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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): JULY 24, 1996 (JUNE 28, 1996)
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AMERICAN UNITED GLOBAL, INC.
DELAWARE 0-19404 95-4359228
- --------------- ---------------- -------------
(State or other (Commission File (IRS Employer
jurisdiction of No.) ID No.)
incorporation)
25 HIGHLAND BOULEVARD, DIX HILLS, NEW YORK 11746
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(Address of principal executive offices)
(516) 254-2134
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report)
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ITEM 5 - OTHER EVENTS.
PROPOSED ACQUISITION OF CONNECTSOFT, INC.
Under the terms of an Agreement and Plan of Merger, dated June 28, 1996
(the "Merger Agreement"), American United Global, Inc. (the "Company") has
agreed to acquire, through merger with C-Soft Acquisition Corp. (a wholly-owned
acquisition subsidiary of the Company), all of the outstanding capital stock of
ConnectSoft, Inc.("ConnectSoft"), a Washington corporation providing
communications software applications and services for persons seeking access to
and utilization of resources and information available on the Internet (the
"Merger"). Pursuant to the terms of the Merger Agreement, the ConnectSoft
shareholders shall receive, on a pro rata basis, an aggregate 1,000,000 shares
of the Company's Series B Preferred Stock. Such Series B Preferred Stock will
not pay a dividend, will not be subject to redemption, will have a liquidation
preference of $3.50 per share over the Company's Common Stock and will vote
together with the Company's Common Stock as a single class on a one share for
one vote basis. Each share of Series B Preferred Stock will be convertible into
shares of Company Common Stock at the holder's option into a minimum of
1,000,000 shares of Common Stock and a maximum of 3,000,000 shares of Common
Stock, based upon certain criteria, including (i) the combined Pre-Tax Income
(as defined), if any, which shall be earned by ConnectSoft and other direct and
indirect Company subsidiaries in any one or all of the three Company fiscal
years ending July 31, 1999, (ii) the sale of assets or securities of ConnectSoft
or other direct and indirect Company subsidiaries on or before December 31,
1999, and (iii) the consummation by the Company of an initial public offering of
the securities of ConnectSoft or other direct and indirect Company subsidiaries,
or the consummation by the Company of a Going Private Transaction (as defined)
on or before December 31, 1999.
The Surviving Corporation (as defined) will succeed to all of the business,
operations, properties and assets of ConnectSoft and will assume and become
responsible for all of ConnectSoft's liabilities and obligations. The corporate
headquarters for ConnectSoft will remain in Bellevue, Washington. The initial
directors serving ConnectSoft following consummation of the ConnectSoft Merger
will be Robert M. Rubin, Lawrence Kaplan, C. Dean McLain, Stephen A. Weiss and
Mitchell London. Messrs. Rubin, Kaplan and McLain are current members of the
Company's Board of Directors. Mr. Weiss is a shareholder of Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, outside general counsel to the Company. Mr.
Rubin will be Chairman and Chief Executive Officer of the Surviving Corporation.
Consummation of the transactions contemplated by the Merger Agreement is
conditioned upon satisfaction of certain conditions, including (i) approval of
the ConnectSoft Merger by stockholders of ConnectSoft under applicable
provisions of Washington law, (ii) absence of written objection to the Merger
Agreement and the ConnectSoft Merger, including timely election to exercise
dissenters' appraisal rights under Washington law by the holders of not more
than five percent (5%) of the holders of the outstanding capital stock of
ConnectSoft entitled to vote, (iii) execution and delivery of certain Exhibits
to the Merger Agreement and other agreements identified in the Merger Agreement,
and (iv) obtaining necessary consents of parties
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to ConnectSoft's material contracts and of applicable governmental authorities.
Since the execution of a letter of intent dated April 29, 1996, the Company
has provided interim financing to ConnectSoft by providing a $2.4 Million line
of credit (the "Line of Credit"). Outstanding balances under this Line of Credit
are convertible into a majority of the outstanding shares of capital stock of
ConnectSoft in the event that the Merger Agreement shall be terminated FOR ANY
REASON, other than a material breach by the Company of its representations and
warranties contained in such agreement or its failure to pay the Merger
Consideration (as defined). In such event, all pre-Merger advances made by the
Company (inclusive of all amounts in excess of $1,000,000 in the aggregate), and
including all interest accrued thereon, shall be convertible into shares of
ConnectSoft Common Stock at a conversion price of $.05 per share. As a result,
on this basis the currently outstanding advances would be converted into
28,000,000 shares of ConnectSoft Common Stock, which would provide the Company
with voting control of ConnectSoft (the "Company Conversion Shares").
Notwithstanding the above, if for any reason, OTHER than: (i) a material
breach by ConnectSoft or any of the Principal Stockholders (as defined) of their
respective representations, warranties or covenants contained in the Merger
Agreement; or (ii) the failure of ConnectSoft shareholders to approve the Merger
in accordance with the provisions of the Merger Agreement and applicable
Washington Law, the Company shall FAIL or refuse to consummate the ConnectSoft
Merger on the terms and conditions set forth in the Merger Agreement,
ConnectSoft or any third party shall have the right at any time on or before
September 30, 1996 to repurchase all, and not less than all, of the ConnectSoft
Conversion Shares from the Company, for a purchase price, payable in immediately
available funds, equal to (A) $.05 per share, plus (B) accrued interest, at the
rate of 10% per annum, on all amounts previously paid or advanced in respect of
the pre-Merger advances, calculated from the date of each such advance to the
date of repurchase of the Company Conversion Shares.
Upon consummation of the Merger, the Company has agreed to increase the
maximum availability under the Line of Credit to ConnectSoft to a maximum of
$5,000,000.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
None.
(b) PRO FORMA FINANCIAL STATEMENTS
None.
(c) EXHIBITS
2.1 Agreement and Plan of Merger, dated June 28, 1996.
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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: July 22, 1996 By:/S/DAVID M. BARNES
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David M. Barnes, Vice President
and Chief Financial Officer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 28th day
of June 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; C-SOFT ACQUISITION CORP., a Washington corporation ("Mergerco"),
having its principal offices at 25 Highland Boulevard, Dix Hills, New York
17746; CONNECTSOFT, INC., a Washington corporation (the "Company"), having its
principal offices at 11130 NE 33rd Place, Suite 250, Bellevue, Washington 98004-
1488; and MITCHELL LONDON ("London"), UNITED PARCEL SERVICE OF AMERICA, INC.
("UPS") and SPACELABS MEDICAL, INC. ("SpaceLabs"). London, UPS and SpaceLabs
are hereinafter individually referred to as a "Principal Stockholder" and
collectively as the "Principal Stockholders".
W I T N E S S E T H:
WHEREAS, London is the record and beneficial owner of approximately 22.7%
of the issued and outstanding shares of the common stock of the Company, on a
fully-diluted basis, after giving effect to: (a) the exercise of all outstanding
options and warrants to purchase common stock of the Company, (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 common stock of the Company, and (c) the exercise of all other rights
and privileges to receive or acquire shares of Common Stock of the Company
(collectively, the "Fully Diluted Equity"); and
WHEREAS, UPS is the holder of shares of Series C Convertible Preferred
Stock of the Company and warrants to purchase common stock of the Company,
entitling UPS to acquire in the aggregate approximately 15.2% of the Fully
Diluted Equity of the Company;
WHEREAS, SpaceLabs is the holder of shares of Series A Convertible
Preferred Stock, and options to purchase shares of Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock of the Company,
entitling SpaceLabs to acquire in the aggregate approximately 22.8% of the Fully
Diluted Equity of the Company;
WHEREAS, Mergerco is a direct wholly-owned subsidiary of AUGI, which has
been formed for the purpose of merging with and into the Company, and thereby
enabling AUGI to acquire all of the shares of capital stock of the Company as
shall represent the Fully Diluted Equity of the Company as at the effective date
of the Merger (hereinafter, referred to as the "Stock") pursuant to the Merger
hereinafter provided for; and
WHEREAS, the Principal Stockholders, the Board of Directors of the Company,
the Board of Directors and 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
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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. 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 Washington Business
Corporation Act ("Washington Law"), Mergerco shall be merged with and into the
Company (the "Merger") 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 "Articles of Merger"), with the Company as the surviving
corporation of such Merger (the Company being hereinafter sometimes referred to
as the "Surviving Corporation"). Thereupon, the separate existence of Mergerco
shall cease, and the Company, as the Surviving Corporation, shall continue its
corporate existence under Washington Law under its current name, ConnectSoft,
Inc.
1.2 EFFECTIVENESS OF THE MERGER. As soon as practicable upon or
after the satisfaction or waiver of the conditions precedent set forth in
Sections 8 and 9 below, Mergerco and the Company will execute the Articles of
Merger (subject to such revisions as to form (but not substance) as may be
required by the relevant provisions of Washington Law), and shall file or cause
to be filed such Articles of Merger with the Secretary of State of Washington;
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 Company (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 Washington 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 Washington Law
without further act or deed.
1.4 SURVIVING CORPORATION. Upon the effectiveness of the Merger, the
Articles 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.
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1.5 STATUS AND CONVERSION OF SECURITIES. At the Closing Date and
upon the effectiveness of the Merger:
(a) MERGERCO STOCK. Each share of capital stock of Mergerco
outstanding immediately prior to the effectiveness of the Merger shall be
converted into and shall become one (1) share of common stock of the Surviving
Corporation; and
(b) SPACELABS FULLY DILUTED EQUITY. In addition to any shares
of Company common stock then owned by SpaceLabs, each outstanding share of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock of the Company (collectively, the
"Preferred Stock") and each option to purchase shares of Preferred Stock or
common stock of the Company which are owned or held by SpaceLabs (collectively,
the "SpaceLabs Securities") shall be deemed to have been converted or exercised
for $.01 per share immediately prior to the Closing Date of the Merger, into the
maximum number of shares of Fully Diluted Equity of the Company into which such
shares of SpaceLabs Securities are currently convertible or exercisable,
representing an aggregate of 2,976,866 shares of Company Fully Diluted Equity.
