SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 24, 1996
(December 11, 1996)
AMERICAN UNITED GLOBAL, INC.
Delaware 0-19404 95-4359228
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(State or other (Commission File (IRS Employer
jurisdiction of No.) ID No.)
incorporation)
11130 NE 33rd Place, Suite 250, Bellevue, Washington 98004
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(Address of principal executive offices)
(206) 803-5400
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Registrant's telephone number, including area code
25 Highland Boulevard, Dix Hills, New York 11746
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(Former name or former address, if changed since last report)
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Item 5 - Acquisition or Disposition of Assets.
Acquisition of Broadcast Tower Sites, Inc.
Pending Acquisition of Arcadia Consulting, Inc.
On December 11, 1996 (effective as of December 1, 1996), American United
Global, Inc. (the "Company") acquired Broadcast Tower Sites, Inc. ("BTS"),
pursuant to a merger transaction (the "BTS Merger"). BTS is engaged in providing
site acquisition, zoning, architectural and engineering services, as well as
consulting services, to the wireless telecommunications industry. The name of
BTS will be changed to Techstar Communications, Inc..
Pursuant to the terms of the BTS acquisition, the BTS shareholders
received an aggregate of 507,246 shares of Company Common Stock (the "BTS
Shares"), $780,000 in cash and the Company's three-year notes aggregating
$600,000, bearing interest at the Citibank, N.A. prime rate, and payable in
installments of $100,000, $200,000 and $300,000 on each of November 30, 1997,
1998 and 1999.
In a related transaction, on December 11, 1996 the Company also entered
into an agreement to acquire 100% of the capital stock of Arcadia Consulting,
Inc. ("Arcadia"), a company recently formed for the purpose of providing
consulting services to clients in the wireless telecommunications industry. The
Company has agreed to pay a purchase price of $220,000 in cash and 192,754
shares of Company Common Stock (the 'Arcadia Share"). The closing of the Arcadia
acquisition is subject to certain conditions, including the effectiveness of a
registration statement filed with respect to the public distribution of, among
other securities, BTS Shares and the Arcadia Shares, and will be consummated
immediately following the effective date of such registration statement.
Following the Arcadia acquisition, Arcadia will be merged with and into the
Company.
The former stockholders of BTS received, and the stockholder of Arcadia
will receive, four-year employment agreements with BTS and the Company pursuant
to which such persons shall receive, in addition to their base salaries and
annual bonuses based upon performance of BTS, options exercisable over a
five-year period entitling the holders to purchase an additional aggregate
780,000 shares of Company Common Stock (the "BTS Options"). The BTS Options
shall vest and be exercisable (i) 195,000 options on November 30, 1997 in the
event that BTS achieves at least $2,000,000 of Pre-Tax Income (as defined) in
the 12 months ending November 30, 1997, (ii) 195,000 options on November 30,
1998 in the event that BTS achieves at least $2,500,000 of Pre-Tax Income (as
defined) in the 12 months ending November 30, 1998, (iii) 195,000 options on
November 30, 1999 in the event that BTS achieves at least $3,000,000 of Pre-Tax
Income in the 12 months ending November 30, 1999, and (iv) 195,000 options on
November 30, 2000 in the event that BTS achieves at least $3,500,000 of Pre-Tax
Income in the 12 months ending November 30, 2000. Alternatively, all 780,000 BTS
Options shall vest if, during the period commencing upon closing of the BTS and
terminating on November 30, 2000, the accumulated Pre-Tax Income of BTS has
equalled or exceeded $11,000,000. In the event that a change in control of the
Company occurs, or the Company effects a sale of all or
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substantially all of the assets of BTS, prior to November 30, 2000, all of the
BTS Options shall immediately vest upon the occurrence of either such event. In
addition, the BTS acquisition agreement provides that if the Company effects a
public offering of BTS or a sale of BTS prior to November 30, 2000, the former
BTS and Arcadia stockholders may elect (but shall not be required) to exchange
all Company securities received by them in the BTS acquisition (the "Exchange
Option") for an aggregate of 25% of the common stock of BTS then owned by the
Company prior to such transaction.
In addition to the 780,000 BTS Options issued to the former BTS and
Arcadia stockholders, the Company also agreed to issue an additional 120,000 BTS
Options, on identical terms as those offered to the former BTS and Arcadia
stockholders, to certain other key employees of BTS designated by the former BTS
and Arcadia stockholders.
Upon completion of the Arcadia acquisition, Solon L. Kandel, the President
and sole stockholder of Arcadia, will be employed by BTS as its President and
Chief Executive Officer under a four-year employment agreement containing terms
which are substantially identical to those provided to each of the former
stockholders of BTS, including the right to receive 260,000 BTS Options. In
addition, Mr. Kandel will be nominated to serve as a member of the Board of
Directors of the Company. Pending completion of the Arcadia acquisition, on
December 11, 1996 the Company engaged Arcadia as a consultant for a monthly fee
of $15,000.
Item 7 - Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Financial Statements
(i) Financial Statements for BTS - to be filed by amendment.
(ii) Financial Statements for Arcadia - None.
(b) Pro Forma Financial Statements
(i) Pro Forma Financial Statements for BTS - to be filed by
amendment.
(ii) Pro Forma Financial Statements for Arcadia - None.
(c) Exhibits
(1) (a) Agreement and Plan of Merger by and among American
United Global, Inc. ("AUGI"), BTS Acquisition Corp.
("Mergerco"), Broadcast Tower Sites, Inc. ("BTSI"),
Simantov Moskona ("Moskona") and Sergio Luciani
("Luciani") dated December 11, 1996. (without schedules)
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(b) Non-Competition and Non-Disclosure Agreement between
AUGI Moskona and Luciani dated December 11, 1996.
(c) Employment Agreement by and among Mergerco, Moskona and
AUGI dated December 11, 1996.
(d) Employment Agreement by and among Mergerco, Luciani and
AUGI dated December 11, 1996.
(e) Registration Rights Agreement by and among AUGI,
Mergerco, BTSI, Moskona, Luciani and Solon Kandel dated
December 11, 1996.
(f) Agreement and Plan of Merger by and among AUGI, Arcadia
Consulting Services, Inc. and Kandel dated December 11,
1996. (without exhibits and schedules)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
AMERICAN UNITED GLOBAL, INC.
(Registrant)
Dated: December 24, 1996 By:/S/ DAVID M. BARNES
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David M. Barnes, Vice President
and Chief Financial Officer
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 11th
day of December 1996 by and among AMERICAN UNITED GLOBAL, INC., a Delaware
corporation ("AUGI"), having its principal offices at 25 Highland Boulevard, Dix
Hills, New York 17746; BTS ACQUISITION CORP., a Delaware corporation
("Mergerco"), having its principal offices at 11130 NE 33rd Place, Suite 250,
Bellevue, Washington 98004; BROADCAST TOWER SITES, INC., a Delaware corporation
("BTS"), having its principal offices at 4340 East West Highway, Suite 1000,
Bethesda, Maryland 20814; and SIMANTOV MOSKONA ("Moskona") and SERGIO LUCIANI
("Luciani"). Moskona and Luciani are each hereinafter individually referred to
as a "Stockholder" and are hereinafter collectively referred to as the
"Stockholders". BTS is hereinafter sometimes referred to as the "Corporation".
W I T N E S S E T H:
WHEREAS, Moskona and Luciani are the record and beneficial owners 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, (a) Mergerco, a wholly-owned direct subsidiary of AUGI, has been
formed solely for the purpose of merging with BTS; the effect of which merger is
to enable Mergerco 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 (the
"Merger"); and
WHEREAS, the Stockholders, the Board of Directors of the Corporation, the
Board of Directors of Mergerco, AUGI, as the sole stockholder of Mergerco, 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:
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1. THE MERGER.
1.1 The Merger; Change of Name of Surviving Corporation.
(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"), BTS shall be merged with and into Mergerco, with Mergerco as
the surviving corporation of such merger (the "Merger"). The Merger shall be in
accordance with the terms and conditions of this Agreement and a certificate of
merger in substantially the form of Exhibit "A" annexed hereto (the "Certificate
of Merger"), with Mergerco as the surviving corporation of such Merger (Mergerco
being hereinafter sometimes referred to as the "Surviving Corporation").
Thereupon, the separate existence of each of BTS shall cease, and Mergerco, as
the Surviving Corporation of the Merger, shall continue its corporate existence
under Delaware Law.
(b) On the Closing Date, the Certificate of Incorporation of
the Surviving Corporation shall be amended in a manner satisfactory to AUGI,
pursuant to which the corporate name of the Surviving Corporation shall be
changed to TRANSCON TELECOMMUNICATION NETWORKS, INC., or such other corporate
name as shall be acceptable to the Stockholders and AUGI.
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, or waiver of such performance by the party or parties for whose
benefit such covenants or agreements are to be performed, Mergerco and BTS (if
required under Delaware Law) 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 each of Mergerco and the Corporation (the
"Constituent Corporations"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, 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 Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Delaware Law
without further act or deed.
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1.4 Surviving Corporation. Upon the effectiveness of the Merger, the
Certificate of Incorporation, By-Laws, directors and officers of the Surviving
Corporation shall be identical to those of Mergerco as in effect immediately
prior to the effectiveness of the Merger.
1.5 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.
(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.
1.6 Books and Records. On the Closing Date, the Corporation shall
deliver to Mergerco 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.
1.7 Tax Free Reorganization. The parties to this Agreement intend
for the transactions whereby Mergerco, as the Surviving Corporation upon
consummation of the Merger, will remain a wholly-owned subsidiary of AUGI and
the owners of the Corporation's securities immediately prior to the consummation
of the Merger shall receive the Merger Consideration upon consummation of the
Merger, shall be treated as a tax free reorganization
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within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended.
2. Merger Consideration.
2.1 Merger Consideration. On consummation of the Merger, the
Stockholders, as the record owners of all outstanding Fully Diluted Equity of
the Corporation, shall receive their allocable percentages, as specified in
Section 3 of this Agreement, of an aggregate of the following (collectively, the
"Merger Consideration"):
(a) Five Hundred and Seven Thousand Two Hundred and Forty Six
(507,246) shares of Class A voting common stock, $0.01 par value per
share, of AUGI (the "AUGI Merger Stock");
(b) Seven Hundred and Eighty Thousand ($780,000) Dollars,
payable by wire transfer of immediately available United States
legal tender funds to bank accounts designated by the Stockholders
(the "Closing Cash Payment"); and
(c) Six Hundred Thousand ($600,000) Dollars, payable in the
form of three year promissory notes of AUGI (the "AUGI Notes");
provided, that the aggregate principal amount of such AUGI Notes to
be delivered on the Closing Date shall be subject to reduction in
the manner set forth in Section 2.3 below.
2.2 The AUGI Notes. The AUGI Notes to be issued on the Closing Date
shall contain the following terms and conditions:
(a) Interest. The AUGI Notes shall bear interest, payable
monthly at the prime rate of interest charged from time to time by
Citibank, NA (the "Prime Rate");
(b) Principal Installments. The AUGI Notes shall be payable as
to principal in three annual installments on each of the three
anniversary dates from the Closing Date, as follows: (A) Sixteen and
2/3 (16-2/3%) percent of principal on the first anniversary of the
Closing Date, (B) Thirty three and 1/3 (33-1/3%) percent of
principal on the second anniversary of the Closing Date, and (C)
Fifty (50%) percent of principal on the third anniversary of the
Closing Date;
(c) Additional Provisions. The AUGI Notes shall be unsecured
obligations of AUGI and shall be prepayable at any time at the
option of AUGI without penalty, and shall contain such terms and
conditions as are set forth on Exhibit "B" annexed hereto and made a
part hereof.
2.3 Adjustment to AUGI Notes.
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(a) In the event and to the extent that on the Closing Date
the sum of the cash, including certificates of deposit and other
marketable securities immediately convertible into cash ("Cash
Reserves") and collectible accounts receivable of BTS (collectively,
with the Cash Reserves, the "Liquid Assets") shall be less than
$1,200,000, the aggregate principal amount of the AUGI Notes shall
be reduced to the extent of 50% of the difference, if any, between
(i) $1,200,000, and (ii) 100% of the actual book value of the Liquid
Assets of the Surviving Corporation as at the Closing Date. No
increase in the AUGI Notes shall be made in the event that the
actual book value of the Liquid Assets of BTS shall exceed
$1,200,000 on the Closing Date.
(b) On the Closing Date, the Stockholders shall deliver to
AUGI a certificate executed by each of the Stockholders (the "Liquid
Assets Certificate") setting forth the Cash Reserves and aggregate
accounts receivable of BTS as of the last business day immediately
prior to the Closing Date. Such accounts receivable shall (i)
represent actual amounts due and owing to the Surviving Corporation
from unaffiliated third parties, without offset or counterclaim of
any kind, (ii) be net of all intercompany transactions, (iii) be net
of appropriate reserves for doubtful accounts, and (iv) otherwise be
calculated in accordance with generally accepted accounting
principles, consistently applied ("GAAP").
(c) The accuracy of the aggregate amount of Liquid Assets set
forth on the Liquid Assets Schedule shall be deemed an additional
covenant of the Stockholders. Accordingly, should a subsequent audit
or review of such Liquid Assets on the business day immediately
prior to the Closing Date reflect that the aggregate principal
amounts of the AUGI Notes delivered at Closing is subject to
reduction in accordance with the provisions of this Section 2.2,
such AUGI Notes shall be deemed null and void, ab initio upon the
same being replaced by new AUGI Notes in the appropriate aggregate
principal amounts. Such audit or review is to be completed not later
than two hundred and ten (210) days of the Closing Date. In the
absence of completion of such audit or review by such date, there
shall be no reduction in the amount of the AUGI Notes.
3. ALLOCATION OF MERGER CONSIDERATION.
3.1 AUGI Merger Stock. On consummation of the Merger, the 507,246
shares of AUGI Merger Stock shall be delivered to the owners of the outstanding
Fully Diluted Equity of the Corporation as follows:
Simantov Moskona - 277,971 shares of AUGI Stock
Sergio Luciani - 229,275 shares of AUGI Stock.
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3.2 Closing Cash Payment. On consummation of the Merger, the
$780,000 of Closing Cash Payment shall be delivered to the owners of the
outstanding Fully Diluted Equity of the Corporation as follows:
Simantov Moskona - $427,440
Sergio Luciani - $352,560
3.3 AUGI Notes. On consummation of the Merger, the AUGI Notes shall
be delivered to the owners of the outstanding Fully Diluted Equity of the
Corporation in the following percentage of the aggregate principal amount of
AUGI Notes to be delivered on the Closing Date:
Simantov Moskona - 54.8%
Sergio Luciani - 45.2%
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
The Stockholders, jointly and severally, hereby represent and
warrant to Mergerco and AUGI as follows, it being understood and agreed that
neither AUGI nor Mergerco is or will be required to undertake any independent
investigation to determine the truth, accuracy and completeness of the
representations and warranties made by the Stockholders in this Agreement, and
it being 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 Stockholders, are as set forth on Schedule
4.1 annexed hereto. Each 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 each of the Stockholders, and all of
the Stock has been duly authorized and validly issued, and is fully paid and
non-assessable.
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4.2 Valid and Binding Agreement.
(a) The execution, delivery and performance by the
Stockholders and the Corporation of this Agreement, the AUGI Notes, the
Registration Rights Agreement, the Non-Competition and Non-Disclosure Agreement,
the Employment Agreements (as such terms are hereinafter defined), the
Subscription Agreement and the other instruments, agreements and written
undertakings of AUGI, Mergerco, the Corporation and the Stockholders, and each
of them, which are executed in connection therewith and to which it or they,
respectively are parties (collectively, the "Transaction Agreements") and the
consummation of the Merger and the other transactions contemplated hereby, have
been duly and validly authorized by the Board of Directors of the Corporation
and the Stockholders, and the Corporation has the full corporate right, power
and authority to execute and deliver this Agreement and the Transaction
Agreements to which the Corporation is a party, to perform its and their
respective 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 each is a party
will constitute, respectively, the legal, valid and binding obligation of the
Corporation and of the Stockholders, enforceable against the Corporation and the
Stockholders 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.
(b) Each Stockholder has full legal right, power and authority
to execute and deliver this Agreement and the Transaction Agreements to which a
Stockholder is a party, and to consummate the transactions contemplated hereby
and thereby. This Agreement and, when executed and delivered by such
Stockholder, the Transaction Agreements 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.
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(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 the assets, including
Intellectual Property (as that term is hereinafter defined), if any, used in
connection with the operation of the business of the Corporation as presently
conducted; Spectrum Tech, Inc. ("Spectrum"), a Delaware corporation recently
formed by the Stockholders, does not own and has never owned any operating
assets or properties used in the business of the Corporation; and Spectrum is
and has since its inception been an inactive corporation which has conducted no
business.
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, demands or commitments: (i)
obligating the Corporation to issue, transfer or purchase any shares of its
capital stock, or (ii) obligating either of the Stockholders 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) Annexed hereto as Schedule 4.6(a) are (i) the unaudited
financial statements of the Corporation as at December 31, 1994 and for the
fiscal year then ended, including balance sheet, statements of operations,
statements of stockholders' equity, and statements of cash flow, all as prepared
by the management of the Corporation (the "Unaudited Financial Statements"); and
(ii) the audited financial statements of the Corporation as at
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December 31, 1995 and September 30, 1996 and for the fiscal year and nine (9)
months then ended, including balance sheets, statements of operations,
statements of stockholders' equity, and statements of cash flow, as audited by
Feldman Radin & Co., P.C. (the "Audited Financial Statements"). Such Unaudited
Financial Statements and Audited Financial Statements are herein collectively
referred to as the "Financial Statements."
