AUGI; (b) require the
issuance of any authorization, license, consent or approval of any Governmental
Authority; or (c) conflict with or result in a breach of any of the terms,
conditions or provisions of any judgment, order, injunction, decree, note,
indenture, loan agreement or other agreement or instrument to which AUGI is a
party, or by which AUGI is bound, or constitute a default thereunder.
5.5 Capitalization of AUGI.
(a) AUGI is (i) authorized to issue 20,000,000 shares of
Common Stock, $.01 par value per share ("AUGI Common Stock"); (ii) 5,689,749
shares of AUGI Common Stock were issued and outstanding at January 31, 1996;
(iii) 750,000 shares of AUGI Common Stock are reserved for issuance pursuant to
AUGI's 1991 Employee Incentive Stock Option Plan, of which approximately 620,000
options were outstanding at July 31, 1995; (iv) 171,000 stock options were
reserved for certain key employees under AUGI's Stock Option Bonus Plan, of
which 114,000 options were outstanding at July 31, 1995; (v) 38,496 options were
reserved for certain employees under a 1991 Transfer Plan, of which options to
purchase 24,328 shares of AUGI Common Stock were outstanding at July 31, 1995;
(vi) 2,500,000 options are reserved for issuance (subject to AUGI stockholder
ratification) pursuant to a 1996 qualified and non-qualified stock option plan,
of which options to purchase a maximum of 1,680,000 shares of AUGI Common Stock
are currently outstanding and are held by the persons listed on Schedule 5.5
annexed; and (vii) warrants to purchase an aggregate of 920,000 shares of AUGI
Common Stock at $7.50 per share were issued and outstanding at July 31, 1995 and
warrants to purchase 50,000 shares of AUGI Common Stock at $6.00 per shares were
issued in October 1996. Subsequent to January 31, 1996, AUGI (i) has acquired
100% of the capital stock of ConnectSoft, Inc. ("ConnectSoft") pursuant to which
it issued 1,000,000 shares of its convertible preferred stock which is
convertible into a maximum of 3,000,000 shares of AUGI Common Stock; (ii) has
acquired 100% of Interglobe Network, Inc. pursuant to which AUGI paid $400,000
and issued 800,000 shares of AUGI Common Stock; and (iii) acquired Seattle On-
Line, Inc. pursuant to which it has issued warrants to purchase 333,333 shares
of AUGI Common Stock. Except for the transactions contemplated by this
Agreement, AUGI has not entered into any other letters of intent or written
understandings with respect to any acquisition. All of the foregoing is
qualified, in its entirety by the disclosures contained in AUGI's Annual Report
on Form 10-K for its fiscal year ended July 31, 1996 (the "1996 Form 10-K"), a
true copy of which has been furnished to the Stockholder.
(b) The AUGI Merger Stock is a portion of the AUGI Common
Stock, which is the stock of AUGI traded on the Nasdaq National Market. When
issued and delivered pursuant to this Agreement, all of the AUGI Merger Stock
will be validly issued, fully-paid and non-assessable, owned by AUGI free and
clear of all pledges, Liens, claims, charges, encumbrances, assessments,
pre-emptive rights and other restrictions and limitations whatsoever.
19
All other classes and series of equity securities of AUGI are identified in the
1996 Form 10-K and, except as set forth in Section 5.5(a) above and in the 1996
Form 10-K, there are no outstanding options, calls, warrants, stock, debentures
or rights of subscription exercisable or convertible into shares of AUGI Common
Stock.
5.6 Intentionally omitted.
5.7 Intentionally Omitted.
5.8 Absence of Litigation. No action, suit or proceeding by or
before any court or any governmental body or authority, against AUGI or
pertaining to the transactions contemplated by this Agreement or their
consummation, have been instituted or, to AUGI's knowledge, threatened, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on AUGI, its business or any material portion of its assets, or
impair the ability of AUGI to deliver in the Merger the Merger Consideration
free and clear of all pledges, Liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws). Except
as disclosed in Schedule 5.8 hereto, AUGI is not aware of any state of facts,
events, conditions or occurrences which would properly constitute grounds for
the basis of any meritorious suit, action, arbitration, investigation against or
with respect to AUGI or any of its subsidiaries, which would, if determined
adversely to AUGI or any of its subsidiaries, have a material adverse effect
upon the business, financial condition or prospects of AUGI and its subsidiaries
when taken as a consolidated whole, or impair the ability of AUGI to deliver in
the Merger the Merger Consideration free and clear of all pledges, Liens,
claims, charges, options, calls, encumbrances, restrictions and assessments
whatsoever (except any restrictions which may be created by operation of state
or federal securities laws).