(c) UPS FULLY DILUTED EQUITY. In addition to any shares of
Company common stock then owned by UPS, each outstanding share of Preferred
Stock and all options or warrants to purchase shares of common stock of the
Company which are owned or held by UPS (collectively, the "UPS Securities")
shall be deemed to have been converted or exercised for $.01 per share
immediately prior to the Closing Date of the Merger, into the maximum number of
shares of Fully Diluted Equity of the Company into which such shares of UPS
Securities are currently convertible or exercisable, representing an aggregate
of 1,982,632 shares of Company Fully Diluted Equity.
(e) OPTIONS AND WARRANTS. Each outstanding warrant to purchase
shares of common stock of the Company owned by any person, firm or corporation
other than the Principal Stockholders, and each outstanding nonqualified and
incentive stock option of the Company which shall have vested as at the Closing
Date of the Merger (collectively, the "Vested Stock Options") shall, unless
earlier surrendered, be exchanged on the effective date of the Merger into the
maximum number of shares of Fully Diluted Equity of the Company represented by
the shares of Company common stock which would have been issuable upon exercise
of such warrants or Vested Stock Options, estimated at an aggregate of 2,320,459
shares of Company Fully Diluted Equity.
(f) TREATMENT OF FULLY DILUTED EQUITY. Each share of the Stock
of the Company outstanding immediately prior to the effectiveness of the Merger,
representing: (i) the Fully Diluted Equity of the Company, after giving effect
to the conversions and exercises of SpaceLabs Securities, UPS Securities, other
warrants and Vested Stock Options described in Sections 1.5(c), (d) and (e)
above; and (ii) all other securities of the Company 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
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Consideration payable pursuant to Section 2 below. Such Merger Consideration
shall be paid and delivered to the holders of the outstanding Stock upon:
(A) 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,
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;
and
(B) delivery to the Surviving Corporation and AUGI by the subject
holder of Stock of an appropriate letter confirming (x) such
holder's ownership of his or her Stock free and clear as
aforesaid (which representation and warranty shall survive the
Closing), (y) such information regarding such holder and his
background and financial status as may reasonably be requested by
AUGI, and (z) such holder's investment intent with respect to the
AUGI Securities being received by such holder pursuant to Section
2 below.
1.6 BOOKS AND RECORDS. On the Closing Date, the Company shall
deliver to AUGI all of the stock books, records and minute books of the Company,
all financial and accounting books and records of the Company, and all referral,
client, customer and sales records of the Company.
2. MERGER CONSIDERATION.
2.1 MERGER CONSIDERATION. On consummation of the Merger, the
record owners of all outstanding Fully Diluted Equity of the Company shall
receive an aggregate of One Million (1,000,000) shares of Series B Convertible
Preferred Stock of AUGI (the "AUGI Preferred Stock"). The AUGI Preferred Stock
is hereinafter sometimes referred to as the "Merger Consideration."
2.2 AUGI PREFERRED STOCK. The AUGI Preferred Stock: (a) shall have
a par value of $.01 per share; (b) shall not pay a dividend; (c) shall not be
subject to redemption by AUGI; (d) shall have a liquidation preference over the
AUGI Common Stock (as defined below) of $3.50 per share; (e) shall vote,
together with the AUGI Common Stock as a single class; provided, that until
December 31, 1999 or sooner if converted into AUGI Common Stock, the AUGI
Preferred Stock shall be voted by Robert M. Rubin or his designee; and (f) shall
be convertible into AUGI Common Stock, as set forth below. A copy of the
Certificate of Rights and Designations of the AUGI Preferred Stock is annexed
hereto as EXHIBIT B and made a part
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hereof.
2.3 CONVERSION OF AUGI PREFERRED STOCK. The AUGI Preferred Stock
may be converted into voting shares of AUGI Common Stock, $.01 par value per
share (the "AUGI Common Stock"), AT ANY TIME, at the option of the holder of the
AUGI Preferred Stock. Each share of AUGI Preferred Stock shall be convertible
into that number of shares of AUGI Common Stock, based upon the factors and
circumstances as are set forth below in this Section 2.3:
(a) MINIMUM NUMBER OF SHARES OF AUGI COMMON STOCK. Each full
share of AUGI Preferred Stock may be converted by the holder, at any time or
from time to time, irrespective of the application of any other provisions of
this Section 2.3, into one (1) full share of AUGI Common Stock (a minimum of
1,000,000 shares of AUGI Common Stock if all such shares of AUGI Preferred Stock
are so converted).
(b) COMBINED PRE-TAX INCOME. In the event that the "Combined
Pre-Tax Income" (as hereinafter defined) of any or all of the "Subject Entities"
(as hereinafter defined) in ANY ONE of the three fiscal years commencing August
1, 1996 and ending July 31, 1997, commencing August 1, 1997 and ending July 31,
1998, or commencing August 1, 1998 and ending July 31, 1999 (each a "Measuring
Fiscal Year" and collectively, the "Measuring Fiscal Years"):
(i) shall equal or exceed Three Million ($3,000,000)
Dollars, each share of AUGI Preferred Stock may be converted
by the holder into two (2) shares of AUGI Common Stock (a
maximum of 2,000,000 shares of AUGI Common Stock if all such
shares of AUGI Preferred Stock are so converted); or
(ii) shall equal or exceed Five Million ($5,000,000)
Dollars, each share of AUGI Preferred Stock may be converted
by the holder into three (3) shares of AUGI Common Stock (a
maximum of 3,000,000 shares of AUGI Common Stock if all such
shares of AUGI Preferred Stock are so converted).
As used herein, the term "Subject Entities" shall mean and include:
(i) the Surviving Corporation, (ii) any consolidated subsidiaries of the
Surviving Corporation hereafter formed or acquired, (iii) eXodus Technologies,
Inc., an Affiliate of the Surviving Corporation to be formed by AUGI as a direct
majority-owned subsidiary of AUGI ("eXodus"), and (iv) any consolidated
subsidiaries of eXodus or AUGI hereafter formed or acquired to conduct the
business operations currently engaged in by ConnectSoft or any derivatives
thereof. Notwithstanding the foregoing, the term Subject Entities shall not be
deemed to include any other independently owned corporations or businesses which
may be acquired by AUGI or any direct or indirect subsidiary of AUGI, unless
assets or operating revenue of any of the Subject Entities are transferred
thereto.
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As used herein, the term "Combined Pre-Tax Income" shall mean the
consolidated income of the Subject Entities after deduction of all expenses paid
or accrued and required to be deducted from such income in accordance with
generally accepted accounting principles then in effect, but BEFORE deduction or
application of (A) all federal, state and local taxes on such income; and (B)
all interest on indebtedness for money borrowed from AUGI or its subsidiaries
OTHER than the Subject Entities; PROVIDED, that there shall be deducted from
such income, all interest paid or accrued on indebtedness incurred by AUGI, to
the extent that any proceeds of such indebtedness were used to provide financing
to any of the Subject Entities.
Promptly following the filing of its Form 10-K for each of the three
(3) fiscal years comprising the Measuring Fiscal Years, AUGI shall provide each
of the Principal Stockholders with annual audited financial statements of the
Subject Entities reflecting the Combined Pre-Tax Income.
(c) SALE OF THE COMPANY OR EXODUS. In the event that AUGI
shall at any time on or before December 31, 1999 sell assets or securities of
the Company, eXodus or any of the other Subject Entities for consideration
aggregating Five Million ($5,000,000) Dollars or more, each share of AUGI
Preferred Stock shall be immediately convertible by the holder into three (3)
shares of AUGI Common Stock (a maximum of 3,000,000 shares of AUGI Common Stock
if all such shares of AUGI Preferred Stock are so converted), irrespective of
the Combined Pre-Tax Income.
(d) INITIAL PUBLIC OFFERING; GOING PRIVATE TRANSACTION. In
the event that AUGI shall at any time on or before December 31, 1999, either:
(i) consummate an initial public offering of the securities of any of the
Subject Entities (an "IPO"), pursuant to which EITHER: (A) the issuer of
securities in such IPO shall receive gross proceeds from such IPO of
$10,000,000 or more, or (B) the market valuation of 100% of the Common
Stock of the issuer of such securities at any time following such IPO
(based upon the average of the closing prices of the common stock of such
issuer as traded on The NASDAQ Stock Market or any other national
securities exchange for any twenty (20) consecutive trading days) shall
equal or exceed $50,000,000; OR
(ii) enter into any transaction with any third party (whether tender offer,
merger, consolidation or other combination) as a result of which it is
contemplated that no shares of Common Stock of AUGI or its successor-in-
interest will be publicly traded on The NASDAQ Stock Market or any other
national securities exchange upon consummation of such transaction (a
"Going Private Transaction"),
then, and in either event, each share of AUGI Preferred Stock shall be
immediately convertible by the holder into three (3) shares of AUGI Common Stock
(a maximum of 3,000,000 shares of AUGI Common Stock if all such shares of AUGI
Preferred Stock are so converted), irrespective of the Combined Pre-Tax Income.
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2.4 REDUCTION OF MERGER CONSIDERATION UPON FORMATION OF EXODUS
TECHNOLOGIES, INC.
(a) Effective upon consummation of the Merger or immediately
thereafter, AUGI shall cause the Surviving Corporation of the Merger to
distribute to eXodus the assets, properties and liabilities of the X-Connection
division of the Surviving Corporation. The capital stock of eXodus shall be
owned 75% by AUGI and 25% by certain key employees of the Company, including
Ajoy Banerjee, Scott Barton and the other persons who are listed on SCHEDULE 2.4
annexed hereto (collectively, the "eXodus Minority Stockholders").
(b) The eXodus Minority Stockholders (but no other shareholders
of the Company) by their execution of this Merger Agreement, hereby waive any
and all right, title and interest in and to the Merger Consideration.