(b) The Financial Statements: (i) are true, complete and
correct in all respects and present fairly the financial position of the
Corporation as of the dates thereof and for the periods reflected therein, all
in conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis; (ii) make full and adequate provision,
in accordance with generally accepted accounting principles, for the various
assets and liabilities of the Corporation on a basis and the results of its
operations and transactions in its accounts, as of the dates and for the periods
referred to therein; (iii) reflect only assets and liabilities and results of
operations and transactions of the Corporation, and do not include or reflect
any assets, liabilities or transactions of any corporation or entity except the
Corporation; and (iv) were prepared from, and are consistent with, the books and
records of the Corporation, which accurately and consistently reflect all
transactions to which the Corporation was and is a party; provided, that the
Unaudited Financial Statements omit footnote disclosures required under GAAP and
are subject to fiscal year end audit adjustments which would not, individually
or in the aggregate, be material.
(c) Except as expressly set forth in the Financial Statements
and/or in the Schedules to this Agreement, or arising in the normal course of
the Corporation's business since October 1, 1996, 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.
(d) Schedule 4.6(d) annexed hereto contains: (i) an aging
schedule of accounts receivable and accounts payable of the Corporation as at
September 30, 1996 (the "Stub Period Date"), (ii) a list of the outstanding
principal balance of and approximate accrued interest on all indebtedness (other
than accounts payable), loans and/or notes payable of the Corporation as of the
Stub Period Date; (iii) a list of any leasehold or other contractual obligations
of the Corporation to any of the Stockholders, any other stockholder of the
Corporation (if any), and/or any of their respective Affiliates on the date
hereof; (iv) a list of all obligations of the Corporation guaranteed by any of
the Stockholders, any other stockholder of the Corporation (if any), and/or any
of their respective Affiliates on the date hereof, and the terms of such
guarantees; (v) a list reflecting the nature and amount of all obligations owed
to the Corporation on the date hereof by any of the Stockholders, any other
stockholder of the Corporation (if any), and/or any of their respective
Affiliates; and (vi) a list reflecting the nature and amount of all obligations
owed by the Corporation on the date hereof to any of the Stockholders, any other
stockholder of the Corporation (if any), and/or any of their respective
Affiliates. Wherever used in this Agreement, the term "Affiliate" means, with
respect to any person or entity, any other
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person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
first person or entity.
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 or herewith been delivered to AUGI), since the 1995 Fiscal Year
End, 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
from that shown in the most recent Reviewed Financial Statements, or any
material transaction or commitment effected or entered into outside of the
normal course of the Corporation's business other than 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
(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
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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 each 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, including without limitation,
all computer 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, as reflected in the Financial
Statements, 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 does not exceed $200,000, 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 business as presently conducted.
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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
businesses 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
Stockholders 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 are 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 Stockholders,
there is no pending proceeding for the taking or condemnation of all or any
portion of the properties 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 Accounts Receivable. All accounts receivable shown on the
balance sheet as of the Stub Period Date included in the Financial Statements
(the "Balance Sheet"), and all accounts receivable thereafter created or
acquired by the Corporation prior to the Closing Date, have arisen or will arise
in the ordinary course of the Corporation's businesses. Except as set
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forth on Schedule 4.11 annexed hereto, to the Stockholders' knowledge (but
without guaranteeing the collectiblity of any accounts receivable), all of such
accounts receivable (a) are and will be subject to no counterclaims, set-offs,
allowances or discounts of any kind, except to the extent of the allowance for
doubtful accounts as of the Stub Period Date reflected in the Balance Sheet, and
(b) have been, are and will be valid and collectible in the ordinary course of
business within two hundred and ten (210) days after the Closing Date (subject
to the aforesaid allowance for doubtful accounts), without necessity of
instituting any legal proceedings for collection.
4.12 Inventories. All supplies and other inventories shown on the
Balance Sheet, 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 Stockholders, 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 Stockholders 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, 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,
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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 each of the Stockholders, 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
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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 any of the Stockholders 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 each of the Stockholders, 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 each of the Stockholders, 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 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.
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(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 do
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
Stockholders 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 or 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.
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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
Stockholders, nor the performance of, or compliance with, the terms and
provisions of this Agreement on the part of the Corporation and/or the
Stockholders, 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 Stockholders, 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 any of the
Stockholders is a party or by which the Corporation or any of the Stockholders
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 Stockholders 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 each 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 any Stockholder pursuant to the
Merger.
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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 Stockholders: (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 each of the Stockholders, 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.
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(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) or
investigations (collectively, the "Actions") pending or, to the knowledge of the
Corporation or any of the Stockholders, 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 any of the
Stockholders 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 businesses or
any material portion of its assets, or impair the ability of any of the
Stockholders to deliver in the Merger all of their 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 any of the Stockholders, 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,
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corporation or trust for their benefit, or any other officer, director or
employee of the Corporation or any Affiliate of the Corporation.
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).
4.25 Disclosure to Stockholders. The Stockholders acknowledge
receipt of the statements and reports referred to in Schedule 5.9 to this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND AUGI.
Mergerco and AUGI hereby jointly and severally represent and warrant
to the Stockholders, as follows, it being understood and agreed that none of the
Stockholders is or will be required to undertake any independent investigation
to determine the truth, accuracy and completeness of the representations and
warranties made by AUGI or Mergerco in this Agreement:
5.1 Organization, Good Standing and Qualification. Each of Mergerco
and AUGI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, respectively, 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 Mergerco and of AUGI
(including all amendments thereto), and a correct and complete list of the
officers and directors of Mergerco and 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 Mergerco and AUGI have been duly and validly authorized by the Board
of Directors and sole stockholder of Mergerco, and by the Board of Directors of
AUGI; and Mergerco and AUGI have the full corporate right, power and authority
to execute and deliver this Agreement and the Transaction Agreements, to perform
their respective obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. No further corporate authorization
is necessary on the part of Mergerco or AUGI to consummate the transactions
contemplated hereby and thereby.
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5.3 Valid and Binding Agreement. This Agreement and the other
Transaction Agreements constitutes the legal, valid and binding obligation of
Mergerco, enforceable against Mergerco in accordance with its and their terms,
and this Agreement and, when executed and delivered by AUGI, and 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.
5.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement and the other Transaction Agreements by Mergerco or
AUGI, nor compliance with the terms and provisions of this Agreement or the
other Transaction Agreements on the part of Mergerco or AUGI, will: (a) violate
any statute or regulation of any Governmental Authority affecting Mergerco or
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 Mergerco or AUGI is a party, or by which Mergerco or 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
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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 Stockholders.
(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. 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 Investment. AUGI owns the outstanding capital stock of Mergerco
for its own account, for investment purposes only, and not with a view to the
resale or distribution thereof.
5.7 Business of Mergerco. Mergerco has been formed solely for the
purposes of consummating the transactions contemplated by this Merger Agreement,
has not conducted and will not conduct any independent business operations until
the Closing Date of the Merger.
5.8 Absence of Litigation. No action, suit or proceeding by or
before any court or any governmental body or authority, against Mergerco or AUGI
or pertaining to the transactions contemplated by this Agreement or their
consummation, have been instituted or, to their 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 Mergerco or 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 Mergerco or 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
Stockholders 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
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(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.
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 Stockholders to AUGI in Subscription
Agreements furnished by each of them 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 Mergerco and AUGI nor
the performance of, or compliance with, the terms and provisions of this
Agreement on the part of AUGI and Mergerco, will violate or conflict with any
term of the Certificate of Incorporation or By-Laws of AUGI or Mergerco, or, to
the knowledge of AUGI and Mergerco, 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.
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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 Stockholders), since July 31, 1996, the
consolidated businesses of AUGI 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 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;
(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
can not 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
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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,
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).
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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 Stockholders:
Broadcast Tower Sites, Inc.
4340 East West Highway, Suite 1000
Bethesda, Maryland 20814
Attn: Simantov Moskona, President
with a copy sent concurrently to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
50 Division Street
Sommerville, New Jersey 08876
Attn: Steven Fuerst, Esq.
facsimile no. (908) 526-9173
(b) If to Mergerco, the Surviving Corporation
or AUGI:
American United Global, Inc.
11130 NE 33rd Place, Suite 250
Bellevue, Washington 98004
Attention: Robert M. Rubin, Chief Executive Officer
with a copy sent concurrently to:
Greenberg Traurig Hoffman
Lipoff Rosen & Quentel
153 East 53rd Street
New York, New York 10022
Attention: Stephen Weiss, Esq.
or to such other address as any party shall have specified by notice in writing
given to all other parties.
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7. CONDITIONS PRECEDENT TO CLOSING; ADDITIONAL AGREEMENTS
OF THE PARTIES.
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 Mergerco or
AUGI. All representations and warranties made by the Stockholders in this
Agreement, in any Schedule(s) hereto, and/or in any Transaction Agreement
delivered to Mergerco or 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
Stockholders shall deliver a certificate to such effect.
(b) Performance by the Corporation and the Stockholders. The
Corporation and the Stockholders 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 Mergerco and, to the extent necessary or appropriate, their
respective 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.
(d) Execution and Delivery of Subscription Agreements. Each of
the Stockholders shall have executed and delivered to AUGI a Subscription
Agreement in the form of Exhibit C to this Agreement.
(e) Execution and Delivery of Registration Rights Agreements.
Each of the Stockholders shall have executed and delivered to AUGI a
Registration Rights Agreement in the form of Exhibit D to this Agreement.
(f) Execution and Delivery of Non-Competition Agreements. Each
of the Stockholders shall have executed and delivered to AUGI a Non-Competition
Agreement in the form of Exhibit E to this Agreement.
(g) [Intentionally Deleted].
(h) Execution and Delivery of Employment Agreements with
Stockholders. The Stockholders and the Surviving Corporation shall have executed
and
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delivered to AUGI their respective employment agreements in the forms of
Exhibits F and G hereto.
(i) Settlement of Affiliated Obligations. The Stockholders
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 any of the Stockholders or owed to the
Corporation by any of the Stockholders of the Corporation and/or any of their
respective Affiliates to be fully paid and satisfied as at the Closing Date,
such that no such debts, liabilities or obligations shall remain outstanding.
(j) Conduct of Business; Payments of Compensation, Dividends
and Distributions. From and after October 14, 1996 (the date of execution of a
letter of intent among the parties hereto) through and including the Closing
Date and except as set forth on any Schedule to this Agreement:
(i) other than as disclosed in writing to Mergerco, no
assets of BTS shall have been dividended or distributed to the
Stockholders prior to the Closing Date, except to the extent necessary to
pay the Stockholders' customary salaries and bonuses (collectively,
"Compensation") for 1996 (not to exceed $200,000 for each of Moskona and
Luciani) and taxes on income of BTS earned through the Closing Date. To
the extent not paid in full by the Closing Date, Moskona and Luciani shall
be entitled to receive unpaid Compensation up to $400,000 in the aggregate
by December 31, 1996; and
(ii) neither of the Stockholders nor the Corporation
shall have engaged in any of the following without, in each instance, the
prior written consent of AUGI:
(1) amended its Articles of Incorporation or
By-Laws;
(2) issued any shares of the Company's capital
stock, other than to a Stockholder;
(3) issued or created any warrants, obligations,
subscriptions, options, convertible securities or other
commitments under which any additional shares of the Company's
capital stock might be directly or indirectly issued;
(4) amended, canceled or modified any existing
Material Contract or entered into any new agreement,
commitment or transaction, whether or not material, except in
the ordinary course of business;
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(5) except as set forth in Section 7.1(j) paid,
granted or authorized any salary increases or bonuses or enter
into any employment, consulting or management agreements;
(6) except in the ordinary course of business,
modified any agreement to which the Company is a party or by
which it may be bound, or modify any payment terms with any
creditor;
(7) made any change in the Company's management
personnel;
(8) except pursuant to commitments in effect on
the date hereof (to the extent disclosed in this Agreement or
in any Schedule hereto), made any capital expenditure(s) or
commitment(s), whether by means of purchase, lease or
otherwise, or any operating lease commitment(s), in excess of
$5,000 in the aggregate;
(9) sold, assigned or disposed of any capital
asset(s) with a net book value in excess of $5,000 as to any
one item;
(10) changed its method of collection of accounts
or notes receivable, accelerated or slowed its payment of
accounts payable, or prepaid any of its obligations or
liabilities, other than prepayments to take advantage of trade
discounts not otherwise inconsistent with or in excess of
historical prepayment practices;
(11) except as set forth in Section 7.1(j),
declare, pay, set aside or made any dividend(s) or other
distribution(s) of cash or other property, or redeem any
outstanding shares of the Company's capital stock;
(12) [intentionally deleted];
(13) voluntarily subjected any of the assets or
properties of the Company to any further liens or
encumbrances;
(14) forgiven any liability or indebtedness owed
to the Company by any of its stockholders or any of their
respective Affiliates; or
(15) agreed to do, or take any action in
furtherance of, any of the foregoing.
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7.2 The Stockholders' and Corporation's Conditions. The obligations
of the Stockholders and the Corporation to close this transaction is hereby
conditioned upon the fulfillment, at or prior to the Closing, of the following
condition unless waived in writing.
(a) Accuracy of Representations and Warranties to the
Corporation and the Stockholders. All representations and warranties made by
Mergerco and/or AUGI in this Agreement, in any Schedule(s) hereto, and/or in any
Transaction Agreement delivered to the Corporation or the Stockholders 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 Mergerco and AUGI. Mergerco and 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 them on or before the Closing Date.
(c) Delivery of Merger Consideration. AUGI shall have
delivered to each of the Stockholders upon the consummation of the Merger,
certificates evidencing the AUGI Merger Stock, the Closing Cash Payment and the
AUGI Notes.
(d) Execution and Delivery of Registration Rights Agreement.
AUGI shall have executed and delivered to each of the Stockholders upon the
consummation of the Merger, a respective Registration Rights Agreements in the
form of Exhibit D to this Agreement.
(e) Execution and Delivery of Employment Agreement. Mergerco
shall have executed and delivered the Employment Agreements in the form of
Exhibit F and G hereto.
7.3 The Parties' Conditions Precedent. The respective Obligations of
the parties to close this transaction is conditioned upon the fulfillment, at or
prior to closing, of the following conditions unless waived in writing:
(a) Resolutions; Incumbency; Certified Bylaws and Certificate
of Incorporation; Good Standing Certificate. On the Closing Date, 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
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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, dated as of a date not more than five
(5) days prior to the Closing Date, 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 has
received the opinion of counsel to each other party to this Agreement, dated as
of the Closing Date substantially in the form of Exhibit K hereto .
(c) Execution of Arcadia Merger Agreement. AUGI, Solon L.
Kandel and Arcadia Consulting Services Co., Inc. shall have executed and
delivered an agreement and plan of merger (the "Arcadia Merger Agreement"), in
the form of Exhibit H to this Agreement.
(d) Votes of the Stockholders. Subject to receipt of the
Merger Consideration, each of the Stockholders hereby covenants and agrees to
vote all of each such 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.
7.4 Corporate Structure and Related Matters.
(a) Surviving Corporation a Subsidiary. Upon completion of the
Merger, the Surviving Corporation shall remain a wholly-owned subsidiary of
AUGI. The Certificate of Incorporation of the Surviving Corporation shall be in
form and substance annexed hereto as Exhibit I and made a part hereof.
(b) Officers and Directors.
(i) The Surviving Corporation. Robert M. Rubin shall be
Chairman of the Surviving Corporation. Kandel (or such other person as shall be
acceptable to the Stockholders and AUGI) shall be the President and Chief
Executive Officer of the Surviving Corporation. Moskona shall be Vice President
and Chief Operating Officer of the Surviving Corporation and Luciani shall be
Vice President and Chief Financial Officer of the Surviving Corporation. The
Board of Directors of the Surviving Corporation shall initially consist of
Robert M. Rubin, Howard Katz, David M. Barnes, Solon L. Kandel ("Kandel") and
Moskona. AUGI shall, at all times, designate a majority of the Board of
Directors of the Surviving Corporation. For so long as the Stockholders and
Kandel shall hold in the aggregate at least 125,000 shares of Common Stock of
AUGI: (i) Moskona and Kandel shall have the right to be designated as two of the
Directors of the Surviving Corporation; and (ii) in the event of the death or
resignation of Moskona or Kandel the survivor of the Stockholders and Kandel
shall be entitled to select a replacement for the designee on the Surviving
Corporation's Board of Directors.
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(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 Kandel to be elected to the Board
of Directors of AUGI. For so long as Robert M. Rubin shall continue to remain as
a principal stockholder and executive officer of AUGI, at the request of Kandel,
he shall use his best efforts to cause AUGI to undertake to continue to
designate Kandel as a Director of AUGI for so long as Kandel shall own an
aggregate of not less than 75,000 shares of AUGI Common Stock.
(c) Management of the Surviving Corporation. The management of
the Surviving Corporation 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"), the Surviving Corporation
shall not, and AUGI shall not permit the Surviving Corporation to, do any of the
following without the prior written consent of a majority of the Stockholders
and Kandel: (i) sell any material assets or securities of the Surviving
Corporation (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 the Surviving Corporation's past practices), (iii)
effect any merger, sale, or acquisition of securities, assets, or business of
any third party, or (iv) otherwise materially change the nature of the Surviving
Corporation'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).
(d) Tax Returns for Stub Period. The Stockholders hsall have
the right and duty to prepare BTS's tax returns for the period between the last
filing made prior to the date hereof and the Closing Date of the Merger.
7.5 Financing of the Surviving Corporation.
(a) AUGI Advances. Based upon annual budgets and forecasts
previously supplied to AUGI by the Surviving Corporation, as the same: (i) shall
be updated by the Surviving Corporation for the three consecutive twelve month
periods commencing January 1, 1997, January 1, 1998 and January 1, 1999; and
(ii) in such form and detail as shall be reasonably satisfactory to AUGI (the
"Budget"), AUGI shall make available to the Surviving Corporation from and after
the Closing Date, inter-company loans and advances of approximately $500,000
(the "Advances") to the extent requested in order to fund the working capital
requirements of the Surviving Corporation.