5.9 Securities Filings and Disclosures. AUGI has furnished to the
Stockholder the statements and reports listed on Schedule 5.9 to this Agreement
(which statements and reports constitute all statements and reports filed by
AUGI with the SEC since January 1, 1994), together with all exhibits and
schedules thereto, which statements and reports (i) complied, as of their
respective dates, as to form and substance in all material respects with the
requirements pertaining to the filing thereof under the Securities Act of 1933,
as amended, and/or the Securities Exchange Act of 1934, as amended, whichever is
applicable, and (ii) as of their respective dates did not contain any material
misstatement of fact or state or omit to state any material fact whose omission,
in light of the circumstances under which such statement was made or omitted,
would result in the statements made therein being materially misleading. AUGI
shall supplement Schedule 5.9 through the Closing Date. The financial statements
of AUGI and its consolidated subsidiaries as set forth in the securities filings
listed on Schedule 5.9 fairly present the financial condition and results of
operations of AUGI and its consolidated subsidiaries as at the dates and for the
periods reflected therein. Since November 13, 1996, the date of AUGI's filing of
its 1996 Form 10-K, there has been no material adverse change in the business,
financial condition or prospects of AUGI and its subsidiaries, when taken as a
consolidated whole.
20
5.10 Registration. The shares of AUGI Merger Stock constituting the
Merger Consideration have been issued pursuant to an available exemption from
the registration requirements under the Securities Act of 1933, as amended, and
the securities laws of the State of Delaware; provided, that such issuance was
made in the good faith belief that such exemption from registration is available
in reliance upon investment, suitability, financial capacity, and investment
sophistication representations made by the Stockholder to AUGI in Subscription
Agreement furnished by the Stockholder to AUGI in connection with the
consummation of the transactions contemplated hereby.
5.11 No Breach of Statute, Decree or Other Instrument. Except as set
forth in Schedule 5.11 annexed hereto and as otherwise would not have a material
adverse effect on the existing businesses, assets, financial condition or
prospects of AUGI and its subsidiaries, taken as a consolidated whole: (i)
neither the execution and delivery of this Agreement by AUGI nor the performance
of, or compliance with, the terms and provisions of this Agreement on the part
of AUGI, will violate or conflict with any term of the Certificate of
Incorporation or By-Laws of AUGI, or, to the knowledge of AUGI, any statute,
law, rule or regulation of any Governmental Authority affecting the existing
businesses of AUGI, or will cause or permit the material modification of the
effect of, the imposition of any Lien in respect of, or the acceleration of any
obligations or terms or the termination of any rights or imposition of any
burdens under, or conflict with, result in a breach of, or constitute a default
under, any of the terms, conditions or provisions of any judgment, order, award,
injunction or decree, or any of the material terms, conditions or provisions of
any contract, lease, agreement, indenture or other instrument to which AUGI or
any of its subsidiaries is a party or by which AUGI or any of its subsidiaries
is bound; and (ii) no consent, authorization or approval of or filing with any
Governmental Authority or agency, or any third party, will be required on the
part of AUGI or its subsidiaries as conditions precedent to the consummation of
the transactions contemplated hereby, or result in the cancellation of any
Permits presently held by AUGI or its subsidiaries which are required for the
operation of their businesses as conducted on the date hereof.