Accordingly, at the Closing Date of the Merger, the aggregate number of shares
of AUGI Preferred Stock issuable by AUGI as Merger Consideration hereunder shall
be REDUCED by that number of shares of AUGI Preferred Stock (including any
shares of AUGI Common Stock into which such AUGI Preferred Stock may be
converted) which shall be equal to the number of shares of such securities which
the eXodus Minority Stockholders would have otherwise received in the Merger in
their capacities as holders of Fully Diluted Equity of the Company.
2.5 SPECIAL AUGI COMMON STOCK ISSUANCE. The provisions of this
Section 2.5 shall NOT apply to eXodus or any eXodus Minority Stockholders, who
shall own their equity directly in the eXodus subsidiary of AUGI. Subject to
the foregoing, in addition to, and not in lieu of the conversion rights
attributable to the AUGI Preferred Stock described in Section 2.3 hereof, if at
any time on or prior to the expiration of the Measuring Fiscal Years, any ONE or
more of Subject Entities shall achieve ON ITS OWN aggregate Pre-Tax Income of at
least $3,000,000, BUT the Company and eXodus and all Subject Entities, as a
combined whole, shall fail, for any reason, to achieve a sufficient Combined
Pre-Tax Income to increase the number of shares of AUGI Common Stock into which
the AUGI Preferred Stock is convertible to the maximum of 3,000,000 shares of
AUGI Common Stock, AUGI shall, on or before December 31, 1999, issue directly to
the officers and key employees of ONLY the Subject Entity which shall have
achieved Pre-Tax Income of $3,000,000 or more, an aggregate of 500,000 shares of
AUGI Common Stock.
3. REGISTRATION RIGHTS.
3.1 UPS AND SPACELABS. If at least 50% of the shares of AUGI
Preferred Stock owed by each of UPS and/or SpaceLabs shall have been converted
into AUGI Common Stock as provided in Section 2.3 hereof, AUGI agrees, at any
time on or after July 31, 1998 to provide either UPS or SpaceLabs, or both of
them, with certain piggyback registration rights on their shares of AUGI Common
Stock on each occasion that AUGI registers securities under the Securities Act
of 1933, as amended (the "Securities Act").
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3.2 OTHER STOCKHOLDERS. To the extent that any other Company
stockholder shall have converted at least 50% of his or her shares of AUGI
Preferred Stock into shares of AUGI Common Stock, AND such shares of AUGI Common
Stock shall not then be salable under Rule 144, at any time after July 31, 1998,
AUGI shall provide piggyback registration rights to such other Company
stockholder.
3.3 Annexed hereto as EXHIBIT C and made a part hereof, is a true
copy of the form of registration rights agreement to be executed by AUGI, UPS,
SpaceLabs and the other Principal Stockholders at the Closing Date of the
Merger.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS.
The Company and the Principal Stockholders hereby represent and
warrant to Mergerco and AUGI as follows; PROVIDED, that AUGI and Mergerco
acknowledge that: (i) the representations and warranties of the Company and
London are joint and several; (ii) the representations and warranties of the
Principal Stockholders, other than London, are limited to those specific
representations and warranties set forth in Section 4.1(a) and Section 4.2(b)
below; (iii) except for representations and warranties made by London, the
Company will not be liable for the representations of the other Principal
Stockholders; and (iv) the representations and warranties of the Principal
Stockholders, other than London, are made severally and not jointly and
severally with all other Principal Stockholders:
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 Principal Stockholders, are as set forth on
SCHEDULE 4.1 annexed hereto. Each Principal Stockholder is the legal and
beneficial owner of his or its shares of the 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.
(b) SCHEDULE 4.1 accurately sets forth the number of shares of
Stock owned of record and beneficially by each Principal Stockholders, 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 of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby by the Company have been duly and validly authorized by the Board of
Directors of the Company and the Principal Stockholders. The Company has the
full legal right, power and authority to execute and deliver this Agreement and,
upon obtaining necessary shareholder approval, will have the
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full power and authority to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company and
the Principal Stockholders in accordance with its terms, except to the extent
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and except that the remedy of specific performance
or similar equitable relief is available only at the discretion of the court
before which enforcement is sought.
(b) Each Principal Stockholder has full legal right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and, when executed and
delivered by such Principal Stockholder, the Registration Rights Agreement, the
Non-Competition Agreement and the Proxy (as such terms are hereinafter defined),
constitutes and will constitute the legal, valid and binding obligations of such
Principal Stockholder, enforceable against such Principal 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 that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court before which
enforcement is sought.
4.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION.
(a) The Company: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington;
(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 Company or its business
or financial condition.
(b) The Company has no subsidiary corporations.
(c) True and complete copies of the Articles of Incorporation
and By-Laws of the Company (including all amendments thereto), and a correct and
complete list of the officers and directors of the Company, are annexed hereto
as SCHEDULE 4.3.
4.4 CAPITAL STRUCTURE; STOCK OWNERSHIP.
(a) The authorized and outstanding shares of capital stock of
the Company, and the record owners of such shares of capital stock, including
thereon all shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, and all outstanding options, warrants and other
securities convertible, exchangeable or exercisable for shares of common stock
of the Company 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 Company are
issued or outstanding.
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(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 Company), there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or calls, demands or commitments: (i) obligating the Company to
issue, transfer or purchase any shares of its capital stock, or (ii) obligating
the Principal Stockholders or, to the best of the knowledge of the Company and
London, any other stockholder of the Company 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 Company), no shares of capital
stock of the Company are reserved for issuance pursuant to stock options,
warrants, agreements or other rights to purchase capital stock.
4.5 INVESTMENTS. Except as set forth on SCHEDULE 4.5, the Company
does not own, directly or indirectly, any stock or other equity securities of
any corporation or entity, or have any direct or indirect equity or ownership
interest in any person, firm, partnership, corporation, venture or business
other than the business conducted by the Company.
4.6 FINANCIAL INFORMATION.
(a) The Company has furnished to AUGI the audited financial
statements of the Company as at December 31, 1993 and December 31, 1994 and for
the fiscal periods then ended, including balance sheets, statements of
operations, statements of stockholders' equity, and statements of cash flow, as
reported on by Coopers & Lybrand (the "Audited Financial Statements"). The
Company has also furnished to AUGI the unaudited financial statements of the
Company as at December 31, 1995 and as at March 31, 1996, consisting of balance
sheets at December 31, 1995 and March 31, 1996 and statements of operations for
the year ended December 31, 1995 and the three months ended March 31, 1996 (the
"Unaudited Financial Statements"). Such Audited Financial Statements and
Unaudited Financial Statements are herein collectively referred to as the
"Financial Statements".
(b) Except as provided in SCHEDULE 4.6(B), the Financial
Statements: (i) are complete and correct in all material respects and present
fairly the financial position of the Company as of the dates thereof and for the
periods reflected therein, and (except as indicated in the financial statements
or notes thereto) all in conformity with 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 Company and provide 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 Company, and do not include or reflect any
assets, liabilities or transactions of any corporation or entity except the
Company; and (iv) were prepared from the books and records of the Company which
accurately and consistently reflect all transactions to which the Company and
Subsidiary were and are a party; PROVIDED, that the Unaudited Financial
Statements omit footnote disclosures required under
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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 Company's business since December 31, 1995, to the best knowledge of the
Company there are, as at the date hereof, no liabilities or obligations
(including, without limitation, any tax liabilities or accruals) of the Company
or Subsidiary, including any contingent liabilities, that are, in the aggregate,
material.
(d) The Company has furnished to AUGI: (i) an aging schedule of
accounts receivable and accounts payable of the Company as at March 31, 1996;
(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 Company and Subsidiary as of March 31, 1996; (iii) a list of any
leasehold or other contractual obligations of the Company to the Principal
Stockholders, any other stockholder of the Company, and/or any of their
respective Affiliates on the date hereof; (iv) a list of all obligations of the
Company guaranteed by the Principal Stockholders, any other stockholder of the
Company 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 Company on the date hereof by the Principal
Stockholders, any other stockholder of the Company, and/or any of their
respective Affiliates; and (vi) a list reflecting the nature and amount of all
obligations owed by the Company on the date hereof to the Principal
Stockholders, any other stockholder of the Company, and/or any of their
respective Affiliates. Wherever used in this Agreement, the term "Affiliate"
means, as respects any person or entity, any other 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 CERTAIN ADVERSE CHANGES. The parties hereto acknowledge that,
since March 31, 1996, there has been material and adverse changes in the
financial condition, operations or business of the Company from that shown in
the Financial Statements. 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 Mergerco), since March 31, 1996, the business of the Company
has continued to be operated only in the ordinary course, and there has not
been:
(a) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, financial condition or prospects of the Company; or
(b) 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 Company 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 Company by any of its stockholders or
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any of their respective Affiliates, or any direct or indirect redemption,
purchase or other acquisition by the Company of any capital stock of the
Company.
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 and on the Closing Date, all federal,
state and local tax returns and tax reports required to be filed by the Company
on or before the date of this Agreement or the Closing Date, as the case may be,
have been and will have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed; (ii) all 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 Company as of the date hereof and as of the Closing Date have
been and will have been fully paid, and appropriate accruals shall have been
made on the Company's books for taxes not yet due and payable; (iii) as of the
Closing Date, all taxes and other assessments and levies which the Company is
required by law to withhold or to collect on or before the Closing Date will
have been duly withheld and collected, and will have been paid over to the
proper governmental authorities to the extent due and payable on or before the
Closing Date; and (iv) there are no outstanding or pending claims, deficiencies
or assessments for taxes, interest or penalties with respect to any taxable
period of the Company. At and after the Closing Date, the Company will have no
liability for any 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.
(b) There are no audits pending with respect to any federal,
state or local tax returns of the Company, and no waivers of statutes of
limitations have been given or requested with respect to any tax years or tax
filings of the Company.
