Joint Venture Agreement
This Joint Venture Agreement ("Agreement"), dated this 20th day of July, 2004,
is executed by and between American United Global Inc., a Delaware corporation
with offices located at 00000 X.X. 000xx Xxxxx, Xxxxxxxx, XX 00000 (the
"Company"), and Vertex Capital Corporation, with offices located 000 0xx Xxxxxx,
Xxx Xxxx, XX 00000 ("Vertex").
WHEREAS, the Company is publicly traded whose the ticker symbol is AUGB and is
engaged in acquiring businesses in various sectors; and,
WHEREAS, Vertex is uniquely knowledgeable of companies located in the Russian
Federation that import/export oil and gas hydrocarbon products and equipment for
the oil and gas industries and has practical experience in the negotiating of
contracts with such import/export companies;
WHEREAS, Vertex has entered into negotiations to acquire Southern Gas Company
and its operating subsidiaries and divisions (collectively, "Southern Gas")
located in the Rostov region of Russia;
WHEREAS, the Company desires to enter into a joint venture with Vertex to
acquire Southern Gas, and Vertex agrees to pursue such acquisition in
partnership with AUGI, all upon the terms and subject to the conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual covenants set forth
in this Agreement, the parties hereby agree as follows:
1. Formation of Joint Venture Company. The Company and Vertex hereby agree to
form and capitalize a limited liability company under the laws of the State
of Delaware to be known as "Southern Gas Holdings LLC" (the "Buyer"). The
Buyer shall be formed solely for the purpose of acquiring the equity or
assets of Southern Gas. The members interest of the Buyer shall be owned as
follows:
o The Company shall own 78.6% of the membership interests and equity of
the Buyer; and
o Vertex shall own 21.4% of the membership interests and equity of the
Buyer.
2. Management of the Buyer; Duties of the Members. Prior to the acquisition of
Southern Gas, the business and affairs of the Buyer shall be managed
jointly by representatives of the Company and of Vertex.
(a) Vertex shall be primarily responsible to (i) obtain introductions to
the principal equity owners of Southern Gas, (ii) deal with
governmental authorities in the Russian Republic, (iii) facilitate and
implement consummation of the acquisition of Southern Gas through the
auspices of the Russian Federation and the Commonwealth of Independent
States, (iv) assist the Buyer in negotiating terms and conditions with
regards to a purchase and sale agreement in respect of the potential
acquisition to benefit the Buyer and the Company ("Purchase
Contract"), (v) direct the Buyer and the Company as to customs and
procedures relating to certain foreign operations, procedures,
compliance, and conducting business in the Russian Federation and
Commonwealth of Independent States.
(b) In addition to the foregoing, Vertex shall be responsible for the
initial travel, entertainment, legal, due diligence and other expenses
up to $100,000 in the aggregate ("Acquisition Expenses"), to be
incurred by the Buyer in the pursuit of the proposed acquisition of
Southern Gas. AUGI shall be responsible for all such Acquisition
Expenses in excess of $100,000 in the aggregate. All Acquisition
Expenses amounting to more than One Thousand Dollars ($1,000.00) shall
be approved by both the Company and Vertex before they are incurred..
(c) In addition to the Acquisition Expenses in excess of $100,000, the
Company shall be responsible to (i) provide a substantially liability
free publicly traded United States company; (ii) establish an active
trading market for the Company common stock on the over-the-counter
pink sheets, (iii) comply with all securities laws, rules and
regulations in the United States, including all requisite filings and
governmental approvals, (iv) apply for listing of the Company's common
stock, following the Southern Gas acquisition, on a national
securities exchange, and (v) arrange for between $10.0 million and
$25.0 million of debt and/or equity financing for ongoing working and
expansion capital for the Southern Gas subsidiary of the Company
following the acquisition.
3. Company Satisfaction with Southern Gas Transaction. The final terms and
conditions of any Purchase Contract or related transaction with Southern
Gas shall be subject to (a) the approval of both the Company and Vertex,
and (b) a satisfactory due diligence review by the Company.
4. Put and Call Options. On the successful consummation of the Southern Gas
acquisition, the Company shall have the right and option, exercisable at
any time during the period commencing with the execution of the Purchase
Agreement and on or before the Closing Date of the acquisition of Southern
Gas (the "Option Period") to require Vertex to exchange all, and not less
than all, of its members interests in the Buyer for 3,500,000 shares of the
common stock of AUGI (the "Vertex Stock"). Such option (the "Call Option")
shall be deemed effective within three business days after receipt by
Vertex of written notice of exercise from the Company. Conversely, on or
before the successful consummation of the Southern Gas acquisition, Vertex
shall have the right and option, exercisable at any time during the Option
Period, to require the Company to issue to Vertex the shares of Vertex
Stock (represented by 3,500,000 shares of the common stock of AUGI). Such
option (the "Put Option") shall be deemed effective within three business
days after receipt by the Company of written notice of exercise from
Vertex.