(b) Form of AUGI Financing. All such Advances shall be
reflected on the books of the Surviving Corporation as long-term (one year
renewable advances) loans or as the issuance of shares of the Surviving
Corporation's preferred stock having liquidation preferences equal to the
aggregate amount of the Advances; the form of such Advances to be as determined
in AUGI's sole discretion. All such Advances shall bear interest at the prime
rate charged from time to time by Citibank, NA (the "Prime Rate") and interest
on outstanding Advances shall be payable monthly. The timing of the Surviving
Corporation's ability to receive
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any Advances shall be based upon the requirements established in the Surviving
Corporation Budget or as otherwise mutually agreed to by the Surviving
Corporation's management and the AUGI Board of Directors. Once the timing of
such Advances have either been established in the Surviving Corporation Budget,
or otherwise approved by the AUGI Board of Directors, the Surviving Corporation
will not need further authorization from AUGI for drawings of Advances from
AUGI; provided, that any requested drawings that are not based upon information
contained in an approved Budget of the Surviving Corporation will require AUGI
Board approval.
(c) Use of Proceeds of AUGI Financing. All AUGI Financing
shall be spent and allocated to working capital and such business, technology
and marketing efforts and other corporate purposes as the Boards of Directors of
AUGI and the Surviving Corporation shall, from time to time determine.
(d) Repayment of Advances. Upon the occurrence of (i) sale by
AUGI of all or substantially all of the securities or assets of the Surviving
Corporation, whether through stock sale, asset sale, merger, consolidation or
like combination (a "Sale of Control"), or (ii) the closing of an initial public
offering or private placement of the Surviving Corporation's debt or equity
securities (an "IPO"), all Advances will be subject to immediate repayment to
AUGI by the Surviving Corporation (including the redemption of any preferred
stock issued by the Surviving Corporation on account of Advances, in the
aggregate amount of the liquidation preference accorded to such shares).
(e) Off-Set of AUGI Advances Against AUGI Withdrawals. To the
extent that AUGI shall borrow, transfer, distribute, remove or withdraw
("Withdrawals") any cash or cash equivalents from the Corporation, no Advances
shall earn interest under Section 7.5(b), except such portion of Advances as
exceed the aggregate amount of such Withdrawals.
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.
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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, Rosen & Quentel, counsel to
Mergerco and AUGI, located at 153 East 53rd Street - 35th floor, New York, New
York 10022, at 10:30 A.M. local time on a date which shall be not more than five
(5) business days following the date of this Agreement; provided, that 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.
10.2 Filing of Merger Certificate. On the Closing Date, Mergerco and
the Corporation shall 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 exclusively by
arbitration to be held before one or more arbitrators 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 procedures of Jams/End-Dispute resolution. The parties
hereto hereby agree to submit to the jurisdiction of such arbitrators 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 arbitrators shall make a fair allocation of the fees of
Jams/End-Dispute, 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 of such arbitrator(s)
so rendered in any court of competent 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 Corporation and the Stockholders. Without prejudice
to any rights of contribution as between the Stockholders, from and after the
Closing Date: each of the Stockholders shall jointly and severally defend,
indemnify and hold harmless the Surviving Corporation and AUGI and their
respective officers, directors, agents, representatives, and controlling persons
(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")
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<PAGE>
that the AUGI Group may incur, sustain or suffer as a result of any breach of,
or failure by the Corporation or any such Stockholder(s) to perform, any of the
representations, warranties, covenants or agreements of the Corporation or such
Stockholder(s) contained in this Agreement or in any Exhibit or any Schedule(s)
furnished by or on behalf of the Corporation or such Stockholder(s) under this
Agreement.
(b) By the AUGI Group. From and after the Closing Date, AUGI
and Mergerco, jointly and severally, shall indemnify, defend and hold harmless
the Stockholders 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
Mergerco or AUGI to perform, any of the representations, warranties, covenants
or agreements of Mergerco or 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, no Stockholder shall be liable to AUGI or Mergerco
with respect to Losses, unless and until the aggregate amount of all Losses
incurred by the Surviving Corporation or AUGI in the aggregate shall exceed the
sum of $100,000 (the "Basket"). The Stockholders shall thereafter be liable,
jointly and severally, for performance of its indemnification obligations under
this Agreement in respect of all Losses in excess of the Basket, provided that
the maximum aggregate liability of each Stockholder in respect of all Losses of
AUGI or Mergerco, on the one hand, and the maximum aggregate liability of AUGI
and Mergerco in respect of all Losses of the Stockholders, 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 any or all of the Stockholders, on the other hand, in an amount
in excess of the aggregate value of the Merger Consideration received by such
Stockholders pursuant to this Agreement (with AUGI Merger Stock to be valued for
such purposes at a per share price equal to the Closing Per Share Market Value).
Each such 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 Per Share Value, 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(s) in question in any
35
<PAGE>
other manner, subject to such 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 and Mergerco shall
be entitled to indemnification by a Stockholder, and each Stockholder shall be
entitled to indemnification by AUGI or Mergerco, 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 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
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<PAGE>
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.
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 Stockholders (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. Mergerco and AUGI, on one hand, and the Corporation
or the Stockholders, 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 for the costs and expenses incurred in obtaining the audit opinion
on the Financial Statements and Mergerco will be responsible to pay the legal
fees and disbursements of counsel to the Stockholders 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 Mergerco
shall not exceed an aggregate of $55,000.
14. FORM OF AGREEMENT.
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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 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.
[the balance of this page intentionally left blank]
38
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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/ Robert M. Rubin, Pres
-----------------------------------
Robert M. Rubin, President
BTS ACQUISITION CORP.
By: /s/ Robert M. Rubin, Pres
-----------------------------------
Robert M. Rubin, President
BROADCAST TOWER SITES, INC.
By: /s/ Simantov Moskona
-----------------------------------
Simantov Moskona, President
THE STOCKHOLDERS:
/s/ Simantov Moskona /s/ Sergio Luciani
- -------------------------------- -------------------------------
SIMANTOV MOSKONA SERGIO LUCIANI
39
<PAGE>
Exhibits
A - Certificate of Merger of BTS into Mergerco
B - Form of AUGI Note
C - Form of Subscription Agreement
D - Form of Registration Rights Agreement
E - Form of Non-Competition Agreement
F - Form of Employment Agreement of
Simantov Moskona
G - Form of Employment Agreement of
Sergio Luciani
H - Form of Arcadia Merger Agreement
I - Form of Certificate of Incorporation of Mergerco
J - Form of Opinions of Legal Counsel
40
EXHIBIT 1(b)
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
DATED: December ___, 1996
Reference is made to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated December __, 1996 (the "Merger Agreement"), among
AMERICAN UNITED GLOBAL, INC., a Delaware corporation ("AUGI") and its affiliate
BTS ACQUISITION CORP., a Delaware corporation ("Mergerco"), both having their
principal offices at 11130 NE 33rd Place, Suite 250, Bellevue, WA 98004;
BROADCAST TOWER SITES, INC., a Delaware corporation (the "Company"), having its
principal offices at 4340 East West Highway, Suite 1000, Bethesda, Maryland
20814; and SIMANTOV MOSKONA and SERGIO LUCIANI (hereinafter referred to
individually a "Stockholder" and collectively, the "Stockholders"). The Merger
Agreement provides for a merger of the Company with and into Mergerco, with
Mergerco as the surviving corporation of such merger (the "Merger"). Pursuant to
the terms of the Merger Agreement, each outstanding share of the Company's
capital stock will be converted into the right to receive cash, certain
promissory notes of AUGI and shares of Common Stock, $.01 par value per share of
AUGI.
In order to induce AUGI and Mergerco to consummate the Merger
pursuant to the Merger Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
bound by the terms and conditions hereof, the undersigned Stockholders of the
Company who beneficially own 100% shares of the issued and outstanding shares of
Company capital stock, shall receive in connection with the Merger Agreement (i)
an aggregate of 507,246 shares of Class A Common Stock, $.01 par value per
share, of AUGI ("AUGI Common Stock"), (ii) $600,000 principal amount of three
year notes of AUGI (the "AUGI Notes"), and (iii) $780,000 in cash, hereby
covenants and agrees with the Company and AUGI as follows:
1. Non-Competition. Each of the Stockholders severally agrees that
for a period (the "Restrictive Period") which shall commence on the Effective
Date of the Merger and shall expire on a date which shall be the latest to occur
of: (a) such date as such Stockholder shall no longer be employed on a full-time
basis with AUGI or any other subsidiary or affiliate of AUGI; or (b) three (3)
years following the effectiveness of the Merger (the "Restrictive Period"),
without the prior written consent of AUGI, such Stockholder shall not invest,
carry on, engage or become involved, either as an employee, agent, advisor,
officer, director, stockholder, manager, partner, joint venturer, participant or
consultant in any business enterprise (other than Mergerco, AUGI or any of their
respective subsidiaries, affiliates, successors or assigns) which derives any
material revenues from the offer or sale in the United States from time to time
during the Restrictive Period of services relating to all aspects of providing
site acquisition, zoning, architectural and engineering consulting and design
services to the wireless telecommunications industry (the "Business"), or which
engages in any other business substantially similar to and directly competitive
with the Business conducted by the Company as at the date hereof. Nothing
contained in this Section 1 shall be deemed to prevent a Stockholder from (a)
leasing or renting real property in which the Stockholder owns a direct or
<PAGE>
indirect interest to a person or entity engaged in the Business; or (b)
beneficially owning, directly or indirectly, 5% or less of any class of
securities of an entity that has a class of securities registered under Section
12 of the Securities Exchange Act of 1934, as amended, so long as such
securities ownership does not include any operational, managerial or consulting
relationship with such corporation or entity.
2. Confidential Information.
(a) Each of Stockholders severally agrees that such
Stockholder shall not, at any time following the effectiveness of the Merger,
print, publish, divulge or communicate to any person, firm, corporation or other
business organization or use for his or their own account any business contacts,
customers, suppliers, technology, product designs and specifications, know-how,
trade secrets, marketing techniques, promotional materials or other secret or
confidential information relating to the Business or any other businesses then
being engaged in by AUGI or any of its subsidiaries, or any secret or
confidential information relating to the affairs, dealings and concerns of the
Company, AUGI or any of the subsidiaries of AUGI (collectively, the
"Confidential Information") which the Stockholder has received or obtained while
an employee or member of the Board of Directors of AUGI or the Company (whether
or not developed, devised, or otherwise created in whole or in part by the
efforts of the Stockholder). The term "Confidential Information" does not
include information which information and its relevance in the particular
instance (A) is a matter of common knowledge or public record, (B) is or becomes
generally available to the public other than as a result of disclosure by the
Stockholder, (C) which information and its relevance is generally known in
Business, (D) the Stockholder can demonstrate that such information and its
relevance in the applicable instance, was already known to the recipient thereof
other than by reason of any breach of any obligation of the Stockholder under
this Agreement or any other confidentiality or non-disclosure agreement, or (E)
the information is required to be disclosed by law or pursuant to court order or
subpoeona.
(b) The term Confidential Information as defined in Section
2(a) hereof shall include information obtained by the Company from any third
party under an agreement including restrictions on disclosure known to the
Stockholder.
(c) In the event that a Stockholder is requested pursuant to
subpoena or other legal process to disclose any of the Confidential Information,
such Stockholder will provide the Company with prompt notice (unless notice is
prohibited by law) so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with Section 2 of this Agreement. In
the event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions of Section 2 of this Agreement,
the Stockholder will furnish only that portion of the Confidential Information
which is legally required.
3. Material Agreement.
(a) It is understood by and between the parties hereto that
the foregoing
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<PAGE>
covenants by the Stockholders are essential elements of this Agreement and that
but for the agreements of the Stockholders to comply with such covenants, AUGI
would not have entered into the Merger Agreement or paid the Merger
Consideration to the Stockholders. AUGI and the Stockholders have independently
consulted with their respective counsel and have been advised concerning the
reasonableness and propriety of such covenants with specific regard to the
businesses conducted by the Company.
(b) Notwithstanding anything to the contrary, express or
implied, contained in this Agreement, the Merger Agreement or in any other
"Transaction Document" (as that term is defined in the Merger Agreement), no
future act of omission or commission by AUGI or any of its affiliates, or other
actual or alleged breach by AUGI or such affiliates of any of their covenants or
agreements contained in any Transaction Documents (in addition to this
Agreement), shall in any way be deemed to modify, limit or terminate the
covenants and agreements of the Stockholders contained in Section 1 and Section
2 hereof, all of which shall remain in full force and effect in accordance with
their respective terms.
4. Without intending to limit the remedies available to AUGI or the
Company, each Stockholder further agrees that damages at law will be an
insufficient remedy to AUGI if such Stockholder(s) breaches the terms of this
Agreement and that AUGI or the Company may apply for and have injunctive relief
in any court of competent jurisdiction to restrain the breach or threatened
breach of or otherwise to specifically enforce any of the covenants contained
herein, in each case without the necessity of proving damages or posting bond.
5. This Agreement shall become effective upon the effectiveness of
the Merger and shall terminate prior to the expiration of the Restrictive Period
only with the written consent of AUGI.
6. Any paragraph, sentence, phrase or other provision of this
Agreement which is in conflict with any applicable statute, rule or other law
shall be deemed, if possible, to be modified or altered to conform thereto or,
if not possible, to be omitted herefrom. The invalidity of any portion hereof
shall not affect the force and effect of the remaining valid portion hereof.
7. THIS AGREEMENT SHALL BE CONSTRUED (BOTH AS TO VALIDITY AND
PERFORMANCE) AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY
WITHIN SUCH JURISDICTION.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by or on
behalf of each party hereto on the date set forth above.
AMERICAN UNITED GLOBAL, INC.
By:_____________________________________
Name:
Title:
THE STOCKHOLDERS:
________________________________________
SIMANTOV MOSKONA
________________________________________
SERGIO LUCIANI
-4-
EXHIBIT 1(c)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of this 11th day
of December 1996 by and between BTS ACQUISITION CORP., a Delaware corporation
having its principal offices at 4340 East West Highway, Suite 1000, Bethesda,
Maryland 20814 (the "Company"), and SIMANTOV MOSKONA, an individual residing at
1813 Ingleside Terrace, Washington, D.C. 20010 (the "Employee" or "Moskona").
W I T N E S S E T H :
WHEREAS, the Employee is presently a senior executive officer and
principal stockholder of Broadcast Tower Sites, Inc. ("BTS") and has extensive
knowledge with respect to the business of BTS;
WHEREAS, BTS has entered into an agreement and plan of merger (the "Merger
Agreement") with American United Global, Inc. ("AUGI") and the Company, which is
a wholly-owned subsidiary of AUGI, pursuant to which the Company and BTS will
merge (the "Merger") and the Company will be the surviving corporation of such
Merger;
WHEREAS, the Company and AUGI desire that the Company have access to the
services of the Employee after the Merger is consummated;
WHEREAS, the Employee is willing and able to render his services to the
Company on the terms and conditions of this Agreement; and
WHEREAS, it is understood that this Agreement shall become effective as of
December 10, 1996 (the "Effective Date");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound thereby, the parties hereby
agree as follows:
1. Nature of Employment.
(a) Subject to the terms and conditions of this Agreement, the
Company shall, throughout the term of this Agreement, retain the Employee, and
the Employee shall render services to the Company, in the capacity and with the
title of Vice President and Chief Operating Officer, and such additional titles
as may be assigned to the Employee from time to time by the Board of Directors
of the Company (the "Board"), which titles the Employee may be willing
<PAGE>
to accept. In such capacity, the Employee shall have and exercise responsibility
for overseeing and actively participating in all aspects of the Company's
business throughout the world, together with such other similar or related
duties customarily afforded a Chief Operating Officer as may be assigned to the
Employee from time to time by the Board.
(b) Throughout the period of his employment hereunder, the Employee
shall: (i) devote his full business time, attention, knowledge and skills,
faithfully, diligently and to the best of his ability, to the active performance
of his duties and responsibilities hereunder on behalf of the Company; (ii)
observe and carry out such rules, regulations, policies, directions and
restrictions as may be established from time to time by the Board, including but
not limited to the standard policies and procedures of the Company as in effect
from time to time; and (iii) do such traveling at the Company's expense as may
reasonably be required in connection with the performance of such duties and
responsibilities; provided, however, that the Employee shall not be assigned to
regular duties that would reasonably require him to relocate his permanent
residence from that first set forth above. The Employee may engage in
charitable, educational, religious, civic and similar types of activities (all
of which shall be deemed to benefit the Company), speaking engagements,
membership on the board of directors of other organizations, and similar
activities to the extent that such activities do not inhibit or prohibit the
performance of his duties hereunder or inhibit or conflict in any material way
with the business of the Company.
2. Term of Employment.
(a) Subject to prior termination in accordance with Section 2(b)
below, the term of this Agreement and the Employee's employment hereunder shall
commence as of the Effective Date and shall continue through November 30, 2000,
and shall thereafter automatically renew (except to the extent otherwise
provided in this Agreement) for additional terms of one (1) year each unless
either party gives written notice of termination to the other party not less
than ninety (90) days prior to the end of any term (in which event this
Agreement shall terminate effective as of the close of such term), as the same
may be renewed (the "Term").
(b) This Agreement may be terminated:
(i) upon mutual written agreement of the Company and the
Employee;
(ii) at the option of the Employee, upon thirty (30) days'
prior written notice to the Company, in the event that (A) the Company shall (1)
fail to make any payment to the Employee required to be made under the terms of
this Agreement within thirty (30) days after payment is due, or (2) fail to
perform any other material covenant or agreement to be performed by it hereunder
(including the failure to re-appoint or re-elect Employee to the offices
described in Section 1(a) of this Agreement or other material change in the
duties of the Employee which reduces the scope or importance of such position)
or take any action prohibited by this Agreement, and fail to cure or remedy same
within thirty (30) days after written notice thereof to the Company; provided,
however, that if any periodic salary payment is not paid
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within ten (10) days of its due date, the Employee shall only be required to
provide fifteen (15) days prior written notice of termination; or (B) the
Company is declared insolvent, liquidates, dissolves or discontinues the Company
Business (as hereinafter defined).