4.9 PERSONAL PROPERTY; LIENS. Except as provided in SCHEDULE 4.9
anenxed hereto, the Company has and owns good and marketable title to all of its
tangible personal property, including therein all software, software
developments and related technology, free and clear of all liens, pledges,
claims, security interests and encumbrances whatsoever, except for: (a) liens
securing the Company's indebtedness for money borrowed 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 personal property, as indicated on SCHEDULE
4.9; (c) liens for current taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings; and (d) liens, pledges,
claims, security interests, encumbrances, mortgages, conditions or restrictions
which are not, individually or in the aggregate, material in character or amount
and do not interfere with the use made or presently proposed to be made of any
such property (collectively, "Permitted Liens"). All material items of
machinery, equipment, vehicles and other personal property owned or leased by
the Company are listed in SCHEDULE 4.9 annexed hereto, and, except as and to the
extent disclosed in SCHEDULE 4.9, all of such personal property are in good
operating
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condition and repair (reasonable wear and tear excepted) and are adequate for
their use in the Company's business as presently conducted.
4.10 REAL PROPERTY.
(a) The Company neither owns nor has any interest of any kind
(whether ownership, lease or otherwise) in any real property except to the
extent of the Company's leasehold interests under the leases for its business
premises, true and complete copies of which leases (including all amendments
thereto) are annexed hereto as SCHEDULE 4.10 (the "Leases").
(b) The Company (and, to the best of the knowledge of London and
the Company, the landlords thereunder) is presently in compliance with all of
its 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 Company's business as presently conducted.
4.11 ACCOUNTS RECEIVABLE. All accounts receivable shown on the
balance sheet as of March 31, 1996 included in the Financial Statements (the
"Balance Sheet"), and all accounts receivable thereafter created or acquired by
the Company prior to the Closing Date, (a) have arisen or will arise in the
ordinary course of the Company's business, (b) 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 March 31, 1996 reflected in
the Balance Sheet, and (c) have been, are and will be valid and collectible in
the ordinary course of business within six (6) months after the Closing Date
(subject to the aforesaid allowance for doubtful accounts), without necessity of
instituting any legal proceedings for collection.
4.12 INVENTORIES. Except as set forth on SCHEDULE 4.12, all supplies
and other inventories shown on the Balance Sheet, and all inventories thereafter
acquired by the Company 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
Company's business.
4.13 INSURANCE POLICIES. SCHEDULE 4.13 annexed hereto contains a
true and correct schedule of all insurance coverages held by the Company
concerning its business and properties (including but not limited to
professional liability insurance).
4.14 PERMITS AND LICENSES. The Company possesses all permits,
licenses and/or franchises, from whatever governmental authorities or agencies
(domestic and/or foreign) requiring the same and having jurisdiction over the
Company, which are necessary in order to operate its business in the manner
presently conducted, all of which permits, licenses and/or franchises are valid,
current and in full force and effect; and none of such permits, licenses or
franchises will be voided, revoked or terminated, or voidable, revocable or
terminable, upon and by reason of the Merger and the change of ownership of the
Company pursuant to this Agreement.
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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 Company is a
party (collectively, "Material Contracts"), except that SCHEDULE 4.15 need not
list any such agreement that is listed on any other Schedule hereto, or was
entered into in the ordinary course of the business of the Company and that, in
any case: (i) is for the purchase of supplies or other inventory items in the
ordinary course of business; (ii) is related to the purchase or lease of any
capital asset involving aggregate payments of less than $5,000 per annum; or
(iii) may be terminated without penalty, premium or liability by the Company on
not more than thirty (30) days' prior written notice; PROVIDED, HOWEVER, that
SCHEDULE 4.15 shall list all technology agreements, software development
agreements and software licenses involving the Company or any Affiliate,
regardless of the duration thereof or the amount of payments called for or
required thereunder.
(b) Except as set forth in SCHEDULE 4.15: (i) all Material
Contracts are listed on SCHEDULE 4.15 and all such Material Contracts are in
full force and effect; (ii) the Company is in compliance in all material
respects with all of its obligations under the Material Contracts, and has not
received any written notice that any Material Contract is in material breach or
default or is now subject to any condition or event which has occurred and
which, after notice or lapse of time or both, would constitute a material
default by any party under any such contract, lease, agreement or commitment;
and (iii) none of the Material Contracts will be voided, revoked or terminated,
or voidable, revocable or terminable, upon and by reason of the Merger and the
change of ownership of the Company pursuant to this Agreement.
(c) No purchase commitment by the Company is in excess of the
normal, ordinary and usual requirements of the business of the Company.
(d) Except as set forth in SCHEDULE 4.15, the Company does not
have any outstanding contracts with or commitments to officers, employees,
technicians, agents, consultants or advisors that are not cancelable by the
Company without penalty, premium or liability (for severance or otherwise) on
less than thirty (30) days' prior written notice.
(e) There is no outstanding power of attorney granted by the
Company to any person, firm or corporation for any purpose whatsoever.
4.16 CUSTOMERS AND SUPPLIERS. Neither the Principal Stockholders
nor, to the best of the knowledge of the Company and London, the Company, has
received any written notice of any existing, announced or anticipated changes in
the policies of any material clients, customers or suppliers of the Company
which will materially adversely affect the business presently being conducted by
the Company.
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4.17 LABOR, BENEFIT AND EMPLOYMENT AGREEMENTS.
(a) Except as set forth in SCHEDULE 4.17 annexed hereto, the
Company is not a party to (i) any collective bargaining agreement or other labor
agreement, or (ii) any agreement with respect to the employment or compensation
of any non-hourly and/or non-union employee(s). SCHEDULE 4.17 sets forth the
amount of all compensation or remuneration (including any discretionary bonuses)
paid or to be paid by the Company 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 Company and London, claims to be certified as a collective bargaining
agent to represent any employees of the Company, and there are no labor disputes
existing or, to the best of the knowledge of the Company or London, threatened,
involving strikes, slowdowns, work stoppages, job actions or lockouts of any
employees of the Company.
(c) Except as set forth on SCHEDULE 4.17, 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 Company. The Company 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.
(d) With respect to any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) to which the Company has at any time been required to make
contributions, the Company has not, at any time on or after April 29, 1980,
suffered or caused any "complete withdrawal" or "partial withdrawal" (as such
terms are respectively defined in Sections 4203 and 4205 of ERISA) therefrom on
its part.
(e) Except as disclosed on SCHEDULE 4.17, the Company does not
maintain, or have any liabilities or obligations of any kind with respect to,
any bonus, deferred compensation, pension, profit sharing, 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 Company 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
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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 Company 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 Principal Stockholders have 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 Company does not maintain any medical, health, life or other employee
benefit insurance programs 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 Company has no liability, fixed or contingent, for
health or medical benefits to any former employee.
4.18 NO BREACH OF STATUTE, DECREE OR OTHER INSTRUMENT.
(a) Except as set forth in SCHEDULE 4.18 annexed hereto:
(i) neither the execution and delivery of this Agreement by the Company and/or
the Principal Stockholders, nor the performance of or compliance with the terms
and provisions of this Agreement on the part of the Company and/or the Principal
Stockholders, will violate or conflict with any term of the Articles of
Incorporation or By-Laws of the Company or any statute, law, rule or regulation
of any governmental authority affecting the existing business of the Company, or
will at the Closing Date 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, decree, contract, lease, agreement, indenture or other
instrument to which the Company or the Principal Stockholders is a party or by
which the Company or the Principal Stockholders is bound; (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 Company or the
Principal Stockholders in connection with the consummation of the transactions
contemplated hereby; and (iii) the Company will not be required, whether by law,
regulation or administrative practice, to reapply for or refile to obtain any of
the licenses, permits or other authorizations presently held by the Company and
required for the operation of its business as conducted on the date hereof.
(b) In connection with and as respects the Merger, the Company
and each Principal Stockholder of the Company has waived any and all rights
which it, he or she 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 Principal Stockholder pursuant to the Merger.
4.19 COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 4.19, to the best of the
knowledge of the Company and London, the Company has not, at any time during the
three (3) year period
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prior to the date hereof, (i) handled, stored, generated, processed or disposed
of any hazardous substances in violation of any federal, state or local
environmental laws or regulations, (ii) otherwise committed any material
violation of any federal, state or local environmental laws or regulations
(including, without limitation, the provisions of the Environmental Protection
Act and other applicable environmental statutes and regulations) or any material
violation of the Occupational Safety and Health Act, or (iii) been in material
violation of any requirements of its insurance carriers from time to time.
(b) Except as set forth on SCHEDULE 4.19, neither the Company
nor any of its current officers has received any written notice of default or
violation, nor, to the best of the knowledge of the Company and London, is the
Company 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 Company's business, affairs, properties or assets. Neither the Company nor
any of its current officers has received written notice of, been charged with,
or 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 Company's
business, affairs, properties or assets, which violation would have a material
adverse effect on the Company, its business or any material portion of its
assets.
(c) SCHEDULE 4.19 sets forth the date(s) of the last known
audits or inspections (if any) of the Company conducted by or on behalf of the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other governmental and/or quasi-governmental agency
(federal, state and/or local).
4.20 LITIGATION. Except as disclosed in SCHEDULE 4.20 annexed
hereto, there is no suit, action, arbitration, or legal, administrative or other
proceeding, or governmental investigation (including, without limitation, any
claim alleging the invalidity, infringement or interference of any patent,
patent application, or rights thereunder owned or licensed by the Company)
pending, or to the best knowledge of the Company and London, threatened, by or
against the Company or any of its assets or properties. Except as disclosed in
SCHEDULE 4.20 annexed hereto, the Company and London is not aware of any state
of facts, events, conditions or occurrences which might properly constitute
grounds for or the basis of any meritorious suit, action, arbitration,
proceeding or investigation against or with respect to the Company.