5.12 No Material Changes. Except as and to the extent described in
Schedule 5.12 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement which
has heretofore been delivered to the Stockholder), since July 31, 1996, the
consolidated businesses of AUGI have continued to be operated only in the
ordinary course, and there has not been:
(a) Any material adverse change in the condition (financial or
otherwise), operations, business, properties, or prospects of AUGI and its
subsidiaries, when taken as a consolidated whole, from that shown in AUGI's
financial statements as at July 31, 1996 and for the fiscal year then ended (the
"1996 AUGI Financials"), or any material transaction or commitment effected or
entered into outside of the normal course of AUGI's businesses (other than this
Merger Agreement);
21
(b) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, condition (financial or otherwise), or prospects of AUGI;
(c) Any declaration, setting aside or payment of any dividend
or other distribution with respect to the AUGI Common Stock, any other payment
of any kind by AUGI or any of its subsidiaries outside of the ordinary course of
business, any forgiveness of any debt or obligation owed to AUGI by any of its
stockholders or any of their respective Affiliates, or any direct or indirect
redemption, purchase or other acquisition by AUGI of any of its capital stock;
or
(d) Any other event or condition arising from or out of or in
connection with the operation of AUGI which has materially and adversely
affected, or may reasonably be expected to materially and adversely affect, AUGI
and its subsidiaries, their consolidated assets or properties, businesses,
condition (financial or otherwise), or prospects, when taken as a consolidated
whole.
5.13 Compliance with Laws.
(a) Except as set forth in Schedule 5.13 to this Agreement,
AUGI has been, and is now in compliance (except to the extent, disclosed on
Schedule 5.13, that incidental and non-material non-compliance has not had and
cannot reasonably be expected to have a material adverse effect on AUGI, its
properties or assets, businesses, condition (financial or otherwise), or its
prospects) with all Requirements of Law affecting AUGI, its assets, businesses,
financial condition or prospects, when taken as a consolidated whole. Neither
AUGI or nor its properties, assets, or business are subject to or directly
affected by any Requirement of Law of any Governmental Authority, other than
those similarly affecting similar enterprises engaged in a material way in the
same business activities.
(b) to the best of its knowledge, AUGI has not: (i) acquired,
handled, utilized, stored, generated, processed, transported, or disposed of any
hazardous or toxic substances, whether in violation of any foreign, federal,
state, or local environmental or occupational health and safety laws or
regulations or otherwise, (ii) otherwise committed any material violation of any
foreign, federal, state, or local environmental or occupational health and
safety laws or regulations (including, without limitation, the provisions of the
Environmental Protection Act and other applicable environmental statutes and
regulations) or any violation of the Occupational Safety and Health Act, or
(iii) been in violation of any material requirements of its insurance carriers
from time to time.
(c) Neither AUGI nor any of its directors, officers or
employees has received any written notice of default or violation, nor, to the
best of AUGI's knowledge, is AUGI or any of its directors, officers or employees
in default or violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal, state, local,
municipal, or other governmental agency, board, commission, bureau,
22
instrumentality or department, domestic or foreign, relating to any aspect of
AUGI's business, affairs, properties, or assets. Neither AUGI nor any of its
directors, officers or employees, has received written notice of, been charged
with, or, to its or their knowledge, is under investigation with respect to, any
violation of any provision of any federal, state, local, municipal, or other law
or administrative rule or regulation, domestic or foreign, relating to any
aspect of AUGI's business, affairs, properties or assets, which violation would
have a material adverse effect on AUGI, its properties or assets, businesses,
its condition (financial or otherwise), or prospects, when taken as a
consolidated whole.
5.14 Litigation. Except as disclosed in Schedule 5.14 annexed
hereto, there are no Actions pending or, to the knowledge of AUGI, are any
Actions threatened, against AUGI or relating to its businesses or properties, at
law or in equity or before or by any court or any Governmental Authority, which
if adversely determined, may have a material adverse effect on the businesses,
properties, financial condition or prospects of AUGI and its subsidiaries, when
taken as a consolidated whole. Except as disclosed in Schedule 5.14 annexed
hereto, AUGI is not aware of any state of facts, events, conditions or
occurrences which might properly constitute grounds for or the basis of any
meritorious Action against or with respect to AUGI, which would, if determined
adversely, have a material adverse effect on AUGI, its businesses or any
material portion of its consolidated assets, or impair the ability of AUGI to
deliver in the Merger all of the Merger Consideration free and clear of all
pledges, Liens, claims, charges, options, calls, encumbrances, restrictions and
assessments whatsoever (except any restrictions which may be created by
operation of state or federal securities laws).