(iii) at the option of the Company, upon written notice to the
Employee, "for cause" (as hereinafter defined);
(iv) at the option of the Company in the event of the
"permanent disability" (as hereinafter defined) of the Employee; or
(v) upon the death of the Employee, or as a result of the
voluntary resignation by the Employee for any reason other than as specified in
Section 2(b)(ii) above.
(c) As used herein, the term "for cause" shall mean and be limited
to:
(i) any breach of any of the material covenants and agreements
of the Employee (A) contained in this Agreement, (B) contained in
the Non-Competition Agreement among the Company, AUGI and the
Employee, dated of even date herewith, (C) contained in the
Registration Rights Agreement between the Employee, certain other
persons and AUGI, dated of even date herewith, or (D) contained in
Section 5 below, which, in any case, is not corrected in all
material respects (if so correctable) within thirty (30) days after
written notice of same from the Company to the Employee;
(ii) any material breach by the Employee of his fiduciary
duties and obligations to the Company which is not corrected in all
material respects (if so correctable within thirty (30) days after
written notice of same from the Company to the Employee;
(iii) the habitual (meaning more than two (2) breaches of the
same covenant or agreement) and material breach by the Employee of a
material provision of this Agreement (regardless of any prior cure
thereof, but provided that Employee shall have received the notice
and opportunity to cure provided by clause (i) above); or
(iv) conduct constituting fraud or embezzlement or gross
dishonesty by Employee in connection with the performance of his
duties under this Agreement, or a formal charge or indictment of
Employee for or conviction of Employee of a felony or, if it shall
materially and adversely damage or bring into disrepute the
business, reputation or goodwill of the Employer, any crime
involving moral turpitude.
The notice pursuant to clause (i) above shall specify with particularity
the covenant or agreement alleged to have been breached by Employee and action
necessary to be taken by
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<PAGE>
Employee to cure the breach to the satisfaction of the Company. Termination for
cause pursuant to clauses (ii), (iii) or (iv) above shall be effective upon
delivery of written notice to Employee specifying the covenants or agreements
alleged to have been breached by Employee.
(d) As used herein, the term "permanent disability" shall mean, and
be limited to, any physical or mental illness, disability or impairment that
prevents the Employee from continuing the performance of his normal duties and
responsibilities hereunder for a period in excess of four (4) consecutive months
or one hundred eighty (180) non-consecutive days within any period of three
hundred sixty five (365) working days. For purposes of determining whether a
"permanent disability" has occurred under this Agreement, the written
determination thereof by two (2) qualified practicing physicians selected and
paid for by the Company (and reasonably acceptable to the Employee) shall be
conclusive.
(e) Upon any termination of this Agreement as hereinabove provided,
the Employee (or his estate or legal representatives, as the case may be) shall
be entitled to receive any and all earned but unpaid Base Salary (as defined
hereby) prorated through the effective date of termination, and any other
amounts and benefits then accrued or due and payable to the Employee hereunder;
provided, that the Employee's participation in any benefit or welfare plans of
the Company (including, without limitation, the Stock Options described below
and any profit-sharing plans) shall terminate upon the effective date of
termination of employment except to the extent otherwise required by law or
provided under the express terms of the applicable plan. All such payments shall
be made on the next applicable payment date therefor (as provided in Section 3
below) following the effective date of termination. Except when termination is
(x) by the Employee pursuant to Section 2(b)(ii) above, or (y) by the Company
other than "for cause" (as defined in Section 2(c) hereof (any termination
described in clauses (x) or (y) being sometimes hereinafter referred to as a
"Non-Cause Termination"), the foregoing constitutes all amounts to which the
Employee shall be entitled upon termination of this Agreement. In the case of a
Non-Cause Termination, the amount to which the Employee shall be entitled is not
so limited and shall include the Option Benefit (defined below).
(f) In the event that there shall be a dispute among the parties
hereto as to whether or not a termination shall constitute a Non-Cause
Termination, during the pendency of such dispute the Company will place in
escrow with a third party attorney or financial institution in an interest
bearing escrow account all such periodic Base Salary payments and the value of
the Option Benefit (as hereinafter defined) and fringe benefits which shall be
disbursed to the appropriate party or parties upon the final resolution or
settlement of such dispute from which no appeal can or shall have been taken. As
use herein, the term Option Benefit means all the Option Shares vested pursuant
to Section 3(d)(iii) of this Agreement.
3. Compensation and Benefits.
(a) Base Salary. As compensation for his services to be rendered
hereunder, the Company shall pay to the Employee a base salary at the rates per
annum set forth below (the
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<PAGE>
"Base Salary"), payable in periodic installments in accordance with the standard
payroll practices of the Company in effect from time to time, but not less than
twice each month:
From the Effective Date through November 30, 1997 $180,000
From December 1, 1997 through November 30, 1998 $200,000
From December 1, 1998 through November 30, 1999 $225,000
From December 1, 1999 through November 30, 2000 $250,000;
provided, that the contemplated increase for the period commencing December 1,
1999 is expressly made subject to the Company achieving its "1999 Target Income"
(described below).
(b) Fringe Benefits. The Company shall also make available to the
Employee, throughout the period of his employment hereunder, such benefits and
perquisites as are generally provided by the Company to its other senior
management employees (which benefits shall, in the aggregate, be at least as
generous as those supplied by AUGI to the senior executive officers of its
subsidiaries other than the Company), including but not limited to eligibility
for participation in any group life, health, dental, disability or accident
insurance, pension plan, 401(k) plan, profit-sharing plan, or other such benefit
plan or policy, if any, which may presently be in effect or which may hereafter
be adopted by the Company for the benefit of its employees generally; provided,
however, that, except as specified on Exhibit "A" annexed hereto, nothing herein
contained may be deemed to require the Company to adopt or maintain any
particular plan or policy; and provided, further, that the Company shall not be
obligated to permit the Employee to participate in any stock option plans it may
provide to its employees from time to time, other than the stock option plan
established for the Employee pursuant to this Agreement and described below or
established pursuant to the Merger Agreement. Participation in such benefit
plans may be subject to standard waiting periods following the commencement of
full-time employment. Notwithstanding the foregoing, throughout the term of this
Agreement, the Employee shall be entitled to receive the minimum fringe benefits
listed on Exhibit "A" annexed hereto and made a part hereof.
(c) Expenses. Throughout the period of the Employee's employment
hereunder, the Company shall also reimburse the Employee, reasonably promptly
after presentment by the Employee to the Company of appropriate receipts and
vouchers therefor and related information in such form and detail as the Company
may reasonably request, for any reasonable out-of-pocket business expenses
incurred by the Employee in connection with the performance of his duties and
responsibilities hereunder.
(d) Stock Options. The Employee has been awarded options (the
"Options") to purchase a maximum aggregate of Two Hundred and Sixty Thousand
(260,000) shares of the common stock, $0.01 par value per share (the "AUGI
Common Stock"), of AUGI (the "Option Shares") at an exercise price equal to
$5.25 per share, being the closing price per share of AUGI Common Stock, as
traded on The Nasdaq National Market on October 7, 1996, the day such Options
were approved by the board of Directors of AUGI (subject to adjustment for
subdivisions or splits, combinations, or reclassifications of the AUGI common
stock); provided,
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<PAGE>
however, that all Options awarded hereunder are subject to the terms and
conditions hereinafter set forth including, without limitation, the forfeiture
provisions set forth below.
(i) Term of Options. The Options shall have a term expiring on
a date which shall be the earlier to occur of: (x) five (5) years from the
"vesting" of the last to vest of the Options, as hereinafter described, or (y)
November 30, 2005 (the "Option Expiration Date").
(ii) Financial Performance. Except as provided in Section
3(d)(iii) below, the Options will only be exercisable, and shall vest only upon
the Company's achieving the following financial results:
(A) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
on the Effective Date and ending November 30, 1997 (the "1997
Measuring Period") shall equal or exceed $2.0 million (the
"1997 Target Income"), a maximum of 65,000 Option Shares may
be immediately exercised; provided, that (x) a maximum of
21,667 Option Shares shall be pro-rated from zero to the
extent of the percentage after shortfall below the 1997 Target
Income; and (y) if the actual Pre-Tax Income for such
Measuring Period shall be equal to or greater than $0.5
million, but less than the 1997 Target Income, the remaining
43,333 Option Shares exercisable for the 1997 Measuring Period
shall be pro-rated to the extent of the percentage of the
short-fall below the 1997 Target Income; and
(B) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
on December 1, 1997 and ending November 30, 1998 (the "1998
Measuring Period") shall equal or exceed $2.5 million (the
"1998 Target Income"), a maximum of an additional 65,000
Option Shares may be immediately exercised; provided, that (x)
a maximum of 21,667 Option Shares shall be pro-rated from zero
to the extent of the percentage after shortfall below the 1998
Target Income; and (y) if the actual Pre-Tax Income for such
Measuring Period shall be equal to or greater than $1.0
million, but less than the 1998 Target Income, the remaining
43,333 Option Shares exercisable for the 1998 Measuring Period
shall be pro-rated to the extent of the percentage of the
short-fall below the 1998 Target Income; and
(C) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
on December 1, 1998 and ending November 30, 1999 (the "1999
Measuring Period") shall equal or exceed $3.0 million (the
"1999 Target Income"), a maximum of an additional 65,000
Option Shares may be immediately exercised; provided, that (x)
a maximum of 21,667 Option Shares shall be pro-rated from zero
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<PAGE>
to the extent of the percentage after shortfall below the 1999
Target Income; and (y) if the actual Pre-Tax Income for such
Measuring Period shall be equal to or greater than $1.5
million, but less than the 1999 Target Income, the remaining
43,333 Option Shares exercisable for the 1999 Measuring Period
shall be pro-rated to the extent of the percentage of the
short-fall below the 1999 Target Income; and
(D) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
on December 1, 1999 and ending November 30, 2000 (the "2000
Measuring Period") shall equal or exceed $3.5 million (the
"2000 Target Income"), a maximum of all remaining 65,000
Option Shares may be immediately exercised; provided, that if
(x) a maximum of 21,667 Option Shares shall be pro-rated from
zero to the extent of the percentage after shortfall below the
2000 Target Income; and (y) the actual Pre-Tax Income for such
Measuring Period shall be equal to or greater than $2.0
million, but less than the 2000 Target Income, the remaining
43,333 Option Shares exercisable for the 2000 Measuring Period
shall be pro-rated to the extent of the percentage of the
short-fall below the 2000 Target Income; and
(E) In the event that the accumulated Pre-Tax Income for
all four (4) Measuring Periods referred to in clauses (A)
through (D) above shall equal or exceed $11.0 million, all of
the remaining 260,000 Option Shares shall be immediately and
fully exercisable, irrespective of the actual Pre-Tax Income
earned in any or all of the 1997 Measuring Period, 1998
Measuring Period or 1999 Measuring Period; provided, that
unless the Board of Directors of the Company and AUGI shall
(i) effect an expansion program not approved by the Employee,
or (ii) violate the provisions of Section 7.4(c) of the Merger
Agreement, either of which shall reduce anticipated Pre-Tax
Income of the Company in the 2000 Measuring Period, the
provisions of this clause (E) shall only be applicable if the
actual Pre-Tax Income in the 2000 Measuring Period shall equal
or exceed $2.0 million.
Example: As an example of the application of the pro-ration
provisions contained in clauses (A) through (D) above, the 65,000
Option Shares shall be multiplied by a fraction: (x) the numerator
of which shall be the amount by which the actual Pre-Tax Income
earned in a Measuring Year shall exceed the minimum base Pre-Tax
Income required in such Measuring Year, and (y) the denominator of
which shall be the difference between the Target Income for such
Measuring Year and the minimum base Pre-Tax Income in such Measuring
Year. Accordingly, if the Company's actual Pre-Tax Income in the
1997 Measuring Year is $1.0 million, 65,000 Option Shares shall be
multiplied by 1/3, the fraction resulting from dividing $500,000
($1.0 million actual Pre-Tax Income
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<PAGE>
less the $500,000 minimum base Pre-Tax Income for the 1997 Measuring
Year) by $1,500,000 (the $2.0 million Target Pre-Tax Income less the
$500,000 minimum base Pre-Tax Income).
(iii) Immediate Vesting on Certain Events. All Options shall
immediately vest if:
(A) prior to November 30, 2000, AUGI shall effect a sale
of all or substantially all of the shares of the capital stock
or assets of the Company to any unaffiliated third party,
whether by merger, consolidation, stock sale, asset sale or
like transaction,
(B) prior to November 30, 2000, the Company consummates
an initial public offering of its securities,
(C) the Company materially violates (and fails to
promptly cure such material violation) its covenants and
agreements contained in Section 7.4(c) of the Merger
Agreement, or
(D) the Employee's employment pursuant to this Agreement
is terminated by the Company or terminates for reasons other
than "for cause" (as defined in this Agreement) or pursuant to
Section 2(b)(i) of this Agreement.
(iv) Termination of Options. Options not previously vested and
immediately exercisable pursuant to their terms shall immediately terminate:
(A) effective as of December 1, 2000, with respect to
any Options that shall not have vested in accordance with the
provisions of Section 3(d)(ii) above; or
(B) if the Employee's employment with the Company shall
terminate "for cause" (as defined herein), or
(C) if the Employee shall resign or otherwise
voluntarily terminate (except arising from constructive
termination) his full-time employment with the Company prior
to November 30, 2000 for any reason other than a breach by the
Company of its obligations to the Employee hereunder.
(v) Definition. As used herein, the term "Pre-Tax Income"
shall mean the net income of the Company after deduction of all expenses paid or
accrued for the appropriate Measuring Period in question in accordance with
generally accepted accounting principles, but before application of all federal,
state and local income taxes for such Measuring
8
<PAGE>
Period, all as determined by AUGI subject only to the right of the Employee to
engage his own accountant or financial advisor to review the calculations of
such Pre-Tax Income for the applicable Measuring Period at the Employee's
expense. Disputes shall be resolved in accordance with Section 10(f) of this
Agreement. Notwithstanding the foregoing, the term "Pre-Tax Income" shall be
calculated after deduction of (i) all interest paid or accrued on money borrowed
by the Company from any unaffiliated third party, and (ii) all interest or
dividends paid, accrued or payable with respect to any cash advances made to the
Company by AUGI (whether evidenced by notes or preferred stock), subject to
reduction pursuant to the provisions of Section 7.5(e) of the Merger Agreement.
(vi) Provisions Governing Registration. The Option Shares are
subject to the provisions governing registration thereof, set forth in the
Registration Rights Agreement between the parties.
(vii) Assignment of Options. The Options may not be
transferred, assigned or otherwise disposed of by the Employee unless and until
they have become vested and are then immediately exercisable into Option Shares;
provided, that the Employee shall have the right to assign all or any portion of
his Options to any member of his family; provided, further, that any such
permitted assignee shall execute a joinder or similar agreement with AUGI and
the Company agreeing to be bound by all of the terms and conditions of this
Section 3(d).
(viii) Reservation of Option Shares; Registration of Options.
AUGI hereby covenants and agrees to:
(A) take all steps necessary and appropriate to keep a
sufficient number of Option Shares reserved for issuance upon
exercise of the Options; and
(B) to the extent that the same have vested and are then
currently exercisable in accordance with this Agreement, AUGI
shall, at its sole cost and expense, include the Options and
underlying Option Shares in any one or more Form S-8
Registration Statements filed by AUGI with the Securities and
Exchange Commission to register stock options for any
executive officers, directors or key employees of AUGI or any
of its subsidiaries, including the Company.
(ix) Cashless Exercise. The Employee shall have the right to
exercise his Options upon vesting pursuant to a "cashless" exercise. Pursuant to
such cashless exercise, vested Options shall, at the request of the Employee, be
deemed to have been exercised by the Employee, to the extent of such number of
Option Shares resulting from dividing the aggregate amount by which all such
vested Options are then "in the money" by the closing price of the AUGI's Common
Stock, as traded on the Nasdaq National Market (or other national securities
exchange). In such event, the number of vested Options resulting from such
calculation shall be deemed exercised in full by the Employee, all such vested
Options shall be cancelled, and
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the underlying Option Shares resulting from such "cashless" exercise may be sold
without payment to the Company or AUGI.
Example: By way of example, if 100,000 Options shall have
vested at an exercise price of $7.50 per share and the closing price of AUGI's
publicly traded Common Stock shall be $15.00 per share: (A) the 100,000 Options
shall be deemed to be "in the money" to the extent of $750,000 (100,000
multiplied by the excess of the $15.00 closing price over the $7.50 exercise
price), and (B) the Employee shall, upon exercise of all 100,000 vested Options,
receive 50,000 shares of AUGI Common Stock, as a result of dividing $750,000 by
the $15.00 per share closing price.
4. Vacation.
The Employee shall be entitled to take, from time to time, normal
and reasonable vacations with pay, consistent with the Company's standard
policies and procedures in effect from time to time (provided that such policies
and procedures shall be no less favorable than those set forth on Exhibit "A"
annexed hereto), at such times as shall be mutually convenient to the Employee
and the Company, and so as not to interfere unduly with the conduct of the
business of the Company.
5. Restrictive Covenants.
(a) The Employee hereby acknowledges and agrees that (i) the
business contacts, customers, suppliers, technology, product designs and
specifications, know-how, trade secrets, marketing techniques, promotional
methods and other aspects of the business of BTS have been of value to BTS and
will be of value to the Company, and have provided BTS and will hereafter
provide the Company with substantial competitive advantage in the operation of
its business, and (ii) the Employee has and will continue to have detailed
knowledge and possesses and will possess confidential information concerning the
business and operations of BTS and the Company.