4.21 PATENTS, LICENSES AND TRADEMARKS. 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, and trademark registrations and
applications, both domestic and foreign, which are presently owned, filed or
held by the Company 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
Company; (b) all licenses, both domestic and foreign, which are owned or
controlled by the Company and/or any of its directors, officers, stockholders or
employees and which in any way relate to or are used in the
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business of the Company; and (c) all franchises, licenses and/or similar
arrangements granted to the Company by others and/or to others by the Company.
None of the patents, patent applications, copyright registrations or
applications, registered trade names, trademark registrations or applications,
franchises, licenses or other arrangements set forth or required to be set forth
in SCHEDULE 4.21 is subject to any pending challenge known to the Company or
London.
4.22 TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE
4.22, no material asset employed in the business of the Company is owned by,
leased from or leased to any of the stockholders of the Company, 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
Company or any Affiliate of the Company.
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 Company, 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, as, to
the extent, and subject to the qualifications and limitations, set forth in such
corresponding Section(s).
4.25 DISCLOSURE TO STOCKHOLDERS. The Company has, or prior to the
Closing Date will have, provided to all holders of shares of capital stock of
the Company a full and fair description of all material terms and conditions of
the Merger and all other material transactions contemplated by this Agreement,
and have made available to all holders of Company capital stock (a) the reports
of AUGI described in Section 5.5 below, (b) true and complete copies of this
Agreement and all of the Exhibits hereto, and (c) a true and complete copy of
Section ___ of the Washington Law (relating to rights of dissenters in a Merger
under Washington Law); and each holder of capital stock has had a full and fair
opportunity to keep a copy of such reports and documents and review same to his
or her satisfaction.
4.26 DISCLOSURE AND DUTY OF INQUIRY. 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 Company and the Principal Stockholders in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND AUGI.
Mergerco and AUGI hereby jointly and severally represent and warrant
to the Company and the Principal Stockholders, as follows:
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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 Washington and Delaware, respectively, with all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby.
5.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby 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 legal right,
power and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder, and to consummate the transactions
contemplated hereby. No further corporate authorization is necessary on the
part of Mergerco or AUGI to consummate the transactions contemplated hereby.
5.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of Mergerco and AUGI, enforceable against
Mergerco and AUGI in accordance with its terms, and this Agreement and, when
executed and delivered by AUGI the Registration Rights Agreement, constitutes
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 their respective terms, except, in each
case, to the extent limited by bankruptcy, insolvency, reorganization and other
laws affecting creditors' rights generally, and except that the remedy of
specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
5.4 NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement by Mergerco or AUGI, nor compliance with the terms
and provisions of this Agreement on the part of Mergerco or AUGI, will:
(a) violate any statute or regulation of any governmental authority, domestic or
foreign, affecting Mergerco or AUGI; (b) require the issuance of any
authorization, license, consent or approval of any federal or state governmental
agency; 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.
CAPITALIZATION OF AUGI
AUGI is (i) authorized to issue 20,000,000 shares of Common
Stock, $.01 par value per share ("AUGI Common Stock"), 1,200,000 shares of
Series A preferred stock, $.01 par value per share ("Series A Preferred Stock")
and 1,500,000 shares of Series B Preferred Stock, $.01 par value per share
("Series B Preferred Stock"); (ii) 5,695,749 shares of AUGI Common Stock were
issued and outstanding at April 30, 1996: (iii) 750,000 shares of AUGI Common
Stock are reserved for issuance pursuant to AUGI's 1991 Employee Incentive
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Stock Option Plan, of which approximately 620,000 options are outstanding; (iv)
171,000 stock options were reserved for certain key employees under AUGI's Stock
Option Bonus Plan, of which 114,000 options are outstanding; (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 are outstanding; (vi) 2,000,000
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 1,050,000 shares of AUGI Common Stock have been granted; and
(vii) warrants to purchase an aggregate of 920,000 shares of AUGI Common Stock
at $7.50 per share are issued and outstanding. AUGI intends to amend its
Certificate of Incorporation to authorize an aggregate of 25 million shares of
Class A voting Common Stock, 25 million shares of Class B non-voting Common
Stock, 1.2 million shares of Series A Preferred Stock and 1.5 million shares of
Series B Preferred Stock. Except as described above, there are no outstanding
options, warrants, shares of capital stock or debentures, rights or
subscriptions which are exercisable or convertible into shares of Common Stock
of AUGI, or otherwise entitling the holders to purchase shares of AUGI Common
Stock.
AUGI PREFERRED STOCK AND AUGI COMMON STOCK. When issued and
delivered pursuant to Section 2.3 above all of the AUGI Preferred Stock and the
underlying maximum of 3,000,000 shares of AUGI Common Stock issuable upon
conversion of the AUGI Preferred Stock, shall have been duly authorized and
validly issued, and shall be fully paid and non-assessable, and except as
described on EXHIBIT B, shall be free of any pre-emptive rights or other
limitations.
5.7 INVESTMENT. AUGI will be acquiring ownership of the outstanding
capital stock of the Surviving Corporation for its own account, for investment
purposes only, and not with a view to the resale or distribution thereof.
5.8 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, and at the Closing Date will have no liabilities
(or obligations to assume any liabilities), except those acquired from the
Company.
5.9 DISCLOSURE AND DUTY OF INQUIRY. The Company and the Principal
Stockholders are 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 Mergerco and AUGI in this Agreement.
5.10 NO BREACH OF STATUTE, DECREE OR OTHER INSTRUMENT.
Neither the execution and delivery of this Agreement by AUGI or
Mergerco, nor the performance of or compliance with the terms and provisions of
this Agreement on the part of AUGI or Mergerco, will violate or conflict with
any term of the Articles of Incorporation or By-Laws of the AUGI or Mergerco or
any statute, law, rule or
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regulation of any governmental authority affecting the existing business of AUGI
or Mergerco, or will at the Closing Date 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, decree, contract, lease, agreement,
indenture or other instrument to which AUGI or Mergerco is a party or by which
AUGI or Mergerco is bound. 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 Mergerco in connection with the consummation of the
transactions contemplated hereby; and (iii) neither AUGI nor Mergerco will be
required, whether by law, regulation or administrative practice, to reapply for
or refile to obtain any of the licenses, permits or other authorizations
presently held by AUGI or Mergerco and required for the operation of its
business as conducted on the date hereof.
6. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Company covenants and agrees that, from the date hereof until the
Closing Date:
6.1 ACCESS TO INFORMATION. The Company shall permit AUGI and its
counsel, accountants and other representatives, upon reasonable advance notice
to the Company, during normal business hours and without undue disruption of the
business of the Company, to have reasonable access to all properties, books,
accounts, records, contracts, documents and information relating to the Company.
AUGI and its representatives shall also be permitted to freely consult with the
Company's counsel concerning the business of the Company.
6.2 MAINTENANCE OF INSURANCE. The Company shall continue to carry
its existing insurance, to the extent obtainable upon reasonable terms.
6.3 CORPORATE MATTERS. The Company shall not, without the prior
written consent of AUGI:
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of the Company's capital stock;
(c) except as contemplated pursuant to Section 2.3 above, issue
or create 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;
(d) amend, cancel or modify any existing Material Contract or
enter into any new agreement, commitment or transaction, whether or not
material;
(e) pay, grant or authorize any salary increases or bonuses or
enter into any employment, consulting or management agreements;
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(f) modify any agreement to which the Company is a party or by
which it may be bound, or modify any payment terms with any creditor;
(g) make any change in the Company's management personnel;
(h) except pursuant to commitments in effect on the date hereof
(to the extent disclosed in this Agreement or in any Schedule hereto), make 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;
(i) sell, assign or dispose of any capital asset(s) with a net
book value in excess of $5,000 as to any one item;
(j) change its method of collection of accounts or notes
receivable, accelerate or slow its payment of accounts payable, or prepay 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;
(k) declare, pay, set aside or make any dividend(s) or other
distribution(s) of cash or other property, or redeem any outstanding shares of
the Company's capital stock;
(l) incur any liability or indebtedness in excess of $5,000 as
to any one item or $25,000 in the aggregate;
(m) voluntarily subject any of the assets or properties of the
Company to any further liens or encumbrances;
(n) forgive any liability or indebtedness owed to the Company by
any of its stockholders or any of their respective Affiliates; or
(o) agree to do, or take any action in furtherance of, any of
the foregoing.
7. ADDITIONAL AGREEMENTS OF THE PARTIES.
7.1 CONFIDENTIALITY. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon Mergerco or AUGI under applicable state or federal
securities or antitrust laws, as to which the Company shall be given reasonable
advance notice, it is expressly understood and agreed by Mergerco and AUGI that
(i) this Agreement, the Schedules hereto, and the conversations, negotiations
and transactions relating hereto and/or contemplated hereby, and (ii) all
financial information, business records and other non-public information
concerning the Company which Mergerco, AUGI or their representatives has
received or may hereafter receive, shall be
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maintained in the strictest confidence by Mergerco, AUGI and their
representatives, and shall not be disclosed to any person that is not associated
or affiliated with Mergerco or AUGI and involved in the transactions
contemplated hereby or used for any purpose other than the transaction
contemplated hereby, without the prior written approval of the Company. The
parties hereto shall use their best efforts to avoid disclosure of any of the
foregoing or undue disruption of any of the business operations or personnel of
the Company. In the event that the transactions contemplated hereby shall not
be consummated for any reason, Mergerco and AUGI covenant and agree that neither
they nor their representatives shall retain any computer files and other
electronic media, documents, lists or other writings of the Company which they
may have received or obtained in connection herewith or any documents
incorporating any of the information contained in any of the same (all of which,
and all copies thereof in the possession or control of Mergerco, AUGI or their
representatives, shall be returned to the Company).
7.2 EXCLUSIVITY. From the date hereof through any termination of
this Agreement by the Company in accordance with Section 11 below, the Company
shall not (and shall not permit authorize or approve any of its stockholders,
officers or affiliates to) negotiate with or enter into any other commitments,
agreements or understandings with any person, firm or corporation (other than
AUGI and its Affiliates) in respect of any sale of capital stock or assets of
the Company, any merger, consolidation or corporate reorganization, or any other
such transaction relating to the Company or any portion of its business.