5. Term. This Agreement shall become effective as of the date set forth above
on this Agreement and shall continue for a period of one (1) year (the
"Term"). Notwithstanding the foregoing, in the event that negotiations for
the acquisition of Southern Gas shall terminate, either the Company or
Vertex have the right to terminate this Agreement upon 30 days' written
notice, which written notice shall be effective upon mailing by first class
mail, FedEx or other such delivery services at the respective addresses
provided by the parties in this Agreement.
6. Registration Provisions, Piggyback Registration. If the Put Option or the
Call Option described in Section 4 above shall be exercised, and thereafter
the Company proposes to register any common stock under the Securities Act
of 1933, as amended, for sale to the public for cash, whether for its own
account or for the account of other security holders, or both, on each such
occasion the Company will give written notice to Vertex, no less than
fifteen (15) business days prior to the anticipated filing date, of its
intention to do so. Upon the written request of Vertex, received by the
Company no later than the tenth (10th) business day after receipt by Vertex
of the notice sent by the Company, to register, on the terms and conditions
as the securities otherwise being sold pursuant to such registration, any
of its Vertex Stock (which request shall state the intended method of
disposition thereof), the Company will cause the Vertex Stock as to which
registration shall have been so requested to be included in the securities
to be covered by the Registration Statement proposed to be filed by the
Company, on the same terms and conditions as any similar securities
included therein, all to the extent requisite to permit the sale or other
disposition by Vertex (in accordance with its written request); provided,
however, that the Company may, at any time prior to the effectiveness of
any such Registration Statement, in its sole discretion, abandon the
proposed offering in which Vertex had requested to participate.
7. Confidentiality. Vertex agrees that all information concerning the Company
which it obtains as a result of the services rendered pursuant to this
Agreement shall be kept confidential and shall not be used by Vertex except
for the direct benefit of the Company and such confidential information
shall not be disclosed by Vertex to any third party without the prior
written approval of the Company, provided, however, that Vertex shall not
be obligated to treat as confidential any information that (a) was publicly
known at the time of disclosure to Vertex, (b) becomes publicly known or
available thereafter other than by means in violation of this Agreement or
any other duty owed to the Company by Vertex, or (c) is lawfully disclosed
to Vertex by a third party.
8. Relationship of Parties. For the purpose of this Agreement, the Company
hereby acknowledges that Vertex is not an employee, consultant, or agent of
the Company. Accordingly, Vertex shall take no action, which binds, or
purports to bind, the Company to any contract or agreement relating to the
proposed transaction contemplated by this Agreement.
9. Miscellaneous.
(a) This Agreement contains the entire agreement between the parties and
may not be waived, amended, modified or supplemented except by
agreement in writing signed by the party against whom the enforcement
of any waiver, amendment, modification or supplement is sought. Waiver
of or failure to exercise any right provided by this Agreement shall
not be deemed a waiver of any further or future rights.
(b) This Agreement shall be construed under the laws of the State of
Delaware.
(c) Any controversy or claim arising out of or relating to this Agreement
shall be determined by arbitration in accordance with the then
prevailing rules of the American Arbitration Association, and judgment
upon the award rendered by the Arbitrator may be entered in any court
having jurisdiction thereof. Any provisional remedy which would be
available from a court of law shall be available to the parties to
this Agreement from the arbitrator pending arbitration. The cost and
expenses of such arbitration shall be borne in accordance with the
determination of the arbitrator and may include reasonably attorney's
fees. Each party hereby further agrees that service of process may be
made upon it by registered or certified mail, express delivery or
personal service at the address provided for herein. The site of any
such arbitration shall be New York, New York.
(d) Vertex understands and acknowledges that the Vertex Stock of the
Company that may be acquired by it upon exercise of the Call Option or
the Put Option are being acquired for investment purposes and not for
distribution and will be a suitable investment for Vertex, taking into
consideration the restrictions on transferability affecting the common
stock.
(e) The Company will undertake to comply with the various states'
securities law with respect to the registration of the shares referred
to herein. Company undertakes to make available for review and comment
on a timely basis and prior to submission to any regulatory agency
copies of any registration statements.
(f) This Agreement shall be binding upon the parties, their successors and
assigns, provided, however, that Vertex shall not permit any other
person or entity to assume the obligations hereunder without the prior
written approval of the Company.
(g) If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were excluded and shall be
enforceable in accordance with its terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth below.
VERTEX CAPITAL CORPORATION AMERICAN UNITED GLOBAL, INC.
By:___________________________ By:_____________________________
Xxxxxxx Vax, President Xxxxxx X. Xxxxx, President