(b) Unless otherwise approved in writing by AUGI or its Chairman of
the Board after full disclosure by the Employee to AUGI's Board of Directors of
all relevant facts and circumstances, the Employee shall not, directly or
indirectly, for the Employee or through or on behalf of any other person or
entity, at any time during the "Restrictive Period" (as defined in clause (ii)
below):
(i) divulge, transmit or otherwise disclose or cause to be
divulged, transmitted or otherwise disclosed, any clients or customer lists,
technology, know-how, trade secrets, marketing techniques, contracts or other
confidential or proprietary information of the Company of whatever nature,
whether now existing or hereafter created or developed (provided, however, that
for purposes hereof, information shall not be considered to be confidential or
proprietary if (A) the information, and its relevance in the applicable
instance, is a matter of common knowledge or public record, (B) the information,
and its relevance in the applicable
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instance, is generally known in the industry, or (C) the information is
disclosed to Employee after termination of his employment by another person not
prohibited from making such disclosure, (D) the information is required to be
disclosed by law pursuant to court order or subpoena, or (E) the Employee can
demonstrate that such information, and its relevance in the particular instance,
was already known to the recipient thereof other than by reason of any breach of
any obligation under this Agreement or any other confidentiality or
non-disclosure agreement); and/or
(ii) unless the Employee's employment with the Company shall
be terminated by reason of a Non-Cause Termination, at any time during the
period commencing on the date hereof through and including the date which shall
be three (3) years following the voluntary resignation by the Employee of his
employment with the Company or his termination by the Company "for cause", but
in no event longer than one (1) year following the end of the Term (the
"Restrictive Period"), invest, carry on, engage or become involved, either as an
employee, agent, advisor, officer, director, stockholder (excluding ownership of
not more than 5% of the outstanding shares of a publicly held corporation if
such ownership does not involve managerial or operational responsibility),
manager, partner, joint venturer, participant or consultant in any business
enterprise (other than AUGI (so long as it is an affiliate of the Company), the
Company or any of their respective subsidiaries, affiliates, successors or
assigns) which derives any material revenues from the offer or sale in the
United States from time to time during the Restrictive Period of all aspects of
providing site acquisition, zoning, architectural and engineering services to
the wireless telecommunications industry (the "Company Business"), or which
engages in any other business substantially similar to and directly competitive
with the Company Business.
(c) The Employee and the Company hereby acknowledge and agree that,
in the event of any breach by the Employee, directly or indirectly, of the
foregoing restrictive covenants, it will be difficult to ascertain the precise
amount of damages that may be suffered by the Company by reason of such breach;
and accordingly, the parties hereby agree that, as liquidated damages (and not
as a penalty) in respect of any such breach, the breaching party or parties
shall be required to pay to the Company, on demand from time to time, cash
amounts equal to any and all gross revenues derived by the Employee or his
affiliate, directly or indirectly, from any and all violative acts or
activities. The parties hereby agree that the foregoing constitutes a fair and
reasonable estimate of the actual damages that might be suffered by reason of
any breach of this Section 5 by the Employee, and the parties hereby agree to
such liquidated damages in lieu of any and all other measures of damages that
might be asserted in respect of any subject breach.
(d) The Employee and the Company hereby further acknowledge and
agree that any breach by the Employee, directly or indirectly, of the foregoing
restrictive covenants will cause the Company irreparable injury for which there
is no adequate remedy at law. Accordingly, the Employee expressly agrees that,
in the event of any such breach or any threatened breach hereunder by the
Employee, directly or indirectly, the Company shall be entitled, in addition to
the liquidated damages provided for in Section 5(c) above, to seek and
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obtain injunctive and/or other equitable relief to require specific performance
of or prevent, restrain and/or enjoin a breach under the provisions of this
Section 5, in any such case without the necessity of proving actual damages or
posting bond.
(e) In the event of any dispute under or arising out of this Section
5, the prevailing party in such dispute shall be entitled to recover from the
non-prevailing party or parties, in addition to any damages and/or other relief
that may be awarded, its reasonable costs and expenses (including reasonable
attorneys' fees) incurred in connection with prosecuting or defending the
subject dispute.
(f) Upon the termination of the Employee's employment with the
Company, the Employee shall immediately surrender and deliver to the Company all
notes, drawings, diagrams, models, prototypes, lists, books, records, documents
and data of every kind or description, in whatever written or other media
(including, without limitation, electronic, tape, or other form of storage)
relating to or connected with the business contacts, client or customer lists,
technology, know-how, trade secrets, marketing techniques, contracts or other
confidential or proprietary information of the Company, its business, its
properties, or its customers referred to in Section 5(b)(i) above.
6. Inventions; Intellectual Property.
(a) The Employee shall promptly communicate to the Company and
disclose to the Company in such form as the Company requests from time to time,
all drawings, sketches, models, records, information, details and data (in
whatever media the same may be created or recorded including, without
limitation, print, tape, electronic, or otherwise) pertaining to all ideas,
processes, trademarks, inventions, improvements, discoveries and improvements,
product designs and specifications, and other intellectual property, whether
patented or unpatented, and copyrightable or uncopyrightable, made, conceived,
developed, acquired or implemented by the Employee, solely or jointly, during
the term of this Agreement (the "Development Term"), whether or not conceived
during regular working hours through the use of Company time, material or
facilities or otherwise (each of the foregoing hereinafter referred to,
individually and collectively, as a "Development"). The Employee hereby assigns,
transfers, conveys and sells to the Company all right, title and interest in and
to all Developments, whether now existing or hereafter existing during the
Development Term, and acknowledges that the same, whether now existing or
hereafter existing during the Development Term, are the sole and exclusive
property of the Company for which the Employee is being adequately compensated
hereunder. At any time and from time to time, upon the request of the Company
and at its expense, the Employee will execute and deliver to the Company any and
all applications, assignments, instruments, documents and papers, give evidence
and do any and all other acts which, in the opinion of the Company, are or may
be necessary or desirable to document such transfer or to enable the Company to
file and prosecute applications for and to acquire, maintain and enforce any and
all patents, trademark or tradename registrations, copyrights or other rights
under United States, foreign, state or local law with respect to any such
Developments or to obtain any extension, validation, reissue, continuance,
division or renewal of any of the same,
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in whole or in part, and otherwise to establish, protect and enforce the
Company's rights in and to such intellectual property.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the foregoing Section 6(a) shall only apply and be effective to the
extent permitted under applicable law. In this regard, the provisions of Section
6(a) of this Agreement which provide that the Employee shall assign or offer to
assign any of the Employee's rights in an invention to the Company shall not
apply to any invention for which no equipment, supplies, facility, or trade
secret information of the Company was used and which was developed entirely on
the Employee's own time, unless (a) the invention relates (i) directly to the
business of the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development, or (b) the invention results from any work
performed by the Employee for the Company.
7. Right to Exchange AUGI Securities for Company Common Stock.
(a) In the event that the Board of Directors of the Company and AUGI
shall elect at any time during the term of this Agreement to effect an initial
public offering of securities of the Company pursuant to a registration
statement filed with the Securities and Exchange Commission (an "IPO") or a
merger or consolidation of the Company with or into another publicly traded
corporation or other entity (a "Public Merger"), then and in such event, the
Employee shall have the right and option, but not the obligation (the "Exchange
Option") to exchange (i) all shares of AUGI Merger Stock received by him as
partial merger consideration under the Merger Agreement, and (ii) all Options
granted to him under this Agreement (whether or not then exercisable) and (iii)
all Option Shares issued upon prior exercise of vested Options (collectively,
the "Exchanged AUGI Securities") for that number of shares of Common Stock of
the Company as shall represent eight and one-third (8.333%) percent of the
fully-diluted shares of Common Stock of the Company which are issued and
outstanding (the "Exchanged Company Securities"), before giving effect to the
issuance of any equity type securities in connection with the IPO or any private
placement or bridge financing effected by the Company with any unaffiliated
third party prior to such IPO, or in connection with the Public Merger. The
Employee shall not be assessed any costs or fees associated with the exercise of
the Exchange Option hereunder, all of which shall be borne by AUGI and/or the
Company.
(b) In the event that the Employee shall elect the Exchange Option
provided in Section 7(a) above, Sergio Luciani ("Luciani") and Solon L. Kandel
("Kandel") shall also have the right to receive the same number of Exchanged
Company Securities as the Employee; provided, that in no event shall Moskona,
Luciani and Kandel have the right to receive in excess of an aggregate of 25% of
the fully-diluted shares of Common Stock of the Company in exchange for all AUGI
Exchanged Securities issued pursuant to Section 3 of the Merger Agreement, a
separate Agreement and Plan of Merger, dated December __, 1996 between Arcadia
Consulting Services, Inc., Kandel and AUGI, and all Options and underlying
Option Shares provided for in the employment agreements of even date among the
Company and Luciani and Kandel.
13
<PAGE>
(c) In the event that the Employee shall elect to exercise his
exchange rights pursuant to this Section 7, such election shall be only with
respect to all, and not less than all, of the Exchanged AUGI Securities, unless
otherwise agreed to in writing by AUGI.
8. Non-Assignability.
In light of the unique personal services to be performed by the
Employee hereunder, it is acknowledged and agreed that any purported or
attempted assignment or transfer by the Employee of this Agreement or any of his
duties, responsibilities or obligations hereunder shall be void.
9. Notices.
Any notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been given when delivered personally, one (1) day after being sent by recognized
overnight courier service will all charges prepaid or charged to the sender's
account, or three (3) days after being mailed by certified mail, return receipt
requested, addressed to the party being notified at the address of such party
first set forth above, or at such other address as such party may hereafter have
designated by notice; provided, however, that any notice of change of address
shall not be effective until its receipt by the party to be charged therewith.
Copies of any notices or other communications to the Company shall
simultaneously be sent by first class mail to American United Global, Inc.,
11130 33rd Place, Suite 250, Bellevue, Washington 98004, Attention: Robert M.
Rubin, Chairman.
10. General.
(a) Neither this Agreement nor any of the terms or conditions hereof
may be waived, amended or modified except by means of a written instrument duly
executed by the party to be charged therewith. Any waiver or amendment shall
only be applicable in the specific instance, and shall not constitute or be
construed as a waiver or amendment in any other or subsequent instance. No
failure or delay on the part of either party in respect of any enforcement of
obligations hereunder shall in any manner affect such party's right to seek or
effect enforcement at any other time or in respect of any other required
performance.
(b) The captions and Section headings used in this Agreement are for
convenience of reference only, and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof.
(c) This Agreement, and all matters or disputes relating to the
validity, construction, performance or enforcement hereof, shall be governed,
construed and controlled by and under the laws of the State of Delaware
applicable to contracts entered into and performed wholly within Delaware.
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<PAGE>
(d) This Agreement shall be binding upon and shall inure to the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit herefrom absent the express written
consent of the party to be charged with such reliance or benefit; provided, that
neither this Agreement nor any rights or obligations hereunder may be assigned
by either party without the express prior written consent of the other party.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original hereof, but all of which
together shall constitute one and the same instrument.
(f) Except for any legal or judicial proceeding which may be brought
for injunctive and/or any other equitable relief as contemplated by Section 5(d)
above, any dispute involving the interpretation or application of this Agreement
shall be resolved by final and binding arbitration in accordance with the terms,
conditions and procedures set forth in the Merger Agreement.
(g) This Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or excised from this Agreement, as the situation may require; and
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the date first set forth above.
BTS ACQUISITION CORP.
By: /s/ Robert M. Rubin, Ch.
-----------------------------------
Name: Robert M. Rubin
Title: Chairman
/s/ Simantov Moskona
---------------------------------------
SIMANTOV MOSKONA
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Only as to Section 2(f), Section 3(d) and Section 7 of the foregoing Agreement:
AMERICAN UNITED GLOBAL, INC.
By: /s/ Robert M. Rubin, CEO.
-------------------------------------
Name: Robert M. Rubin
Title: Chief Executive Officer
16
EXHIBIT 1(d)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of this 11th day
of December, 1996 by and between BTS ACQUISITION CORP., a Delaware corporation
having its principal offices at 4340 East West Highway, Suite 1000, Bethesda,
Maryland 20814 (the "Company"), and SERGIO LUCIANI, an individual residing at
7508 Lynn Drive, Chevy Chase, MD 20815 (the "Employee" or "Luciani").
W I T N E S S E T H :
WHEREAS, the Employee is presently a senior executive officer and
principal stockholder of Broadcast Tower Sites, Inc. ("BTS") and has extensive
knowledge with respect to the business of BTS;
WHEREAS, BTS has entered into an agreement and plan of merger (the "Merger
Agreement") with American United Global, Inc. ("AUGI") and the Company, which is
a wholly-owned subsidiary of AUGI, pursuant to which the Company and BTS will
merge (the "Merger") and the Company will be the surviving corporation of such
Merger;
WHEREAS, the Company and AUGI desire that the Company have access to the
services of the Employee after the Merger is consummated;
WHEREAS, the Employee is willing and able to render his services to the
Company on the terms and conditions of this Agreement; and
WHEREAS, it is understood that this Agreement shall become effective as of
December 10, 1996 (the "Effective Date");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound thereby, the parties hereby
agree as follows:
1. Nature of Employment.
(a) Subject to the terms and conditions of this Agreement, the
Company shall, throughout the term of this Agreement, retain the Employee, and
the Employee shall render services to the Company, in the capacity and with the
title of Vice President and Chief Financial Officer, and such additional titles
as may be assigned to the Employee from time to time by the Board of Directors
of the Company (the "Board"), which titles the Employee may be willing to
accept. In such capacity, the Employee shall have and exercise responsibility
for overseeing
<PAGE>
and actively participating in all aspects of the Company's business throughout
the world, together with such other similar or related duties customarily
afforded a Chief Financial Officer as may be assigned to the Employee from time
to time by the Board.
(b) Throughout the period of his employment hereunder, the Employee
shall: (i) devote his full business time, attention, knowledge and skills,
faithfully, diligently and to the best of his ability, to the active performance
of his duties and responsibilities hereunder on behalf of the Company; (ii)
observe and carry out such rules, regulations, policies, directions and
restrictions as may be established from time to time by the Board, including but
not limited to the standard policies and procedures of the Company as in effect
from time to time; and (iii) do such traveling at the Company's expense as may
reasonably be required in connection with the performance of such duties and
responsibilities; provided, however, that the Employee shall not be assigned to
regular duties that would reasonably require him to relocate his permanent
residence from that first set forth above. The Employee may engage in
charitable, educational, religious, civic and similar types of activities (all
of which shall be deemed to benefit the Company), speaking engagements,
membership on the board of directors of other organizations, and similar
activities to the extent that such activities do not inhibit or prohibit the
performance of his duties hereunder or inhibit or conflict in any material way
with the business of the Company.
2. Term of Employment.
(a) Subject to prior termination in accordance with Section 2(b)
below, the term of this Agreement and the Employee's employment hereunder shall
commence as of the Effective Date and shall continue through November 30, 2000,
and shall thereafter automatically renew (except to the extent otherwise
provided in this Agreement) for additional terms of one (1) year each unless
either party gives written notice of termination to the other party not less
than ninety (90) days prior to the end of any term (in which event this
Agreement shall terminate effective as of the close of such term), as the same
may be renewed (the "Term").
(b) This Agreement may be terminated:
(i) upon mutual written agreement of the Company and the
Employee;
(ii) at the option of the Employee, upon thirty (30) days'
prior written notice to the Company, in the event that (A) the Company shall (1)
fail to make any payment to the Employee required to be made under the terms of
this Agreement within thirty (30) days after payment is due, or (2) fail to
perform any other material covenant or agreement to be performed by it hereunder
(including the failure to re-appoint or re-elect Employee to the offices
described in Section 1(a) of this Agreement or other material change in the
duties of the Employee which reduces the scope or importance of such position)
or take any action prohibited by this Agreement, and fail to cure or remedy same
within thirty (30) days after written notice thereof to the Company; provided,
however, that if any periodic salary payment is not paid within ten (10) days of
its due date, the Employee shall only be required to provide fifteen (15)
2
<PAGE>
days prior written notice of termination; or (B) the Company is declared
insolvent, liquidates, dissolves or discontinues the Company Business (as
hereinafter defined).
(iii) at the option of the Company, upon written notice to the
Employee, "for cause" (as hereinafter defined);
(iv) at the option of the Company in the event of the
"permanent disability" (as hereinafter defined) of the Employee; or
(v) upon the death of the Employee, or as a result of the
voluntary resignation by the Employee for any reason other than as specified in
Section 2(b)(ii) above.
(c) As used herein, the term "for cause" shall mean and be limited
to:
(i) any breach of any of the material covenants and agreements
of the Employee (A) contained in this Agreement, (B) contained in
the Non-Competition Agreement among the Company, AUGI and the
Employee, dated of even date herewith, (C) contained in the
Registration Rights Agreement between the Employee, certain other
persons and AUGI, dated of even date herewith, or (D) contained in
Section 5 below, which, in any case, is not corrected in all
material respects (if so correctable) within thirty (30) days after
written notice of same from the Company to the Employee;
(ii) any material breach by the Employee of his fiduciary
duties and obligations to the Company which is not corrected in all
material respects (if so correctable) within thirty (30) days after
written notice of same from the Company to the Employee;
(iii) the habitual (meaning more than two (2) breaches of the
same covenant or agreement) and material breach by the Employee of a
material provision of this Agreement (regardless of any prior cure
thereof, but provided that Employee shall have received the notice
and opportunity to cure provided by clause (i) above); or
(iv) conduct constituting fraud or embezzlement or gross
dishonesty by Employee in connection with the performance of his
duties under this Agreement, or a formal charge or indictment of
Employee for or conviction of Employee of a felony or, if it shall
materially and adversely damage or bring into disrepute the
business, reputation or goodwill of the Employer, any crime
involving moral turpitude.