7.3 NON-COMPETITION AGREEMENT. On the Closing Date, the Surviving
Corporation, London, Katsuta and those other key employees of the Company who
are listed on SCHEDULE 7.3 annexed hereto and made a part hereof, shall execute
and deliver to AUGI a non-competition and non-disclosure agreement in
substantially the form of EXHIBIT D annexed hereto (the "Non-Competition
Agreement").
7.4 VOTES OF THE PRINCIPAL STOCKHOLDERS; PROXY. By their execution
and delivery of this Agreement, and subject only to receipt of the Merger
Consideration on the Closing Date, each of the Principal Stockholders does
hereby irrevocably and unconditionally covenant and agree to vote all of his,
her or its shares of capital stock of the Company IN FAVOR of the Merger and all
of the other transactions contemplated by this Agreement. In such connection,
each of the Principal Stockholders has executed and delivered to Robert M. Rubin
and Stephen A. Weiss, Esq., an irrevocable and unconditional proxy to vote such
shares of capital stock of the Company in the form of EXHIBIT E annexed hereto
and made a part hereof (the "Proxy").
7.5 ADDITIONAL AGREEMENTS AND INSTRUMENTS. On or before the Closing
Date, the Company, Mergerco and AUGI shall execute, deliver and file the
Certificate of Merger and all exhibits, agreements, certificates, instruments
and other documents, not inconsistent with the provisions of this Agreement,
which, in the opinion of counsel to the parties hereto, shall reasonably be
required to be executed, delivered and filed in order to consummate the Merger
and the other transactions contemplated by this Agreement.
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7.6 NON-INTERFERENCE. Neither Mergerco, AUGI, the Company nor the
Principal Stockholders shall cause to occur any act, event or condition which
would cause any of their respective representations and warranties made in this
Agreement to be or become untrue or incorrect in any material respect as of the
Closing Date, or would interfere with, frustrate or render unreasonably
expensive the satisfaction by the other party or parties of any of the
conditions precedent set forth in Sections 8 and 9 below.
7.7 CORPORATE STRUCTURE OF THE SURVIVING CORPORATION.
(a) THE SURVIVING CORPORATION AND SUBSIDIARIES. Upon completion
of the Merger, the Surviving Corporation shall change its name to "ConnectSoft
Holding Corp." ("CHC") which will become a holding company for two newly-formed
separate corporate subsidiaries to be organized under the laws of the State of
Washington: (i) ConnectSoft, Inc., organized to engage in the production and
sale at retail and at wholesale of E-Mail and Web site software ("E-Mail"); and
(ii) Northwest Central Network Center, Inc. ("CNOC"). E-Mail and CNOC are
collectively referred to as the "CHC Subsidiaries").
(b) OFFICERS AND DIRECTORS.
(i) THE SURVIVING CORPORATION. Robert M. Rubin shall be
Chairman and Chief Executive Officer of the Surviving Corporation. A full-time
President and Chief Operating Officer and a full time Chief Financial Officer of
the Surviving Corporation will be recruited by AUGI and shall be hired upon such
terms and conditions as shall be determined by AUGI and the Board of Directors
of the Surviving Corporation. On an interim basis, David M. Barnes will serve
as Chief Financial Officer of the Surviving Corporation. The Board of Directors
of the Surviving Corporation shall initially consist of Robert M. Rubin,
Lawrence Kaplan, C. Dean McLain, Stephen A. Weiss and Mitchell London. AUGI
shall, at all times, designate a majority of the Board of Directors of the
Company, but senior executive officers of the Surviving Corporation and the CHC
Subsidiaries shall at all times be two (2) of the members of such Board of
Directors, and each of UPS and SpaceLabs shall (at their option) be entitled to
designate a member of the Board of Directors of the Surviving Corporation.
(ii) EXODUS AND THE CHC SUBSIDIARIES. The President and
Chief Operating Officers of each of the CHC Subsidiaries shall be such person
as AUGI shall designate. The Officers of eXodus shall be such other persons as
AUGI and the eXodus Minority Stockholders shall determine. The Boards of
Directors of each of eXodus and the CHC Subsidiaries shall consist of either
five or seven persons, a majority of which shall be designated by AUGI and not
less than two of which shall be designated by management, including a
representative of one or more of the strategic partners of such subsidiary,
including without limitation Motorola, Inc., SpaceLabs, Prologue, SA or America
On-Line Corporation.
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7.8 EMPLOYEE INCENTIVE PROGRAMS.
(a) AUGI STOCK OPTIONS. AUGI's Board of Directors does hereby
authorize for issuance on the effectiveness of the Merger, stock options under
AUGI's 1996 Stock Option Plan to those key employees of the Company (excluding
eXodus) listed on SCHEDULE 7.8(A) annexed hereto, entitling such employees to
purchase up to 300,000 shares of AUGI Common Stock at an exercise price equal to
the closing price of AUGI's Common Stock, as traded on the NASDAQ National
Market ("Nasdaq") on the Closing Date of this Agreement. Twenty-Five (25%) of
such stock options shall vest on a cumulative basis in each consecutive twelve
month period following the Closing Date that such employee remains in the full
time employ of the Surviving Corporation or the CHC Subsidiaries.
(b) ADDITIONAL STOCK OPTIONS. In addition to and not in lieu of
the AUGI stock options referred to in Section 7.8(a) above, in the event that
the Surviving Corporation, eXodus or any CHC Subsidiary shall consummate an IPO,
in addition to any other AUGI securities then owned by them, the key employees
of the Surviving Corporation, eXodus or CHC Subsidiary which is the subject of
the IPO shall each receive stock options of such corporation, based on a
separate option plan to be established on terms and conditions no less favorable
to the participants than the AUGI 1996 stock option plan; PROVIDED, that such
stock option plan shall authorize such number of shares of common stock for
issuance thereunder as shall represent not less than 15% of the outstanding
shares of common Stock of the Surviving Corporation, eXodus or other CHC
Subsidiary immediately prior to the IPO of such corporation.
(c) CASH BONUSES. Within thirty (30) days after consummation of
the Merger, the Board of Directors of AUGI shall, in consultation with key
executive officers of the Surviving Corporation, eXodus and CHC Subsidiaries
establish an annual cash incentive bonus plan targeted to operating performance
of the Surviving Corporation, eXodus or the specific CHC Subsidiary in which the
participants have responsibility.
7.9 FINANCING OF THE COMPANY.
Subject to the provisions of this Section 7.9, on consummation of the
Merger, AUGI shall provide the Surviving Corporation, the CHC Subsidiaries and
eXodus with up to an aggregate of Five Million ($5,000,000) Dollars of cash
financing (the "AUGI Financing").
(a) INTERIM AUGI ADVANCES. The $5,000,000 aggregate amount of the
AUGI Financing to be funded following consummation of the Merger, shall be NET
OF (and not in addition to) all amounts advanced prior to the Closing Date by
AUGI, either (i) directly to the Company, or (ii) otherwise paid by AUGI to UPS,
SpaceLabs, Prologue, SA or any other creditor of the Company, at any time,
whether prior or subsequent to the date of this Agreement and up to and
including the consummation of the Merger (individually, an "Interim AUGI
Advance" and collectively, the "Interim AUGI Advances"). As at the date of this
Agreement, an aggregate of approximately $2.4 million has been advanced by AUGI
as Interim AUGI Advances.
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(b) FORM OF AUGI FINANCING. With the exception of an aggregate of
$500,000, which shall be capitalized as equity by AUGI in the Surviving
Corporation and its CHC Subsidiaries and in eXodus (in such proportion as AUGI
shall determined), all additional AUGI Financing provided and to be provided by
AUGI to the Surviving Corporation, eXodus and/or any CHC Subsidiary shall be in
the form of intercompany loans from AUGI to the Surviving Corporation, the CHC
Subsidiaries and/or eXodus, as the case be may; which intercompany loans shall,
effective as at the Closing Date of the Merger:
(i) bear interest at the rate of 8% per annum (which shall accrue
and be payable together with principal);
(ii) be payable, as to principal, on a date which shall be the
earlier to occur of (A) completion of an IPO of the borrower, or
(B) five years from the date of the advance; and
(iii) be unsecured, and expressly made subordinated to all
indebtedness owed by such borrower to any banks, institutional
lenders or other trade creditors.
(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, the Surviving Corporation and eXodus shall, from time to time determine;
PROVIDED, that the expenditure of such funds shall be based upon the following.
(i) OPERATING BUDGETS. Funds shall be spent for and on behalf
of the Surviving Corporation, eXodus and the CHC Subsidiaries, as
the case may be, only based on detailed operating business plans
and budgets to be provided to AUGI's Board of Directors by the
senior executive officers of each of eXodus or a CHC Subsidiary.
Such executive officers shall have "bottom line" responsibility
and shall be accountable for such expenditures, with the stated
corporate goal being to keep fixed costs and overhead to a
necessary minimum until eXodus and the CHC Subsidiary in question
achieves a positive cash flow from operations. At the same time,
the AUGI Board of Directors recognizes the absolute requirement
that the best people be retained and hired, and compensated on a
level commensurate with their skills as well as industry and
local standards.
(ii) PAYMENTS TO CREDITORS. The Surviving Corporation will
utilize a portion of such funds to retire certain notes payable
and trade accounts payable, effect settlements with SpaceLabs and
stabilize relationships with Shepherd Financial Corporation
("Shepherd"). In addition, funds will be made available to meet
payout obligations on extended payment arrangements previously
made with certain trade creditors.