5.15 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement, as, to
the extent, and subject to the qualifications and limitations, set forth in such
corresponding Section(s).
23
6. NOTICES.
6.1 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
(a) If to the Corporation or the Stockholder:
Arcadia Consulting Services, Inc.
00 Xxxxx Xxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxxx, President
with a copy sent concurrently to:
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
facsimile no. (000) 000-0000
(b) If to the Surviving Corporation, AUGI:
American United Global, Inc.
00000 XX 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, President
with a copy sent concurrently to:
Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
given to all other parties.
7. CONDITIONS PRECEDENT TO CLOSING; AGREEMENTS OF THE PARTIES.
24
7.1 AUGI's Conditions Precedent. The obligation of AUGI to close
this transaction is hereby conditioned upon the fulfillment, at or prior to the
Closing, of the following conditions unless waived in writing.
(a) Accuracy of Representations and Warranties to AUGI. All
representations and warranties made by the Stockholder in this Agreement, in any
Schedule(s) hereto, and/or in any Transaction Agreement delivered to AUGI under,
pursuant to, or in connection with, this Agreement will be true and correct in
all material respects on and as of the date hereof and will be true and correct
in all material respects on the Closing Date, unless such warranty is
specifically stated to be as of an earlier date, in which case it shall be true
and correct as of such earlier date, and Stockholder shall deliver a certificate
to such effect.
(b) Performance by the Corporation and the Stockholder. The
Corporation and the Stockholder shall have performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement and any
Transaction Agreement to be performed, satisfied or complied with by them on or
before the Closing Date hereof.
(c) Execution and Delivery of Certificate of Merger. The
Corporation and, to the extent necessary or appropriate, its officers and
directors, shall have executed and delivered the Certificate of Merger in the
form of Exhibit A to this Agreement for filing with the appropriate governmental
authority immediately upon execution and delivery of this Agreement; which
Certificate of Merger shall be held in escrow by Xxxxxxxxxx Xxxxxxx, counsel to
the Stockholder pending the Closing Date.
(d) Execution and Delivery of Registration Rights Agreement.
The Stockholder shall have executed and delivered to AUGI a Registration Rights
Agreement in the form of Exhibit B to this Agreement.
(e) Performance under Consulting Agreement. The Stockholder
shall have performed in all material respects all of his material covenants and
obligations to be performed under the Consulting Agreement with AUGI in the form
of Exhibit C to this Agreement; which Consulting Agreement has been executed and
entered into simultaneous with this Agreement.
(f) Execution and Delivery of Employment Agreement with
Stockholder. The Stockholder and the Surviving Corporation shall have executed
and delivered to AUGI the employment agreement in the forms of Exhibits D
hereto; which Employment Agreement shall be held in escrow by Xxxxxxxxxx
Xxxxxxx, counsel to the Stockholder, pending the Closing Date.
(g) Execution and Delivery of Non-Competition Agreements. The
Stockholder shall have executed and delivered to AUGI a Non-Competition and
Non-Disclosure Agreement in the form of Exhibit E to this Agreement; which
Non-Competition and Non-
25
Disclosure Agreement shall be held in escrow by Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxx, counsel to AUGI, pending the Closing Date..
(h) Execution and Delivery of Subscription Agreement. The
Stockholder shall have completed, executed and delivered to AUGI the
Subscription Agreement in the form of Exhibit F to this Agreement.
(i) Settlement of Affiliated Obligations. The Stockholder
shall have caused all debts, liabilities and other monetary obligations (if
any), including, without limitation, any accrued cash compensation payable,
which shall be owed by the Corporation to the Stockholder or owed to the
Corporation by the Stockholder and/or any of his affiliates to be fully paid and
satisfied as at the Closing Date, such that no such debts, liabilities or
obligations shall remain outstanding.
7.2 The Stockholder's and Corporation's Conditions. The obligations
of the Stockholder and the Corporation to close this transaction is hereby
conditioned upon the fulfillment, at or prior to the Closing, of the following
conditions unless waived in writing.