The notice pursuant to clause (i) above shall specify with particularity
the covenant or agreement alleged to have been breached by Employee and action
necessary to be taken by Employee to cure the breach to the satisfaction of the
Company. Termination for cause pursuant
3
<PAGE>
to clauses (ii), (iii) or (iv) above shall be effective upon delivery of written
notice to Employee specifying the covenants or agreements alleged to have been
breached by Employee.
(d) As used herein, the term "permanent disability" shall mean, and
be limited to, any physical or mental illness, disability or impairment that
prevents the Employee from continuing the performance of his normal duties and
responsibilities hereunder for a period in excess of four (4) consecutive months
or one hundred eighty (180) non-consecutive days within any period of three
hundred sixty five (365) working days. For purposes of determining whether a
"permanent disability" has occurred under this Agreement, the written
determination thereof by two (2) qualified practicing physicians selected and
paid for by the Company (and reasonably acceptable to the Employee) shall be
conclusive.
(e) Upon any termination of this Agreement as hereinabove provided,
the Employee (or his estate or legal representatives, as the case may be) shall
be entitled to receive any and all earned but unpaid Base Salary (as defined
hereby) prorated through the effective date of termination, and any other
amounts and benefits then accrued or due and payable to the Employee hereunder;
provided, that the Employee's participation in any benefit or welfare plans of
the Company (including, without limitation, the Stock Options described below
and any profit-sharing plans) shall terminate upon the effective date of
termination of employment except to the extent otherwise required by law or
provided under the express terms of the applicable plan. All such payments shall
be made on the next applicable payment date therefor (as provided in Section 3
below) following the effective date of termination. Except when termination is
(x) by the Employee pursuant to Section 2(b)(ii) above, or (y) by the Company
other than "for cause" (as defined in Section 2(c) hereof (any termination
described in clauses (x) or (y) being sometimes hereinafter referred to as a
"Non-Cause Termination"), the foregoing constitutes all amounts to which the
Employee shall be entitled upon termination of this Agreement. In the case of a
Non-Cause Termination, the amount to which the Employee shall be entitled is not
so limited and shall include the Option Benefit (defined below).
(f) In the event that there shall be a dispute among the parties
hereto as to whether or not a termination shall constitute a Non-Cause
Termination, during the pendency of such dispute the Company will place in
escrow with a third party attorney or financial institution in an interest
bearing escrow account all such periodic Base Salary payments and the value of
the Option Benefit (as hereinafter defined) and fringe benefits which shall be
disbursed to the appropriate party or parties upon the final resolution or
settlement of such dispute from which no appeal can or shall have been taken. As
use herein, the term Option Benefit means all the Option Shares vested pursuant
to Section 3(d)(iii) of this Agreement.
3. Compensation and Benefits.
(a) Base Salary. As compensation for his services to be rendered
hereunder, the Company shall pay to the Employee a base salary at the rates per
annum set forth below (the "Base Salary"), payable in periodic installments in
accordance with the standard payroll practices of the Company in effect from
time to time, but not less than twice each month:
4
<PAGE>
From the Effective Date through November 30, 1997 $180,000
From December 1, 1997 through November 30, 1998 $200,000
From December 1, 1998 through November 30, 1999 $225,000
From December 1, 1999 through November 30, 2000 $250,000;
provided, that the contemplated increase for the period commencing December 1,
1999 is expressly made subject to the Company achieving its "1999 Target Income"
(described below).
(b) Fringe Benefits. The Company shall also make available to the
Employee, throughout the period of his employment hereunder, such benefits and
perquisites as are generally provided by the Company to its other senior
management employees (which benefits shall, in the aggregate, be at least as
generous as those supplied by AUGI to the senior executive officers of its
subsidiaries other than the Company), including but not limited to eligibility
for participation in any group life, health, dental, disability or accident
insurance, pension plan, 401(k) plan, profit-sharing plan, or other such benefit
plan or policy, if any, which may presently be in effect or which may hereafter
be adopted by the Company for the benefit of its employees generally; provided,
however, that, except as specified on Exhibit "A" annexed hereto, nothing herein
contained may be deemed to require the Company to adopt or maintain any
particular plan or policy; and provided, further, that the Company shall not be
obligated to permit the Employee to participate in any stock option plans it may
provide to its employees from time to time, other than the stock option plan
established for the Employee pursuant to this Agreement and described below or
established pursuant to the Merger Agreement. Participation in such benefit
plans may be subject to standard waiting periods following the commencement of
full-time employment. Notwithstanding the foregoing, throughout the term of this
Agreement, the Employee shall be entitled to receive the minimum fringe benefits
listed on Exhibit "A" annexed hereto and made a part hereof.
(c) Expenses. Throughout the period of the Employee's employment
hereunder, the Company shall also reimburse the Employee, reasonably promptly
after presentment by the Employee to the Company of appropriate receipts and
vouchers therefor and related information in such form and detail as the Company
may reasonably request, for any reasonable out-of-pocket business expenses
incurred by the Employee in connection with the performance of his duties and
responsibilities hereunder.
(d) Stock Options. The Employee has been awarded options (the
"Options") to purchase a maximum aggregate of Two Hundred and Sixty Thousand
(260,000) shares of the common stock, $0.01 par value per share, (the "AUGI
Common Stock"), of AUGI (the "Option Shares") at an exercise price equal to
$5.25 per share, being the closing price per share of AUGI Common Stock, as
traded on The Nasdaq National Market on October 7, 1996, the day such Options
were approved by the Board of Directors of AUGI (subject to adjustment for
subdivisions or splits, combinations, or reclassifications of the AUGI common
stock); provided, however, that all Options awarded hereunder are subject to the
terms and conditions hereinafter set forth including, without limitation, the
forfeiture provisions set forth below.
5
<PAGE>
(i) Term of Options. The Options shall have a term expiring on
a date which shall be the earlier to occur of: (x) five (5) years from the
"vesting" of the last to vest of the Options, as hereinafter described, or (y)
November 30, 2005 (the "Option Expiration Date").
(ii) Financial Performance. Except as provided in Section
3(e)(iii) below, the Options will only be exercisable, and shall vest only upon
the Company's achieving the following financial results:
(A) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
as of December 10, 1996 (the "Effective Date") and ending
November 30, 1997 (the "1997 Measuring Period") shall equal or
exceed $2.0 million (the "1997 Target Income"), a maximum of
65,000 Option Shares may be immediately exercised. In the
event that the actual Pre-Tax Income for the 1997 Measuring
Period shall be less than $2.0 million, then the number of
Option Shares which may be exercised shall be the sum of:
(x) 21,667 Option Shares multiplied by a fraction, the
numerator of which shall be the actual 1997 Pre-Tax
Income and the denominator of which shall be the 1997
Target Income; and
(y) as to the remaining 43,333 Option Shares, if, and
only if, the actual Pre-Tax Income for such Measuring
Period shall be equal to or greater than $0.5 million,
but less than the 1997 Target Income, the remaining
43,333 Option Shares exercisable for the 1997 Measuring
Period shall be pro-rated to the extent of the
percentage of the short-fall below the 1997 Target
Income in the manner described in the example set forth
below. If the actual 1997 Pre-Tax Income is less than
$0.5 million, none of such 43,333 Option Shares may be
exercised pursuant to this subsection (A).
(B) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
as of December 1, 1997 and ending November 30, 1998 (the "1998
Measuring Period") shall equal or exceed $2.5 million (the
"1998 Target Income"), a maximum of 65,000 Option Shares may
be immediately exercised. In the event that the actual Pre-Tax
Income for the 1998 Measuring Period shall be less than $2.5
million, then the number of Option Shares which may be
exercised shall be the sum of:
6
<PAGE>
(x) 21,667 Option Shares multiplied by a fraction, the
numerator of which shall be the actual 1998 Pre-Tax
Income and the denominator of which shall be the 1998
Target Income; and
(y) as to the remaining 43,333 Option Shares, if, and
only if, the actual Pre-Tax Income for such Measuring
Period shall be equal to or greater than $1.0 million,
but less than the 1998 Target Income, the remaining
43,333 Option Shares exercisable for the 1998 Measuring
Period shall be pro-rated to the extent of the
percentage of the short-fall below the 1998 Target
Income in the manner described in the example set forth
below. If the actual 1998 Pre-Tax Income is less than
$1.0 million, none of such 43,333 Option Shares may be
exercised pursuant to this subsection (B).
(C) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
as of December 1, 1998 and ending November 30, 1999 (the "1999
Measuring Period") shall equal or exceed $3.0 million (the
"1999 Target Income"), a maximum of 65,000 Option Shares may
be immediately exercised. In the event that the actual Pre-Tax
Income for the 1999 Measuring Period shall be less than $3.0
million, then the number of Option Shares which may be
exercised shall be the sum of:
(x) 21,667 Option Shares multiplied by a fraction, the
numerator of which shall be the actual 1999 Pre-Tax
Income and the denominator of which shall be the 1999
Target Income; and
(y) as to the remaining 43,333 Option Shares, if, and
only if, the actual Pre-Tax Income for such Measuring
Period shall be equal to or greater than $1.5 million,
but less than the 1999 Target Income, the remaining
43,333 Option Shares exercisable for the 1999 Measuring
Period shall be pro-rated to the extent of the
percentage of the short-fall below the 1999 Target
Income in the manner described in the example set forth
below. If the actual 1999 Pre-Tax Income is less than
$1.5 million, none of such 43,333 Option Shares may be
exercised pursuant to this subsection (C).
(D) In the event that the "Pre-Tax Income" (as
hereinafter defined) of the Company for the period commencing
as of December 1, 1999 and ending November 30, 2000 (the "2000
Measuring Period") shall equal or exceed $3.5 million (the
"2000 Target Income"), a maximum of 65,000 Option Shares may
be immediately exercised. In the event that the actual
7
<PAGE>
Pre-Tax Income for the 2000 Measuring Period shall be less
than $3.5 million, then the number of Option Shares which may
be exercised shall be the sum of:
(x) 21,667 Option Shares multiplied by a fraction, the
numerator of which shall be the actual 2000 Pre-Tax
Income and the denominator of which shall be the 2000
Target Income; and
(y) as to the remaining 43,333 Option Shares, if, and
only if, the actual Pre-Tax Income for such Measuring
Period shall be equal to or greater than $2.0 million,
but less than the 2000 Target Income, the remaining
43,333 Option Shares exercisable for the 2000 Measuring
Period shall be pro-rated to the extent of the
percentage of the short-fall below the 1999 Target
Income in the manner described in the example set forth
below. If the actual 2000 Pre-Tax Income is less than
$2.0 million, none of such 43,333 Option Shares may be
exercised pursuant to this subsection (D).
(E) In the event that the accumulated Pre-Tax Income for
all four (4) Measuring Periods referred to in clauses (A)
through (D) above shall equal or exceed $11.0 million, all of
the remaining 260,000 Option Shares shall be immediately and
fully exercisable, irrespective of the actual Pre-Tax Income
earned in any or all of the 1997 Measuring Period, 1998
Measuring Period or 1999 Measuring Period; provided, that
unless the Board of Directors of the Company and AUGI shall
(i) effect an expansion program not approved by the Employee,
or (ii) violate the provisions of Section 7.4(c) of the Merger
Agreement, either of which shall reduce anticipated Pre-Tax
Income of the Company in the 2000 Measuring Period, the
provisions of this clause (E) shall only be applicable if the
actual Pre-Tax Income in the 2000 Measuring Period shall equal
or exceed $2.0 million.
Example: As an example of the application of the pro-ration
provisions as to the 43,333 Option Shares contained in subclauses
(y) of each of clauses (A) through (D) above, the 43,333 Option
Shares shall be multiplied by a fraction: (x) the numerator of which
shall be the amount by which the actual Pre-Tax Income earned in a
Measuring Year shall exceed the minimum base Pre-Tax Income required
in such Measuring Year, and (y) the denominator of which shall be
the difference between the Target Income for such Measuring Year and
the minimum base Pre-Tax Income in such Measuring Year. Accordingly,
if the Company's actual Pre-Tax Income in the 1997 Measuring Year is
$1.0 million, 43,333 Option Shares shall be multiplied by 1/3, the
fraction resulting from dividing $500,000 ($1.0 million actual
Pre-Tax Income less the $500,000
8
<PAGE>
minimum base Pre-Tax Income for the 1997 Measuring Year) by
$1,500,000 (the $2.0 million Target Pre-Tax Income less the $500,000
minimum base Pre-Tax Income).
(iii) Immediate Vesting on Certain Events. All Options shall
immediately vest if:
(A) prior to November 30, 2000, AUGI shall effect a sale
of all or substantially all of the shares of the capital stock
or assets of the Company to any unaffiliated third party,
whether by merger, consolidation, stock sale, asset sale or
like transaction,
(B) prior to November 30, 2000, the Company consummates
an initial public offering of its securities,
(C) the Company materially violates (and fails to
promptly cure such material violation) its covenants and
agreements contained in Section 7.4(c) of the Merger
Agreement, or
(D) the Employee's employment pursuant to this Agreement
is terminated by the Company or terminates for reasons other
than "for cause" (as defined in this Agreement) or pursuant to
Section 2(b)(i) of this Agreement.
(iv) Termination of Options. Options not previously vested and
immediately exercisable pursuant to their terms shall immediately terminate:
(A) effective as of December 1, 2000, with respect to
any Options that shall not have vested in accordance with the
provisions of Section 3(d)(ii) above; or
(B) if the Employee's employment with the Company shall
terminate "for cause" (as defined herein), or
(C) if the Employee shall resign or otherwise
voluntarily terminate (except arising from constructive
termination) his full-time employment with the Company prior
to November 30, 2000 for any reason other than a breach by the
Company of its obligations to the Employee hereunder.
(v) Definition. As used herein, the term "Pre-Tax Income"
shall mean the net income of the Company after deduction of all expenses paid or
accrued for the appropriate Measuring Period in question in accordance with
generally accepted accounting principles, but before application of all federal,
state and local income taxes for such Measuring
9
<PAGE>
Period, all as determined by AUGI subject only to the right of the Employee to
engage his own accountant or financial advisor to review the calculations of
such Pre-Tax Income for the applicable Measuring Period at the Employee's
expense. Disputes shall be resolved in accordance with Section 10(f) of this
Agreement. Notwithstanding the foregoing, the term "Pre-Tax Income" shall be
calculated before deduction of all legal fees and disbursements of counsel to
the Employee paid by the Company, but after deduction of (i) all interest paid
or accrued on money borrowed by the Company from any unaffiliated third party,
and (ii) all interest or dividends paid, accrued or payable with respect to any
cash advances made to the Company by AUGI (whether evidenced by notes or
preferred stock), subject to reduction pursuant to the provisions of Section
7.5(e) of the Merger Agreement.
(vi) Provisions Governing Registration. The Option Shares are
subject to the provisions governing registration thereof, set forth in the
Registration Rights Agreement between the parties.
(vii) Assignment of Options. The Options may not be
transferred, assigned or otherwise disposed of by the Employee unless and until
they have become vested and are then immediately exercisable into Option Shares;
provided, that the Employee shall have the right to assign all or any portion of
his Options to any member of his family; provided, further, that any such
permitted assignee shall execute a joinder or similar agreement with AUGI and
the Company agreeing to be bound by all of the terms and conditions of this
Section 3(d).
(viii) Reservation of Option Shares; Registration of Options.
AUGI hereby covenants and agrees to:
(A) take all steps necessary and appropriate to keep a
sufficient number of Option Shares reserved for issuance upon
exercise of the Options; and
(B) to the extent that the same have vested and are then
currently exercisable in accordance with this Agreement, AUGI
shall, at its sole cost and expense, include the Options and
underlying Option Shares in any one or more Form S-8
Registration Statements filed by AUGI with the Securities and
Exchange Commission to register stock options for any
executive officers, directors or key employees of AUGI or any
of its subsidiaries, including the Company.
(ix) Cashless Exercise. The Employee shall have the right to
exercise his Options upon vesting pursuant to a "cashless" exercise. Pursuant to
such cashless exercise, vested Options shall, at the request of the Employee, be
deemed to have been exercised by the Employee, to the extent of such number of
Option Shares resulting from dividing the aggregate amount by which all such
vested Options are then "in the money" by the closing price of the AUGI's Common
Stock, as traded on the Nasdaq National Market (or other national securities
exchange). In such event, the number of vested Options resulting from such
calculation shall
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be deemed exercised in full by the Employee, all such vested Options shall be
cancelled, and the underlying Option Shares resulting from such "cashless"
exercise may be sold without payment to the Company or AUGI.
Example: By way of example, if 100,000 Options shall have
vested at an exercise price of $7.50 per share and the closing price of AUGI's
publicly traded Common Stock shall be $15.00 per share: (A) the 100,000 Options
shall be deemed to be "in the money" to the extent of $750,000 (100,000
multiplied by the excess of the $15.00 closing price over the $7.50 exercise
price), and (B) the Employee shall, upon exercise of all 100,000 vested Options,
receive 50,000 shares of AUGI Common Stock, as a result of dividing $750,000 by
the $15.00 per share closing price.
4. Vacation.
The Employee shall be entitled to take, from time to time, normal
and reasonable vacations with pay, consistent with the Company's standard
policies and procedures in effect from time to time (provided that such policies
and procedures shall be no less favorable than those set forth on Exhibit "A"
annexed hereto), at such times as shall be mutually convenient to the Employee
and the Company, and so as not to interfere unduly with the conduct of the
business of the Company.