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(d) MINIMUM ALLOCATION OF AUGI FINANCING TO EXODUS. Notwithstanding
anything to the contrary set forth in this Section 7.8, subject only to their
meeting revised budgets and projections for the twelve month periods ending July
31, 1997 and July 31, 1998, to be furnished to AUGI prior to May 31, 1996 (the
"Revised eXodus Budget"), AUGI hereby agrees that not less than $2,500,000 of
the AUGI Financing shall be allocated to eXodus, LESS amounts previously paid by
AUGI to the Company as Interim Advances and allocated to the business conducted
by eXodus; which amount is set forth on SCHEDULE 7.9(D) hereof.
7.10 FORM S-8 REGISTRATION STATEMENT. In the event that it shall be
determined that the exchange contemplated by Section 1.5(e) hereof shall result
in a taxable event to the holders of the Vested Stock Options, AUGI shall, as
soon as practicable file a Form S-8 or related registration statement to
register for sale shares of AUGI Common Stock which have been converted from
shares of AUGI Preferred Stock issued to the holders of such Vested Stock
Options
8. CONDITIONS PRECEDENT TO MERGERCO'S AND AUGI'S PERFORMANCE.
In addition to the fulfillment of the parties' agreements in Section 7
above, the obligations of Mergerco to consummate the Merger and of Mergerco and
AUGI to consummate the transactions contemplated by this Agreement are further
subject to the satisfaction, at or before the Closing Date, of all the following
conditions, any one or more of which may be waived in writing by Mergerco and
AUGI:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Company and/or the Principal Stockholders in this
Agreement, in any Schedule(s) hereto, and/or in any written statement delivered
to Mergerco or AUGI under this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representations
and warranties were made on and as of that date.
8.2 PERFORMANCE. The Company and the Principal Stockholders 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.
8.3 CERTIFICATION. Mergerco and AUGI shall have received a
certificate, dated the Closing Date, signed by the Principal Stockholders,
certifying, in such detail as Mergerco and AUGI and their counsel may reasonably
request, that, to their actual knowledge, the conditions specified in Sections
8.1 and 8.2 above have been fulfilled.
8.4 RESOLUTIONS. Mergerco shall have received certified resolutions
of the Board of Directors and the stockholders of the Company, in form
reasonably satisfactory to counsel for Mergerco, authorizing the Company's
execution, delivery and performance of this Agreement and the Merger, and all
actions to be taken by the Company hereunder.
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8.5 TERMINATION OF EMPLOYMENT AGREEMENT WITH LONDON. The Company
shall have delivered to Mergerco evidence, reasonably satisfactory to Mergerco,
of the termination and cancellation of the existing employment agreement between
the Company and London.
8.6 ABSENCE OF LITIGATION. No action, suit or proceeding by or
before any court or any governmental body or authority, against the Company or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the Company, its business or any material portion of its
assets, or impair the ability of any of the stockholders of the Company to
deliver in the Merger all of his or her 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).
8.7 CONSENTS. All necessary disclosures to and agreements and
consents of (a) any parties to any Material Contracts and/or any licensing
authorities which are material to the Company's business, and (b) any
governmental authorities or agencies to the extent required in connection with
the transactions contemplated by this Agreement, shall have been obtained and
true and complete copies thereof delivered to Mergerco.
8.8 SETTLEMENT OF ACCOUNTS. All debts, liabilities and other
monetary obligations (if any) owed to the Company by any of the Principal
Stockholders of the Company and/or any of their respective Affiliates shall have
been fully paid to the Company, such that no such debts, liabilities or
obligations shall be outstanding on the Closing Date.
8.9 EXODUS STOCKHOLDERS AGREEMENT. A subscription and stockholders
agreement among AUGI, eXodus, Banerjee, Barton and the other eXodus Minority
Stockholders, in the form annexed as EXHIBIT F hereto and made a part hereof
(the "eXodus Stockholders Agreement") shall have been duly executed and
delivered by the eXodus Minority Stockholders.
8.10 SPACELABS AGREEMENT. The Company and AUGI shall have entered
into an agreement with SpaceLabs in substantially the form of agreement annexed
hereto as EXHIBIT G and made a part hereof (the "SpaceLabs Agreement"), pursuant
to which the Surviving Corporation shall, upon the effectiveness of the Merger,
be entitled to receive certain software and related technology in consideration
for the payments, aggregating $400,000, described in such SpaceLabs Agreement.
8.11 CONDITION OF PROPERTY. Between the date of this Agreement and
the Closing Date, assets of the Company having an aggregate fair market value of
$10,000 or more shall not have been lost, destroyed or irreparably damaged by
fire, flood, explosion, theft or any other cause, if not fully covered by
insurance.
8.12 NO MATERIAL ADVERSE CHANGE. On the Closing Date, there shall
not have occurred any event or condition (including, without limitation, third
party claims) not disclosed
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on Schedules to this Agreement which, in the reasonable opinion of AUGI and its
counsel, would materially and adversely affecting the value of the technologies,
software and other assets owned or used by the Company.
8.13 EXECUTION AND DELIVERY OF EXHIBITS. On or before the Closing
Date: (a) the Company shall have executed and delivered to Mergerco the
Certificate of Merger; (b) the Principal Stockholders shall have executed and
delivered to all other parties thereto the Non-Competition Agreement, the
Registration Rights Agreement and the Proxy; (c) the eXodus Minority
Stockholders shall have executed and delivered the eXodus Stockholders
Agreement; and (d) SpaceLabs shall have executed and delivered the SpaceLabs
Agreement.
8.14 COMPANY SHAREHOLDERS' APPROVAL. The requisite percentage of
holders of all shares of capital stock of the Company entitled to vote shall
have, in their capacities as shareholders of the Company, approved or ratified
this Agreement, the consummation of the Merger and all other transactions
contemplated by this Agreement, all in accordance with the applicable provisions
of Washington Law.
8.15 DISSENTERS' RIGHTS. On or before the Closing Date, holders of
not more than five (5%) percent of the outstanding capital stock of the Company
shall have timely elected to exercise their dissenters' rights pursuant to the
applicable provisions of Washington Law.
8.16 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to Mergerco, AUGI and their counsel. The
Company shall have submitted to AUGI or its representatives for examination the
originals or true and correct copies of all records and documents relating to
the business and affairs of the Company which AUGI may have requested in
connection with said transactions.
9. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE
PRINCIPAL STOCKHOLDERS' PERFORMANCE.
In addition to the fulfillment of the parties' agreements in Section 7
above, the obligations of the Company to consummate the Merger and of the
Principal Stockholders to consummate the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all of the following conditions, any one or more of which may be waived
in writing by the Company and the Principal Stockholders:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Mergerco and AUGI in this Agreement and/or in any written
statement delivered by Mergerco or AUGI under this Agreement shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of that date.
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9.2 PERFORMANCE. 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 Mergerco and AUGI on or
before the Closing Date.
9.3 CERTIFICATION. The Principal Stockholders shall have received a
certificate, dated the Closing Date, signed by Mergerco and AUGI, certifying, in
such detail as the Principal Stockholders and his counsel may reasonably
request, that the conditions specified in Sections 9.1 and 9.2 above have been
fulfilled.
9.4 RESOLUTIONS. The Principal Stockholders shall have received
certified resolutions of the Board of Directors and sole stockholder of Mergerco
and of the Board of Directors of AUGI, in form reasonably satisfactory to
counsel for the Principal Stockholders, authorizing the Merger and Mergerco's
and AUGI' execution, delivery and performance of this Agreement and all actions
to be taken by Mergerco and AUGI hereunder.
9.5 APPROVAL OF COMPANY STOCKHOLDERS. The holders of the requisite
percentage of the outstanding shares of capital stock of the Company entitled to
vote shall have approved, adopted and ratified this Agreement and the
transactions contemplated hereby.
9.6 EXECUTION AND DELIVERY OF EXHIBITS. Mergerco shall have executed
and delivered to the Company the Certificate of Merger, and AUGI and/or the
Surviving Corporation (as applicable) shall have executed and delivered (a) to
the Principal Stockholders duly executed counterparts of the Non-Competition
Agreement and the Registration Rights Agreement, and (b) to the eXodus Minority
Stockholders, the eXodus Stockholders Agreement.
9.7 DELIVERY OF MERGER CONSIDERATION. AUGI and Mergerco shall have
delivered to the Principal Stockholders and the other stockholders of the
Company stock certificates evidencing the AUGI Preferred Stock, in amounts
representing their allocable share the Merger Consideration described in Section
2 of this Merger Agreement.
9.8 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incidental thereto, shall be reasonably satisfactory in form and
substance to the Company, the Principal Stockholders and their respective
counsel.
10. CLOSING.
10.1 PLACE AND DATE OF CLOSING. Unless this Agreement shall be
terminated pursuant to Section 11 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place either in
Seattle, Washington at the offices of the Company or its legal counsel, or (by
mutual agreement of the parties) in New York, New York at the offices of Messrs.
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, counsel to Mergerco and
AUGI, the Company located at 153 East 53rd Street - 35th floor, New York, New
York 10022, or such other location as is agreed to between the parties, at 10:30
A.M. local
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time on a date which shall be not more than five business days following written
notice by AUGI (the "Closing Date"); PROVIDED, that in no event shall such
Closing Date, the Closing and consummation of the Merger occur later than July
31, 1996, unless approved in writing by AUGI. The effectiveness of the Merger
shall occur on the Closing Date simultaneous with the Closing.
10.2 ACTIONS AT CLOSING. On the Closing Date, simultaneous with the
Closing, Mergerco and the Company shall file or cause to be filed the
Certificate of Merger with the Secretary of State of Washington. At such
Closing, there shall be made, by all necessary and appropriate persons, all
payments and deliveries stated in this Agreement to be made at the Closing
and/or on or prior to the Closing Date.