(a) Accuracy of Representations and Warranties to the
Corporation and the Stockholder. All representations and warranties made by AUGI
in this Agreement, in any Schedule(s) hereto, and in any Transaction Agreement
delivered to the Corporation or the Stockholder under, pursuant to, or in
connection with, this Agreement are true and correct in all material respects on
and as of the date hereof and will be true and correct in all material respects
on the Closing Date, unless such warranty is specifically stated to be as of an
earlier date, in which case it shall be true and correct as of such earlier
date, and AUGI shall deliver a certificate to such effect.
(b) Performance by AUGI. AUGI shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by it on or before the
Closing Date.
(c) Delivery of Merger Consideration. AUGI shall have
delivered to the Stockholder upon the consummation of the Merger, certificates
evidencing the AUGI Merger Stock.
(d) Execution and Delivery of Registration Rights Agreement.
AUGI shall have executed and delivered to the Stockholder upon the date of
execution and delivery of this Agreement, the Registration Rights Agreements in
the form of Exhibit B to this Agreement.
(e) Effectiveness of Registration Statement. The Registration
Statement contemplated by Section 3 of this Agreement shall have been declared
effective by the SEC and no stop order or other suspension of the offering of
the securities contemplated by such Registration Statement shall have been
issued by the SEC.
26
(f) Compliance with Terms of Consulting Agreement. Between the
date of this Agreement and the Closing Date, AUGI and BTS Acquisition Corp.
("Mergerco") shall have complied in all material respects with their respective
covenants and agreements contained in the Consulting Agreement annexed hereto as
Exhibit C and made a part hereof.
7.3 The Parties' Conditions Precedent. The respective Obligations of
the parties to close this transaction is conditioned upon the fulfillment of the
following conditions unless waived in writing:
(a) Resolutions; Incumbency; Certified Bylaws and Certificate
of Incorporation; Good Standing Certificate. On the date of execution hereof,
each of the corporate parties shall have delivered to each of the other parties
hereto the following: (i) copies of resolutions of such corporate parties' Board
of Directors and, to the extent reasonably requested, stockholders of the
corporate entity, in form reasonably satisfactory to counsel for the other
parties to this Agreement, authorizing such corporate party's execution,
delivery and performance of this Agreement and the Merger, and all actions to be
taken by such corporate party hereunder, certified by the Secretary of such
corporate party as of the date hereof to be in accurate and complete and in full
force and effect; (ii) certificates evidencing the incumbency and signatures of
relevant officers of such corporate party, certified by the Secretary of such
corporate party as of the date of this Agreement to be complete and accurate;
(iii) a copy of the bylaws and of the certificate of incorporation of such
corporate party, certified by the Secretary of such corporate party to be
complete and accurate and in full force and effect as of the date hereof; and
(iv) certificates by the Secretary of State of the state of incorporation of
such corporate party, evidencing the good standing of such corporate party in
such state.
(b) Opinion of Counsel. Each party to this Agreement shall
have received the opinion of counsel to each other party to this Agreement,
dated as of the date hereof substantially in the form of Exhibit G hereto .
(c) Closing of BTS Merger Agreement. On or prior to the date
of execution and delivery of this Agreement, all transactions contemplated by
that certain agreement and plan of merger (the "BTS Merger Agreement"), dated of
even date herewith, among AUGI, BTS, BTS Acquisition Corp. ("BTS Mergerco") and
the Simantov Moskona ("Moskona") and Xxxxxx Xxxxxxx ("Xxxxxxx") shall have been
consummated.
(d) Votes of the Stockholder. Subject to receipt of the Merger
Consideration, the Stockholder hereby covenants and agrees to vote all of the
Stockholder's shares of capital stock of the Corporation IN FAVOR of the Merger
and all of the other transactions contemplated by this Agreement and the
Transaction Agreements.
27
7.4 Corporate Structure and Related Matters.
(a) Officer of Mergerco. Upon completion of the Merger: (i)
the Consulting Agreement shall terminate and be replaced with the Employment
Agreement in the form of Exhibit D annexed hereto, and (ii) the Stockholder
shall assume the office of President and Chief Executive Officer of BTS
Mergerco, pursuant to the terms of the Employment Agreement.
(b) Officers and Directors.