5. Restrictive Covenants.
(a) The Employee hereby acknowledges and agrees that (i) the
business contacts, customers, suppliers, technology, product designs and
specifications, know-how, trade secrets, marketing techniques, promotional
methods and other aspects of the business of BTS have been of value to BTS and
will be of value to the Company, and have provided BTS and will hereafter
provide the Company with substantial competitive advantage in the operation of
its business, and (ii) the Employee has and will continue to have detailed
knowledge and possesses and will possess confidential information concerning the
business and operations of BTS and the Company.
(b) Unless otherwise approved in writing by AUGI or its Chairman of
the Board after full disclosure by the Employee to AUGI's Board of Directors of
all relevant facts and circumstances, the Employee shall not, directly or
indirectly, for the Employee or through or on behalf of any other person or
entity, at any time during the "Restrictive Period" (as defined in clause (ii)
below):
(i) divulge, transmit or otherwise disclose or cause to be
divulged, transmitted or otherwise disclosed, any clients or customer lists,
technology, know-how, trade secrets, marketing techniques, contracts or other
confidential or proprietary information of the Company of whatever nature,
whether now existing or hereafter created or developed (provided, however, that
for purposes hereof, information shall not be considered to be confidential or
proprietary if (A) the information, and its relevance in the applicable
instance, is a matter of
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<PAGE>
common knowledge or public record, (B) the information, and its relevance in the
applicable instance, is generally known in the industry, or (C) the information
is disclosed to Employee after termination of his employment by another person
not prohibited from making such disclosure, (D) the information is required to
be disclosed by law pursuant to court order or subpoena, or (E) the Employee can
demonstrate that such information, and its relevance in the particular instance,
was already known to the recipient thereof other than by reason of any breach of
any obligation under this Agreement or any other confidentiality or
non-disclosure agreement); and/or
(ii) unless the Employee's employment with the Company shall
be terminated by reason of a Non-Cause Termination, at any time during the
period commencing on the date hereof through and including the date which shall
be three (3) years following the voluntary resignation by the Employee of his
employment with the Company or his termination by the Company "for cause", but
in no event longer than one (1) year following the end of the Term (the
"Restrictive Period"), invest, carry on, engage or become involved, either as an
employee, agent, advisor, officer, director, stockholder (excluding ownership of
not more than 5% of the outstanding shares of a publicly held corporation if
such ownership does not involve managerial or operational responsibility),
manager, partner, joint venturer, participant or consultant in any business
enterprise (other than AUGI (so long as it is an affiliate of the Company), the
Company or any of their respective subsidiaries, affiliates, successors or
assigns) which derives any material revenues from the offer or sale in the
United States from time to time during the Restrictive Period of all aspects of
providing site acquisition, zoning, architectural and engineering services to
the wireless telecommunications industry (the "Company Business"), or which
engages in any other business substantially similar to and directly competitive
with the Company Business.
(c) The Employee and the Company hereby acknowledge and agree that,
in the event of any breach by the Employee, directly or indirectly, of the
foregoing restrictive covenants, it will be difficult to ascertain the precise
amount of damages that may be suffered by the Company by reason of such breach;
and accordingly, the parties hereby agree that, as liquidated damages (and not
as a penalty) in respect of any such breach, the breaching party or parties
shall be required to pay to the Company, on demand from time to time, cash
amounts equal to any and all gross revenues derived by the Employee or his
affiliate, directly or indirectly, from any and all violative acts or
activities. The parties hereby agree that the foregoing constitutes a fair and
reasonable estimate of the actual damages that might be suffered by reason of
any breach of this Section 5 by the Employee, and the parties hereby agree to
such liquidated damages in lieu of any and all other measures of damages that
might be asserted in respect of any subject breach.
(d) The Employee and the Company hereby further acknowledge and
agree that any breach by the Employee, directly or indirectly, of the foregoing
restrictive covenants will cause the Company irreparable injury for which there
is no adequate remedy at law. Accordingly, the Employee expressly agrees that,
in the event of any such breach or any threatened breach hereunder by the
Employee, directly or indirectly, the Company shall be
12
<PAGE>
entitled, in addition to the liquidated damages provided for in Section 5(c)
above), to seek and obtain injunctive and/or other equitable relief to require
specific performance of or prevent, restrain and/or enjoin a breach under the
provisions of this Section 5, in any such case without the necessity of proving
actual damages or posting bond.
(e) In the event of any dispute under or arising out of this Section
5, the prevailing party in such dispute shall be entitled to recover from the
non-prevailing party or parties, in addition to any damages and/or other relief
that may be awarded, its reasonable costs and expenses (including reasonable
attorneys' fees) incurred in connection with prosecuting or defending the
subject dispute.
(f) Upon the termination of the Employee's employment with the
Company, the Employee shall immediately surrender and deliver to the Company all
notes, drawings, diagrams, models, prototypes, lists, books, records, documents
and data of every kind or description, in whatever written or other media
(including, without limitation, electronic, tape, or other form of storage)
relating to or connected with the business contacts, client or customer lists,
technology, know-how, trade secrets, marketing techniques, contracts or other
confidential or proprietary information of the Company, its business, its
properties, or its customers referred to in Section 5(b)(i) above.
6. Inventions; Intellectual Property.
(a) The Employee shall promptly communicate to the Company and
disclose to the Company in such form as the Company requests from time to time,
all drawings, sketches, models, records, information, details and data (in
whatever media the same may be created or recorded including, without
limitation, print, tape, electronic, or otherwise) pertaining to all ideas,
processes, trademarks, inventions, improvements, discoveries and improvements,
product designs and specifications, and other intellectual property, whether
patented or unpatented, and copyrightable or uncopyrightable, made, conceived,
developed, acquired or implemented by the Employee, solely or jointly, during
the term of this Agreement (the "Development Term"), whether or not conceived
during regular working hours through the use of Company time, material or
facilities or otherwise (each of the foregoing hereinafter referred to,
individually and collectively, as a "Development"). The Employee hereby assigns,
transfers, conveys and sells to the Company all right, title and interest in and
to all Developments, whether now existing or hereafter existing during the
Development Term, and acknowledges that the same, whether now existing or
hereafter existing during the Development Term, are the sole and exclusive
property of the Company for which the Employee is being adequately compensated
hereunder. At any time and from time to time, upon the request of the Company,
and at its expense, the Employee will execute and deliver to the Company any and
all applications, assignments, instruments, documents and papers, give evidence
and do any and all other acts which, in the opinion of the Company, are or may
be necessary or desirable to document such transfer or to enable the Company to
file and prosecute applications for and to acquire, maintain and enforce any and
all patents, trademark or tradename registrations, copyrights or other rights
under United States, foreign, state or local law with respect to any such
Developments or to
13
<PAGE>
obtain any extension, validation, reissue, continuance, division or renewal of
any of the same, in whole or in part, and otherwise to establish, protect and
enforce the Company's rights in and to such intellectual property.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the foregoing Section 6(a) shall only apply and be effective to the
extent permitted under applicable law. In this regard, the provisions of Section
6(a) of this Agreement which provide that the Employee shall assign or offer to
assign any of the Employee's rights in an invention to the Company shall not
apply to any invention for which no equipment, supplies, facility, or trade
secret information of the Company was used and which was developed entirely on
the Employee's own time, unless (a) the invention relates (i) directly to the
business of the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development, or (b) the invention results from any work
performed by the Employee for the Company.
7. Right to Exchange AUGI Securities for Company Common Stock.
(a) In the event that the Board of Directors of the Company and AUGI
shall elect at any time during the term of this Agreement to effect an initial
public offering of securities of the Company pursuant to a registration
statement filed with the Securities and Exchange Commission (an "IPO") or a
merger or consolidation of the Company with or into another publicly traded
corporation or other entity (a "Public Merger"), then and in such event, the
Employee shall have the right and option, but not the obligation (the "Exchange
Option") to exchange (i) all shares of AUGI Merger Stock received by him as
partial merger consideration under the Merger Agreement, and (ii) all Options
granted to him under this Agreement (whether or not then exercisable) and (iii)
all Option Shares issued upon prior exercise of vested Options (collectively,
the "Exchanged AUGI Securities") for that number of shares of Common Stock of
the Company as shall represent eight and one-third (8.333%) percent of the
fully-diluted shares of Common Stock of the Company which are issued and
outstanding (the "Exchanged Company Securities"), before giving effect to the
issuance of any equity type securities in connection with the IPO or any private
placement or bridge financing effected by the Company with any unaffiliated
third party prior to such IPO, or in connection with the Public Merger. The
Employee shall not be assessed any costs or fees associated with the exercise of
the Exchange Option hereunder, all of which shall be borne by AUGI and/or the
Company.
(b) In the event that the Employee shall elect the Exchange Option
provided in Section 7(a) above, Simantov Moskona ("Moskona") and Solon L. Kandel
("Kandel") shall also have the right to receive the same number of Exchanged
Company Securities as the Employee; provided, that in no event shall Luciani,
Moskona and Kandel have the right to receive in excess of an aggregate of 25% of
the fully-diluted shares of Common Stock of the Company in exchange for all AUGI
Exchanged Securities issued pursuant to Section 3 of the Merger Agreement, a
separate Agreement and Plan of Merger, dated December, __, 1996 between Arcadia
Consulting Services, Inc., Kandel and AUGI, and all Options and underlying
Option Shares provided for in the employment agreements of even date among the
Company and Moskona and Kandel.
14
<PAGE>
(c) In the event that the Employee shall elect to exercise his
exchange rights pursuant to this Section 7, such election shall be only with
respect to all, and not less than all, of the Exchanged AUGI Securities, unless
otherwise agreed to in writing by AUGI.
8. Non-Assignability.
In light of the unique personal services to be performed by the
Employee hereunder, it is acknowledged and agreed that any purported or
attempted assignment or transfer by the Employee of this Agreement or any of his
duties, responsibilities or obligations hereunder shall be void.
9. Notices.
Any notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been given when delivered personally, one (1) day after being sent by recognized
overnight courier service will all charges prepaid or charged to the sender's
account, or three (3) days after being mailed by certified mail, return receipt
requested, addressed to the party being notified at the address of such party
first set forth above, or at such other address as such party may hereafter have
designated by notice; provided, however, that any notice of change of address
shall not be effective until its receipt by the party to be charged therewith.
Copies of any notices or other communications to the Company shall
simultaneously be sent by first class mail to American United Global, Inc.,
11130 33rd Place, Suite 250, Bellevue, Washington 98004, Attention: Robert M.
Rubin, Chairman.
10. General.
(a) Neither this Agreement nor any of the terms or conditions hereof
may be waived, amended or modified except by means of a written instrument duly
executed by the party to be charged therewith. Any waiver or amendment shall
only be applicable in the specific instance, and shall not constitute or be
construed as a waiver or amendment in any other or subsequent instance. No
failure or delay on the part of either party in respect of any enforcement of
obligations hereunder shall in any manner affect such party's right to seek or
effect enforcement at any other time or in respect of any other required
performance.
(b) The captions and Section headings used in this Agreement are for
convenience of reference only, and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof.
(c) This Agreement, and all matters or disputes relating to the
validity, construction, performance or enforcement hereof, shall be governed,
construed and controlled by and under the laws of the State of Delaware
applicable to contracts entered into and performed wholly within Delaware.
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(d) This Agreement shall be binding upon and shall inure to the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit herefrom absent the express written
consent of the party to be charged with such reliance or benefit; provided, that
neither this Agreement nor any rights or obligations hereunder may be assigned
by either party without the express prior written consent of the other party.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original hereof, but all of which
together shall constitute one and the same instrument.
(f) Except for any legal or judicial proceeding which may be brought
for injunctive and/or any other equitable relief as contemplated by Section 5(d)
above, any dispute involving the interpretation or application of this Agreement
shall be resolved by final and binding arbitration in accordance with the terms,
conditions and procedures set forth in the Merger Agreement.
(g) This Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or excised from this Agreement, as the situation may require; and
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the date first set forth above.
BTS ACQUISITION CORP.
By: /s/ Robert M. Rubin, Ch.
----------------------------------
Name: Robert M. Rubin
Title: Chairman
/s/ Sergio Luciani
---------------------------------------
SERGIO LUCIANI
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Only as to Section 2(f), Section 3(d) and Section 7 of the foregoing Agreement:
AMERICAN UNITED GLOBAL, INC.
By: /s/ Robert M. Rubin, CEO.
------------------------------------
Name: Robert M. Rubin
Title: Chief Executive Officer
17
EXHIBIT 1(e)
REGISTRATION RIGHTS AGREEMENT
DATED: December 11, 1996
Reference is made to: (a) that certain Agreement and Plan of Merger
(the "BTS Merger Agreement"), dated December 11, 1996 among AMERICAN UNITED
GLOBAL, INC., a Delaware corporation ("AUGI"); BTS ACQUISITION CORP., a Delaware
corporation ("Mergerco"); BROADCAST TOWER SITES, INC., a Delaware corporation
("BTS"); SIMANTOV MOSKONA ("Moskona"); and SERGIO LUCIANI ("Luciani"); and (b)
that certain Agreement and Plan of Merger (the "Arcadia Merger Agreement"), also
dated December 11, 1996 among AUGI; ARCADIA CONSULTING SERVICES, INC., a
Delaware corporation ("Arcadia") and SOLON L. KANDEL ("Kandel"). The BTS Merger
Agreement and the Arcadia Merger Agreement are hereinafter collectively referred
to as the "Merger Agreements." Moskona, Luciani and Kandel are hereinafter
individually referred to as a "Stockholder" and collectively as the
"Stockholders."
In order to induce Moskona and Luciani to enter into the BTS Merger
Agreement and to induce Kandel to enter into the Arcadia Merger Agreement, and
for other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each of AUGI and the Stockholders do hereby agree as follows:
1. Certain Defined Term. For purposes of this Agreement, the term
"Registrable Securities" shall mean and include the individual or collective
reference to: (i) the 507,246 shares of AUGI Common Stock issued to Moskona and
Luciani upon consummation of the merger (the "BTS Merger") described in the BTS
Merger Agreement and designated therein as the "AUGI Merger Stock"; (ii) the
192,754 shares of AUGI Common Stock to be issued to Kandel upon consummation of
the merger (the "Arcadia Merger") described in the Arcadia Merger Agreement and
designated therein as the "AUGI Merger Stock"; and (iii) all additional shares
of AUGI Common Stock issuable to the Stockholders upon the vesting and permitted
exercise of options to purchase shares of AUGI Common Stock granted to such
Stockholders pursuant to their respective employment agreements entered into in
connection with the consummation of the BTS Merger and Arcadia Merger,
respectively (the "AUGI Option Stock").
Unless otherwise expressly defined herein, all capitalized terms used in
this Registration Rights Agreement shall have the same meaning as is defined in
the BTS Merger Agreement.
As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when:
(A) a registration statement with respect to the sale of
such securities shall have become effective under the
Securities Act and such securities shall have been disposed of
in accordance with such registration statement,
<PAGE>
(B) all of such securities may be sold under Rule 144
(or any successor provision) during any three-month period
under the Securities Act,
(C) such securities shall have been otherwise
transferred and new certificates for them not bearing a legend
restricting further transfer shall have been delivered by AUGI
in accordance with applicable law,
(D) such securities shall have ceased to be outstanding,
or
(E) a Stockholder shall have been offered the
opportunity to have all of such Stockholder's Registrable
Securities sold pursuant to two or more such Registration
Statements (singly or in the aggregate), the effective dates
of at least two of such registration statements being not less
than six (6) months apart, but has elected not to cause such
Registrable Securities to be covered thereby.
1A. General. Notwithstanding any other provision of this Agreement, in no
event shall any underwriter cutback provisions contained herein (i) apply to the
82,884 shares of AUGI Common Stock issuable to Kandel on the Closing Date of the
Arcadia Merger, or (ii) reduce or otherwise limit the ability of any of the
Stockholders to sell the maximum number of shares of AUGI Common Stock which
they are permitted to sell during any three-month period pursuant to Section
2(d) hereof; it being understood that AUGI shall have effected, pursuant to
Section 2(a) hereof of the maximum number of shares which all Stockholders are
permitted to sell during each three-month period referred to in such Section
2(d) no later than the first day of each such three-month period.
2. Demand Registration Rights.
(a) Filing of Demand Registration Statement. As soon as reasonably
practicable following the Closing Date of the BTS Merger and the date of
execution of the Arcadia Merger Agreement, AUGI shall file a Registration
Statement under the Securities Act, on a registration statement form then
available to AUGI and the Stockholders for such purpose (the "Demand
Registration Statement"), to register for sale by the Stockholders all (and not
less than all) of the AUGI Merger Stock. AUGI shall use its best efforts to
cause such Demand Registration Statement to be declared effective by the
Securities and Exchange Commission (the "Commission") on a date which shall be
not later than June 30, 1997. In such connection, AUGI shall (i) promptly file
all amendments to the Demand Registration Statement in response to all letters
of comments and other correspondence from the Commission, and (ii) at AUGI's
sole expense, shall bear all costs of registering the AUGI Merger Stock and
other securities included therein, including all filing fees, professional fees
of counsel and auditors to AUGI, printing fees, blue sky fees and expenses, fees
of underwriters and underwriters' counsel, printing costs and the like;
provided, that the Stockholders shall be solely responsible to pay all fees and
expenses of legal counsel and accountants engaged by the Stockholders,
commissions incurred in connection with the sale of AUGI Merger Stock, and all
income, capital gains and related taxes in connection with the sale of any such
AUGI Merger Stock.
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<PAGE>
(b) Primary and Secondary Offerings. Notwithstanding anything to the
contrary, express or implied contained herein, the Stockholders hereby agree
that the Demand Registration Statement may include therein other AUGI securities
(including AUGI Common Stock) which AUGI shall be registering, either for its
own account, and/or for the account of other AUGI securityholders, in addition
to the Stockholders (collectively, with the Stockholders, the "AUGI
Registrants").