(i) Mergerco. Xxxxxx X. Xxxxx shall be Chairman of
Mergerco. Subject to his compliance with his covenants and agreements set forth
in the Employment Agreement, the Stockholder (or such other person as shall be
acceptable to the Stockholder and AUGI) shall be the President and Chief
Executive Officer of Mergerco. Subject to compliance with their respective
covenants and agreements set forth in employment agreements between such persons
and Mergerco, Moskona shall be Vice President and Chief Operating Officer of
Mergerco and Xxxxxxx shall be Vice President and Chief Financial Officer of
Mergerco. The Board of Directors of Mergerco shall initially consist of Xxxxxx
X. Xxxxx, Xxxxxx Xxxx, Xxxxx X. Xxxxxx, the Stockholder and Moskona. AUGI shall,
at all times, designate a majority of the Board of Directors of Mergerco. For so
long as the Stockholder, Moskona and Xxxxxxx shall hold in the aggregate at
least 125,000 shares of Common Stock of AUGI: (i) Moskona and the Stockholder
shall have the right to be designated as two of the Directors of Mergerco; and
(ii) in the event of the death or resignation of Moskona or the Stockholder, the
survivor of the Stockholder, Xxxxxxx and Moskona shall be entitled to select a
replacement for the designee on Mergerco's Board of Directors.
(ii) AUGI. As soon as is reasonably practicable without
undue expense to AUGI but, in any event, not later than thirty days following
consummation of the Merger, AUGI shall cause the Stockholder to be elected to
the Board of Directors of AUGI. For so long as Xxxxxx X. Xxxxx shall continue to
remain as a principal stockholder and executive officer of AUGI, at the request
of the Stockholder, he shall use his best efforts to cause AUGI to undertake to
continue to designate the Stockholder as a Director of AUGI for so long as the
Stockholder shall own an aggregate of not less than 75,000 shares of AUGI Common
Stock.
(c) Management of Mergerco. The management of Mergerco will be
subject to the direction of its Board of Directors; provided that commencing
with the Closing Date and through and including December 31, 2000 (the
"Measuring Period"), Mergerco shall not, and AUGI shall not permit Mergerco to,
do any of the following without the prior written consent of a majority of a
majority of Moskona, Xxxxxxx and the Stockholder: (i) sell any material assets
or securities of Mergerco (other than assets sold in the ordinary course of
business), (ii) incur indebtedness for borrowed money (other than in the
ordinary course of business in accordance with Mergerco's past practices), (iii)
effect any merger, sale, or acquisition of securities, assets, or business of
any third party, or (iv) otherwise materially
28
change the nature of Mergerco's business from the nature of the business
conducted by the Corporation immediately prior to the consummation of the Merger
(except for the natural growth of the business which is contemplated by the
parties to this Agreement).
8. AMENDMENTS AND MODIFICATIONS.
8.1 Amendments and Modifications. No amendment or modification of
this Agreement or any Exhibit or Schedule hereto shall be valid unless made in
writing and signed by the party to be charged therewith.
9. NON-ASSIGNABILITY; BINDING EFFECT.
9.1 Non-Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto. Otherwise, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
10. CLOSING.
10.1 Place and Date of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Messrs. Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel, counsel to
Mergerco and AUGI, located at 000 Xxxx 00xx Xxxxxx - 35th floor, Xxx Xxxx, Xxx
Xxxx 00000, at 10:30 A.M. local time on a date which shall be not later than the
effective date of the Registration Statement referred to in Section 3 hereof and
the shares so registered are immediately delivered to the Stockholder, or as
soon thereafter as is practicable; provided, that (a) unless otherwise consented
to in writing by the Stockholder, the Closing Date shall be not later than 5:00
p.m. (New York time) on June 30, 1997; and (b) the parties may participate in
the closing by telephonic conference call if they so desire. The effectiveness
of the Merger shall occur on the Closing Date simultaneous with the Closing and
upon filing of the Certificate of Merger with the Secretary of State pursuant to
Section 10.2.
10.2 Filing of Merger Certificate. On satisfaction of the conditions
set forth in Section 10.1 above, Xxxxxxxxxx Xxxxxxx, as escrow agent, shall
immediately file or cause to be filed the Certificate of Merger with the
Secretary of State of Delaware.
11. GOVERNING LAW; JURISDICTION.
11.1 Governing Law; Jurisdiction. This Agreement shall be construed
and interpreted and the rights granted herein governed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
wholly within such State. Except as otherwise provided in Section 12.2(c) below,
any claim, dispute or controversy arising under or in connection with this
Agreement or any actual or alleged breach hereof shall be settled
29
exclusively by arbitration to be held before a single arbitrator in New York,
New York, or in any other locale or venue as legal jurisdiction may otherwise be
had over the party against whom the proceeding is commenced, in accordance with
the commercial arbitration rules of the Jams/End-Dispute resolution service. The
parties hereto hereby agree to submit to the jurisdiction of such an arbitrator
in New York, New York for such purpose, and waive all objections to venue, forum
non conveniens, and related objections in connection therewith. As part of his
or her award, the arbitrator shall make a fair allocation of the fee of the
Jams/End- Dispute resolution service, the cost of any transcript, and the
parties' reasonable attorneys' fees, taking into account the merits and good
faith of the parties' claims and defenses. Judgment may be entered on the award
so rendered in any court having jurisdiction. Any process or other papers
hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
12. INDEMNIFICATION.
12.1 General.
(a) By the Stockholder. From and after the Closing Date, the
Stockholder shall defend, indemnify and hold harmless AUGI, as the Surviving
Corporation, and the officers, directors, agents, representatives, and
controlling persons of AUGI (all of the foregoing, the "AUGI Group") from,
against and in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees (collectively, "Losses") that
the AUGI Group may incur, sustain or suffer as a result of any breach of, or
failure by the Corporation or the Stockholder to perform, any of the
representations, warranties, covenants or agreements of the Corporation or the
Stockholder contained in this Agreement or in any Exhibit or any Schedule(s)
furnished by or on behalf of the Corporation or the Stockholder(s) under this
Agreement.
(b) By the AUGI Group. From and after the Closing Date, AUGI
shall indemnify, defend and hold harmless the Stockholder from, against and in
respect of any and all Losses that such person may incur, sustain or suffer as a
result of any breach of, or failure by AUGI to perform, any of the
representations, warranties, covenants or agreements of AUGI contained in this
Agreement or in any Exhibit or any Schedule(s) furnished by or on behalf of
Mergerco or AUGI under this Agreement.
12.2 Limitations on Certain Indemnities.
(a) The Basket. Notwithstanding any other provision of this
Agreement to the contrary, the Stockholder shall not be liable to AUGI with
respect to Losses, unless and until the aggregate amount of all Losses incurred
by AUGI in the aggregate shall exceed the sum of $25,000 (the "Basket"). The
Stockholder shall thereafter be liable for performance of his indemnification
obligations under this Agreement in respect of all Losses in excess of the
Basket, provided that the maximum aggregate liability of the Stockholder in
respect of all Losses of AUGI on the one hand, and the maximum aggregate
liability of AUGI in respect of all Losses
30
of the Stockholder, on the other hand, shall not, in the absence of proven fraud
by such indemnifying party in respect of any particular Losses, in any event
exceed the limitations set forth in Section 12.2(b) below.
(b) Limitation on Amount of Indemnity. Except with respect to
any Losses involving proven fraud by the indemnifying party, no indemnifying
party hereunder found liable for any Losses by any indemnified party under this
Agreement shall be required to pay indemnification hereunder, against AUGI On
the one hand, or after application of the Basket against the aggregate amount of
claims against the Stockholder, on the other hand, in an amount in excess of the
aggregate value of the Merger Consideration received by the Stockholder pursuant
to this Agreement (with AUGI Merger Stock to be valued for such purposes at a
per share price equal to the Closing Date Per Share Price, less any tax
liability on account of the receipt of such price paid or accrued). The
Stockholder shall have the option to satisfy, in whole or in part, any claims
for indemnification hereunder by transferring and returning to AUGI any or all
of the Stockholder's AUGI Merger Stock, which, for purposes hereof, shall
(regardless of any intervening fluctuations in market price) be deemed to have a
value equal to the Closing Date Per Share Price, subject only to appropriate
adjustment to reflect any stock splits, stock dividends, recapitalizations or
other such events relating to the Common Stock of AUGI occurring after the date
hereof. Nothing herein contained, however, shall be deemed to preclude the
Surviving Corporation and/or AUGI from seeking and obtaining payment of
indemnification from the Stockholder in any other manner, subject to the
Stockholder's option to pay any claim (in whole or in part) in the foregoing
manner.