(c) Underwritten Offerings; Underwriters' Cutback. AUGI may, at its
sole and exclusive option, select one or more investment banker(s) acceptable to
AUGI, to manage and underwrite one or more offerings of AUGI securities,
including the AUGI Merger Stock, covered by any Demand Registration Statement
contemplated hereby. AUGI agrees to use its best efforts to cause a Demand
Registration Statement in respect of the AUGI Merger Stock to remain current for
a period of at least twenty four (24) months from the effective date of the
Arcadia Merger, and, in such connection, shall file such post-effective
amendments to the Demand Registration Statement or additional Demand
Registration Statements as shall be required by the applicable rules and
regulations of the Commission to enable the Stockholders (subject at all times
to the restrictions contained in Section 2(d) hereof) to effect sales and
distributions from time to time during such twenty-four (24) month period of
their AUGI Merger Stock pursuant thereto. Notwithstanding the foregoing, if the
managing underwriter for any offering of Registrable Securities effected
pursuant to Section 2 of this Agreement shall determine in good faith and advise
AUGI and the AUGI Registrants in writing that the inclusion in any registration
effected pursuant to this Agreement of some or all of the Registrable Securities
and/or other securities sought to be registered for AUGI Registrants creates a
substantial risk that the proceeds or the price per share that AUGI and/or such
AUGI Registrants will derive from such offering will be reduced or that the
number of securities to be registered (including those sought to be registered
at the instance of AUGI and/or such AUGI Registrants as well as those sought to
be registered by the Stockholders holding Registrable Securities) is too large a
number to be reasonably sold, AUGI will include in such registration to the
extent which AUGI is so advised they can be sold in such offering (the "Maximum
Number"), at the option of AUGI, either (i) the number of securities sought to
be registered by each seller (which term shall include each AUGI Registrant, as
well as the Stockholders holding Registrable Securities) reduced pro rata among
such sellers in proportion to the number of securities sought to be registered
by all such sellers or, (ii) (A) first, securities to be registered at the
instance of AUGI, if any, and (B) second, if the number of securities to be
registered under clause (A) is less than the Maximum Number, securities to be
registered by all other sellers pro rata as aforesaid.
(d) Lock-Up Agreement. Notwithstanding anything to the contrary in
this Agreement, each of the Stockholders does hereby covenant and agree that all
Registrable Securities now or hereafter owned of record by him which shall be
registered under the Securities Act of 1933, as amended, pursuant to a Demand
Registration contemplated by this Section 2 or a Piggyback Registration
contemplated by Section 3 below:
(i) may not be sold, transferred or otherwise subject to any
public distribution for a period of twelve (12) consecutive
months from the Closing Date of the BTS Merger (the "Initial
Twelve Month Period"); and
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<PAGE>
(ii) thereafter shall be limited, in each consecutive
quarterly period of three (3) months each, commencing after
the expiration of the Initial Twelve Month Period, to the
sale, transfer or other public distribution of an aggregate
amount of Registrable Securities owned of record by each such
Stockholder which shall not exceed ten (10%) percent of the
aggregate number of shares of AUGI Merger Stock owned of
record by such Stockholder;
provided, that the foregoing lockup restrictions shall not be applicable to an
aggregate of up to 82,884 shares of AUGI Merger Stock issuable to Kandel on the
Closing Date of the Arcadia Merger pursuant to the terms of the Arcadia Merger
Agreement; which shares of AUGI Merger Stock may be immediately sold by Kandel
pursuant to such Demand Registration Statement or otherwise.
The lockup restrictions set forth in this Section 2(d) are a
material element of the consideration paid by AUGI pursuant to the Merger
Agreements. Accordingly, except for certificates evidencing 82,884 shares of
AUGI Merger Stock issuable to Kandel on the Closing Date of the Arcadia Merger,
(i) AUGI shall have the right to provide its transfer agent with appropriate
"stop transfer" instructions, and (ii) all certificates issued to the
Stockholders evidencing the AUGI Merger Stock shall (in addition to any other
legends required pursuant to this Agreement or other Transaction Documents)
contain the following legend:
"THE SALE, TRANSFER, HYPOTHECATION OR ASSIGNMENT OF THE SHARES
EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS PURSUANT
TO THE TERMS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT BETWEEN THE
CORPORATION AND THE RECORD HOLDER OF THIS CERTIFICATE; A COPY OF
WHICH AGREEMENT IS ON FILE AT THE OFFICES OF THE CORPORATION."
The lockup restrictions set forth in this Section 2(d) shall expire
and be of no further force or effect on a date which shall be twenty-four (24)
months from the effective date of the BTS Merger.
(e) Contemporaneous Piggyback Registrations. Notwithstanding
anything to the contrary in this Agreement, the Stockholders may not require any
Demand Registration within 120 days of any opportunity to participate in any
Piggyback Registration contemplated by Section 3 below.
(f) AUGI Option Stock. AUGI shall promptly register on a Form S-8
Registration Statement or other applicable registration statement all (i) AUGI
Options to the extent the same shall have vested and are exercisable in
accordance with their terms, and (ii) AUGI Option Stock issued or issuable to
the Stockholders upon exercise of AUGI stock options, and the Stockholders shall
have the right to include any shares of AUGI Option Stock issued upon exercise
of any stock option in a Registration Statement filed pursuant to Sections 2 or
3 hereof, for purposes of resale.
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<PAGE>
3. Piggyback Registration Rights.
(a) In addition to and not in limitation of the rights specified in
Section 2 above, if, at any time on or after the date of this Agreement, AUGI
proposes to register any of its equity securities under the Securities Act of
1933, as amended (the "Securities Act"), on a registration statement on Form
S-1, Form S-2, Form S-3, or an equivalent general registration form then in
effect (a "Registration Statement"), whether in whole or in part for purposes of
a sale by any stockholder of AUGI (other than the Stockholders) of such equity
securities for such person's (each such person, an "AUGI Registrant") own
account, on each such occasion AUGI shall give prompt written notice of its
intention to do so to the Stockholders.
(i) Upon the written request of the Stockholders, given within
fifteen (15) days following the receipt of any such written notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Stockholder and the intended method of distribution thereof), AUGI will use
its best efforts to include in such registration statement any or all of the
Registrable Securities then owned by such Stockholder requesting such
registration to the extent necessary to permit the sale or other disposition of
the shares constituting Registrable Securities to be so registered, but only to
the extent of a number of shares of AUGI Common Stock such that the Stockholders
are able to sell shares of Registrable Securities but
(x) in the case of an underwritten public offering,
subject to such "underwriter cutbacks" described in Section
3(b) of this Agreement, as the applicable underwriter may
determine in good faith, and
(y) in the case of any other offering, on a proportional
basis with AUGI and/or such other AUGI Registrants intending
to sell shares pursuant to such registration statement
(each such effort to include Registrable Shares under such a Registration
Statement pursuant to this Section 3 is sometimes hereinafter referred to as a
"Piggyback Registration").
(ii) The Stockholders shall have the right to withdraw a
request to include Registrable Securities in any registration statement filed
pursuant to this Section 3(a) by giving written notice to AUGI of his election
to withdraw such request at least five (5) days prior to the proposed filing
date of such registration statement.
(b) If the managing underwriter for any offering of Registrable
Securities effected pursuant to Section 3(a) of this Agreement shall determine
in good faith and advise AUGI and/or the AUGI Registrants and the Stockholders
holding Registrable Securities in writing that the inclusion in any registration
effected pursuant to this Agreement of some or all of the Registrable Securities
sought to be registered creates a substantial risk that the proceeds or the
price per share that AUGI and/or such AUGI Registrants will derive from such
offering will be reduced or that the number of securities to be registered
(including those sought to be registered at the instance of AUGI and/or such
AUGI Registrants as well as those sought to be registered by the Stockholders
holding Registrable Securities) is too large a number to be reasonably sold,
AUGI will include in such registration to the extent which AUGI is so advised
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<PAGE>
they can be sold in such offering (the "Maximum Number"), at the option of AUGI,
either (i) the number of securities sought to be registered by each seller
(which term shall include each AUGI Registrant, as well as the Stockholders
holding Registrable Securities) reduced pro rata among such sellers in
proportion to the number of securities sought to be registered by all such
sellers or, (ii) (A) first, securities to be registered at the instance of AUGI,
if any, and (B) second, if the number of securities to be registered under
clause (A) is less than the Maximum Number, securities to be registered by all
other sellers pro rata as aforesaid.
4. Restrictive Legend. Until a Registration Statement (whether a Piggyback
Registration, a Demand Registration, or otherwise) has become effective under
the Securities Act covering every share issued to the Stockholders pursuant to
the BTS Merger and/or Arcadia Merger (whether or not subsequently transferred)
and such shares are disposed of pursuant to such effective Registration
Statement, each certificate representing each such share of AUGI Common Stock
issued to the Stockholders pursuant to the Arcadia Merger and/or the BTS Merger
which has not been covered by and disposed of pursuant to such an effective
Registration Statement, and all certificates and instruments issued in transfer
thereof, shall be endorsed with the substantially the following restrictive
legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN TAKEN
FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO THE DISTRIBUTION
THEREOF, AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD, TRANSFERRED, ASSIGNED OR PLEDGED EXCEPT IF REGISTERED UNDER
APPLICABLE FEDERAL OR STATE BLUE SKY OR SECURITIES LAWS OR ANY
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE
AVAILABLE, ALL IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE REGISTERED HOLDER HEREOF AND THE ISSUER OF SUCH SHARES. A COPY
OF WHICH IS AVAILABLE FROM THE COMPANY UPON REQUEST."
Upon the effectiveness of any such Registration Statement and in connection with
the disposition of shares pursuant thereto, AUGI shall, upon the request of any
Stockholder, issue upon the direction of such Stockholder a replacement
certificate with regard to any shares covered by such Registration Statement and
being disposed of pursuant thereto, which certificate shall be without such
legend, in exchange for any such legended certificate.
5. Registration Statements and Prospectus'. AUGI shall furnish to the
Stockholders, at the Company's expense, such number of copies of the
Registration Statement and each amendment and supplement thereto, preliminary
prospectus, final prospectus and such other documents as such Stockholder may
reasonably request in order to facilitate the public offering of the Registrable
Securities pursuant to this Agreement.
6. Blue Sky Laws. AUGI shall promptly, at AUGI's expense, use its
reasonable efforts to register or qualify the Registrable Securities covered by
any Registration Statement filed pursuant to this Agreement under such state
securities or blue sky laws of such jurisdictions
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<PAGE>
as such Stockholder participating in such registration may reasonably request,
except that AUGI shall not for any purpose be required to execute a general
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified.
7. Miscellaneous.
(a) AUGI shall notify the Stockholders, promptly after it shall
receive notice thereof, of the date and time when the Registration Statement and
each post-effective amendment thereto has become effective or a supplement to
any prospectus forming a part of the Registration Statement has been filed.
(b) AUGI shall advise the Stockholders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceeding for the purpose and promptly use its
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued. AUGI's obligations to cause said
Registration Statements to become effective, and to otherwise comply with the
terms and conditions of this Agreement, shall be limited to performance on a
"best efforts" basis. The Stockholders, in turn, shall be obligated to utilize
their best efforts to facilitate the completion and effectiveness of any
Registration Statement pursuant hereto including, without limitation, furnishing
customary information (for inclusion in any such Registration Statement and for
due diligence purposes in connection therewith), undertakings, and agreements
(including, without limitation, customary indemnifications of underwriters) in
connection therewith.
(c) AUGI agrees to bear (i) all SEC registration and filing fees,
(ii) printing and mailing expenses, fees and disbursements of counsel and
accountants for AUGI and the underwriters and all expenses and fees incident to
an application for listing the shares of AUGI Common Stock on The Nasdaq
National Market, (iii) NASD filing fees and expenses incurred by any person or
entity in connection therewith, and (iv) legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which such Registrable Securities are to be registered or
qualified.
(d) The Stockholders agree to bear all discounts, commissions and
fees of any such underwriters, brokers and dealers incurred with respect to the
distribution of such Registrable Securities, and the fees and disbursements of
counsel, if any, which may be selected by the Stockholders.
(e) AUGI hereby agrees to indemnify and hold harmless the
Stockholders from and against, and agrees to reimburse such Stockholder with
respect to, any and all claims, actions (actual or threatened), demands, losses,
damages, liabilities, costs and expenses to which such Stockholder may become
subject under the Securities Act or otherwise, insofar as such claims, actions,
demands, losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any prospectus contained therein, or any amendment
or supplement thereto, or are caused by the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that AUGI shall not be
liable in any such case to the extent that any such claim, action, demand,
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<PAGE>
loss, damage, liability, cost or expense is caused by an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished in writing by such Stockholder for use in the
preparation thereof; provided further, however, that this indemnity is subject
to the condition that insofar as it relates to any untrue statement, alleged
untrue statement, omission or alleged omission made in a preliminary prospectus
but eliminated or remedied in the final prospectus, such indemnity shall not
inure to the benefit of any Stockholder if a copy of the final prospectus was
not furnished to the person asserting the claim, action, demand, loss, damage or
liability.
(f) The Stockholders hereby agrees to indemnify and hold harmless
AUGI, its officers, directors, legal counsel and accountant and each person or
entity who controls AUGI within the meaning of the Securities Act, from and
against, and agrees to reimburse AUGI, its officers, directors, legal counsel,
accountants and controlling persons or entities with respect to, any and all
claims, actions, demands, losses, damages, liabilities, costs or expenses to
which AUGI, its officers, directors, legal counsel, accountants or such
controlling persons or entities, may become subject under the Securities Act or
otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, any
prospectus contained or any amendment or supplement thereto, or are caused by
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
conformity with information furnished in writing by such Stockholder for use in
the preparation thereof.
(g) If any claim shall be asserted against any person or entity (an
"Indemnified Person") for which such person or entity intends to seek
indemnification pursuant to Section 7(e) or (f), as the case may be, such
Indemnified Person shall give prompt written notice to AUGI or the Stockholders,
as the case may be, of the nature of such claim, but the failure to give such
notice shall not relieve AUGI or the Stockholders, as the case may be, of their
obligations under this Section 7 unless it or they have been prejudiced
substantially thereby. AUGI or the Stockholders (whichever is not the
Indemnified Person in the particular instance) shall have the exclusive right to
conduct, at their expense, through counsel of its or their own choosing, which
counsel is approved by the Indemnified Person (which approval may not be
unreasonably withheld), the defense of any such claim, and may compromise or
settle such claims with the prior consent of AUGI or the Stockholders (which
consent shall not be unreasonably withheld).
(h) THIS AGREEMENT SHALL BE CONSTRUED (BOTH AS TO VALIDITY AND
PERFORMANCE) AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY
WITHIN SUCH JURISDICTION.
(i) In the event of any dispute concerning the interpretation or
application of this Agreement, the same shall be resolved by final and binding
arbitration in accordance with the procedures set forth in the BTS Merger
Agreement; provided, that in the event of any actual or threatened violation by
AUGI or the Stockholders or their respective covenants and
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<PAGE>
agreements contained herein, for which the other party or parties hereto shall
have no adequate remedy at law, the actual or alleged injured party or parties
shall have the right to apply to, and obtain from, any court of competent
jurisdiction such injunctive relief, specific performance or other equitable
remedy as such court may award in the circumstances.
IN WITNESS WHEREOF, this Agreement has been duly executed by or on
behalf of each party hereto on the date set forth above.
AMERICAN UNITED GLOBAL, INC.
By: [ILLEGIBLE]
-------------------------------------
Name:
Title:
The STOCKHOLDERS
/s/ Simantov Moskona
----------------------------------------
Simantov Moskona
/s/ Sergio Luciani
----------------------------------------
Sergio Luciani
/s/ Solon L. Kandel
----------------------------------------
Solon L. Kandel
-9-
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 11130 NE 33rd Place, Suite
250, Bellevue, Washington 98004; ARCADIA CONSULTING SERVICES, INC., a Delaware
corporation (the "Corporation"); and SOLON L. KANDEL (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
<PAGE>
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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<PAGE>
(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.
3
<PAGE>
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 S-1, S-3 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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<PAGE>
(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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<PAGE>
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
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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
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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.
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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.
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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.
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(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.
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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.
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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.
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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.
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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);
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(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,
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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).
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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.
30 Janet Lane
Springfield, New Jersey 07081
Attn: Solon L. Kandel, President
with a copy sent concurrently to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
50 Division Street
Somerville, New Jersey 08876
Attn: Steven Fuerst, Esq.
facsimile no. (908) 526-9173
(b) If to the Surviving Corporation, AUGI:
American United Global, Inc.
11130 NE 33rd Place, Suite 250
Bellevue, Washington 98004
Attention: Robert M. Rubin, President
with a copy sent concurrently to:
Greenberg Traurig Hoffman
Lipoff Rosen & Quentel
153 East 53rd Street
New York, New York 10022
Attention: Stephen Weiss, 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.
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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 Lowenstein Sandler, 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 Lowenstein
Sandler, 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-
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Disclosure Agreement shall be held in escrow by Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, 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.
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(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 Sergio Luciani ("Luciani") 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.
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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. Robert M. Rubin 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 Luciani shall be Vice President and Chief Financial Officer of
Mergerco. The Board of Directors of Mergerco shall initially consist of Robert
M. Rubin, Howard Katz, David M. Barnes, 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 Luciani 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, Luciani 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 Robert M. Rubin 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, Luciani 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
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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, Rosen & Quentel, counsel to
Mergerco and AUGI, located at 153 East 53rd Street - 35th floor, New York, New
York 10022, 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, Lowenstein Sandler, 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
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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
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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
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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.
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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
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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/ Robert M. Rubin, Pres.
------------------------------
Robert M. Rubin, President
ARCADIA CONSULTING SERVICES, INC.
By:/s/ Solon L. Kandel
------------------------------
Solon L. Kandel, President
THE STOCKHOLDER:
/s/ Solon L. Kandel
--------------------------------
SOLON L. KANDEL
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