(c) Damages and Equitable Relief. Notwithstanding the
provisions of Section 12.2(b) above, nothing contained in this Agreement shall
be deemed to limit or restrict the right of any party hereto from seeking such
monetary damages and/or equitable remedies (including injunctive relief) as may
be available from any court of competent jurisdiction in the event of a breach
by any other party or parties of any material covenant on its or their part
contained in the AUGI Notes, the Registration Rights Agreement, the Non-
Competition and Non-Disclosure Agreement and/or the Employment Agreements.
(d) Time Limitation on Indemnity for Breach of
Representations, Warranties, Agreements, and Covenants. AUGI shall be entitled
to indemnification by the Stockholder, and the Stockholder shall be entitled to
indemnification by AUGI, pursuant to this Agreement for Losses relating to: (i)
breach of any representation or warranty or agreement or covenant hereunder only
in respect of claims for which notice of claim shall have been given to the
indemnifying party on or before December 31, 1998, or (ii) with respect to
Losses relating to a breach of any representations or warranties under Section
4.8 above, the expiration of the final statute of limitations for those tax
returns covered by the warranties under Section 4.8 above.
(e) Prejudice of Rights to Defend. No party shall be entitled
to indemnification pursuant to this Agreement in the event that the subject
claim for indemnification relates to a third-party claim and the party seeking
such indemnification delayed giving notice
31
thereof to the party from whom it seeks such indemnification to such an extent
as to cause material prejudice to the defense of such third-party claim.
(f) Insurance Coverage. Notwithstanding any other term or
provision of this Section 12.2, absent only a finding by a court of competent
jurisdiction from which no appeal can or shall be taken that an indemnifying
party shall have committed statutory or common law fraud, no indemnifying party
shall be required to indemnify any indemnified party hereunder for Losses to the
extent that such Losses shall have been reimbursed by insurance proceeds, but
shall be required to provide such indemnity until the Loss has, in fact, been
reimbursed. In the event that insurance does not cover the full amount of such
Losses, the indemnifying party shall remain liable for the full amount of the
difference between the insurance payment as described above and the amount of
the Losses, subject to the limitations set forth above.
12.3 Claims for Indemnity. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party in writing within sixty (60) days of the
indemnified party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event within such shorter
period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If the indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
12.4 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, through counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.
32
13. COSTS.
13.1 Finder's or Broker's Fees. Except as set forth herein, each of
Mergerco and AUGI (on the one hand) and the Corporation and the Stockholder (on
the other hand) represents and warrants that neither they nor any of their
respective Affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions.
13.2 Expenses. AUGI, on one hand, and the Stockholder, on the other
hand, shall each pay all of their own respective costs and expenses incurred or
to be incurred by them, respectively, in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement, except that AUGI will be responsible to pay the legal fees and
disbursements of counsel to the Stockholder incurred in negotiating this
Agreement and in closing and carrying out the transactions contemplated hereby;
provided, that such legal fees and disbursements so payable by AUGI shall not
exceed an aggregate of $15,000.
14. FORM OF AGREEMENT.
14.1 Effect of Headings. The Section headings used in this Agreement
and the titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of the
provisions hereof or of the information set forth in such Schedules.
14.2 Entire Agreement; Waivers. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof,
and supersedes all prior agreements or understandings as to such subject matter.
No party hereto has made any representation or warranty or given any covenant to
the other except as set forth in this Agreement and the other Transaction
Agreements and the Schedules and Exhibits hereto. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
14.3 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15. PARTIES.
15.1 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement
33
intended to relieve or discharge the obligations or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
AMERICAN UNITED GLOBAL, INC.
By:/s/ Xxxxxx X. Xxxxx, Pres.
------------------------------
Xxxxxx X. Xxxxx, President
ARCADIA CONSULTING SERVICES, INC.
By:/s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, President
THE STOCKHOLDER:
/s/ Xxxxx X. Xxxxxx
--------------------------------
XXXXX X. XXXXXX
34