11. TERMINATION OF AGREEMENT.
11.1 GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing: (a) by
the mutual written consent of the Company, the Principal Stockholders, Mergerco
and AUGI; (b) by Mergerco and AUGI, on one hand, or by the Company and the
Principal Stockholders, on the other hand, if: (i) a material breach shall
exist with respect to the written representations and warranties made by the
other party or parties, as the case may be, (ii) the other party or parties, as
the case may be, shall take any action prohibited by this Agreement, if such
actions shall or may have a material adverse effect on the Company and/or the
transactions contemplated hereby, (iii) the other party or parties, as the case
may be, shall not have furnished, upon reasonable notice therefor, such
certificates and documents required in connection with the transactions
contemplated hereby and matters incidental thereto as it or they shall have
agreed to furnish, and it is reasonably unlikely that the other party or parties
will be able to furnish such item(s) prior to the Outside Closing Date specified
below, or (iv) any consent of any third party to the transactions contemplated
hereby (whether or not the necessity of which is disclosed herein or in any
Schedule hereto) is reasonably necessary to prevent a default under any
outstanding material obligation of Mergerco or AUGI, on one hand, and the
Principal Stockholders or the Company, on the other hand, and such consent is
not obtainable without material cost or penalty (unless the party or parties not
seeking to terminate this Agreement agrees or agree to pay such cost or
penalty); or (c) by Mergerco and AUGI, at any time on or after July 31, 1996
(the "Outside Closing Date"), if the transactions contemplated hereby shall not
have been consummated prior thereto, and the party directing termination shall
not then be in breach or default of any obligations imposed upon such party by
this Agreement.
11.2 EFFECT OF TERMINATION; CONVERSION OF INTERIM AUGI ADVANCES INTO
COMPANY CONVERSION SHARES; RIGHT OF REPURCHASE.
(a) NOTICE. In the event of termination of this Agreement
pursuant to this Section 11, prompt written notice shall be given by the
terminating party or parties other party or parties.
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(b) CONVERSION OF INTERIM AUGI ADVANCES. Notwithstanding
anything to the contrary, express or implied, contained herein or in any prior
document or instruments executed by any of the parties hereto, it is expressly
understood and agreed by and among the parties hereto that in the event that
this Agreement shall be terminated FOR ANY REASON, other than a material breach
by AUGI of its representations and warranties contained herein or failure to pay
the Merger Consideration, all Interim AUGI Advances (inclusive of all amounts in
excess of $1,000,000 in the aggregate), including all interest accrued thereon,
shall be convertible at the option of AUGI into shares of Company Common Stock,
at a conversion price of $.05 per share (the "Company Conversion Shares"),
subject only to the repurchase provisions of Section 11.2(c) below.
(c) RIGHT OF REPURCHASE OF COMPANY CONVERSION SHARES.
Notwithstanding the provisions of Section 11.2(b) hereof, if for any reason,
OTHER than:
(i) a material breach by the Company or any of the
Principal Stockholders of their respective representations, warranties
or covenants contained in this Agreement or the Exhibits hereto; or
(ii) the failure of the Company shareholders to approve such
Merger in accordance with the provisions of Section 8.14 hereof and
applicable Washington Law,
AUGI shall FAIL or refuse to consummate the Merger on the terms and conditions
set forth herein, the Company or any third party shall have the right at any
time on or before September 30, 1996, to repurchase all, and not less than all,
of the Company Conversion Shares from AUGI, for a purchase price, payable in
immediately available funds, equal to (i) $.05 per share, plus (ii) accrued
interest, at the rate of 10% per annum on all amounts previously paid or
advanced in respect of Interim AUGI Advances, calculated from the date of each
such Interim AUGI Advance to the date of repurchase of the Company Conversion
Shares.
12. INDEMNIFICATION.
12.1 GENERAL.
(a) BY THE COMPANY AND THE PRINCIPAL STOCKHOLDERS. Without
prejudice to any rights of contribution as between the Principal Stockholders
and any other stockholder(s) of the Company, from and after the Closing Date:
(i) the Company and London shall jointly and severally; and (ii) the other
Principal Stockholders, severally (not jointly and severally), to the limited
extent set forth herein, defend, indemnify and hold harmless the Surviving
Corporation and AUGI 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, that the Surviving
Corporation, the CHC Subsidiaries, eXodus or AUGI (collectively, the "AUGI
Group") may incur, sustain or suffer ("Losses") as a result of any breach of, or
failure by the Company or such Principal Stockholder(s) to perform, any of
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the representations, warranties, covenants or agreements of the Company or such
Principal Stockholder(s) contained in this Agreement or in Exhibit or any
Schedule(s) furnished by or on behalf of the Company or such Principal
Stockholder(s) under this Agreement. Notwithstanding the foregoing, it is
expressly understood and agreed that: (i) the Company shall not be liable to
indemnify the AUGI Group from any Losses incurred by reason of failure by the
Principal Stockholder(s) to perform, any of their respective representations,
warranties, covenants or agreements contained in this Agreement or in any
Exhibit or Schedule(s) hereto; and (ii) no individual Principal Stockholder
shall be liable to indemnify the AUGI Group from any Losses incurred by reason
of failure by any other Principal Stockholder(s) to perform, any of their
individual or respective representations, warranties, covenants or agreements
contained in this Agreement or in any Exhibit or Schedule(s) hereto.
(b) BY THE AUGI GROUP. From and after the Closing Date, the
AUGI Group shall jointly and severally indemnify, defend and hold harmless the
Principal Stockholders and each other shareholder of the Company 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, 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.
12.2 LIMITATIONS ON CERTAIN INDEMNITIES.
(a) THE BASKET. Notwithstanding any other provision of this
Agreement to the contrary, except for Losses arising out of claims for breach of
any of the warranties made under Sections 4.1, 4.2, 4.8, 4.11 and/or 4.22 above,
neither the Company nor any Principal Stockholder shall be liable to the AUGI
Group with respect to Losses unless and until the aggregate amount of all Losses
incurred by the Surviving Corporation or AUGI shall exceed the sum of $100,000
(the "Basket"). The applicable Principal Stockholder(s) shall thereafter be
liable for all Losses in excess of the Basket, provided that the maximum
aggregate liability in respect of all Losses of each Principal Stockholder shall
not, in the absence of proven fraud by such Principal Stockholder 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
(i) any Losses involving proven fraud by a Principal Stockholder, or (ii) a
material breach by such Principal Stockholder of any provision of the Non-
Competition Agreement or the eXodus Stockholders Agreement executed by such
Principal Stockholder, a Principal Stockholder found liable for any Losses by
the AUGI Group, or any member thereof, shall only be required to pay
indemnification hereunder, after application of the Basket, up to a maximum
amount equal to the pro rata value of the Merger Consideration received by such
Principal Stockholders pursuant to this Agreement (with AUGI Preferred Stock to
be valued for such purposes at a per share price equal to 80% of the closing
price of a share of AUGI Common Stock, as reported on The NASDAQ National
Market, on the Closing Date of the Merger (the "Per Share Value"). Such
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Principal 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 Principal Stockholder's AUGI Preferred Stock, which, for purposes
hereof, shall (regardless of any intervening fluctuations in market price) be
deemed to have a value equal to the 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 Principal Stockholder(s) in question in any other
manner, subject to such Principal 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 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 Principal Stockholder of any material covenant or agreement on its or their
part contained in the Registration Rights Agreement, the Non-Competition
Agreement and/or the eXodus Stockholders Agreement.
(d) TIME LIMITATION ON INDEMNITY FOR BREACH OF REPRESENTATION
AND WARRANTY. The AUGI Group shall be entitled to indemnification by a
Principal Stockholder and/or the Company for Losses relating to: (i) breach of
any representation or warranty hereunder only in respect of claims for which
notice of claim shall have been given to the Principal Stockholder on or before
October 31, 1997, 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; PROVIDED, HOWEVER, that there shall be NO time
limitation on the AUGI Group's right to indemnification in respect of any
violation of any covenant or agreement on the part of such Principal Stockholder
contained in any Exhibit hereto, including the Non-Competition Agreement, the
Registration Rights Agreement and the eXodus Stockholders Agreement.
(e) PREJUDICE OF RIGHTS TO DEFEND. No member of the AUGI
Group shall be entitled to indemnification from the Principal Stockholder in the
event that the subject claim for indemnification relates to a third-party claim
and the AUGI Group delayed giving notice thereof to the Principal Stockholder to
such an extent as to cause material prejudice to the defense of such third-party
claim.
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
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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, though 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 Company and the Principal
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. AUGI shall pay any compensation or
related finders' fees owed to Hampshire Securities, Inc. or its affiliates, in
connection with its introduction of AUGI to the Company. The Surviving
Corporation shall indemnify, defend and hold harmless the Principal Stockholders
from any claims for finder's or broker's fees from Prudential Securities, Inc.
or its affiliates.
13.2 EXPENSES. Mergerco, AUGI, the Company and the Principal
Stockholders 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. Notwithstanding the foregoing, it is agreed by and among the
parties hereto that: (i) AUGI will be responsible for the costs and expenses
incurred in obtaining the audit opinion on the Financial Statements, and (ii)
AUGI agrees that a maximum of $25,000 plus an amount equal to such counsel's
fees and disbursements between June 24, 1996 and June 28, 1996 of the amounts
loaned to the Company in respect of the Interim AUGI Advances shall be paid by
the Company as legal fees and disbursements to Messrs. Helsell
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Fetterman, LLP, counsel to the Company, with any fees and disbursements of such
legal counsel in addition to such amounts in the aggregate to be borne SOLELY by
persons or entities other than AUGI or the Company.
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 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.
15.2 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:
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(a) If to the Company:
c/o ConnectSoft, Inc.
11130 NE 33rd Place, Suite 250
Bellevue, WA 98004-1488
with a copy sent concurrently to:
Helsell Fetterman, LLP
1500 Puget South Plaza
1326 Fourth Avenue
Seattle, WA 98101-2509
Attn: Bruce Benson, Esq.
If to London:
Mitchell London
2112 179th Court NE
Redmond, WA 98052
with a copy sent concurrently to:
Robert B. Fikso, Esq.
Phillips McCullough Wilson Hill & Fikso
2025 First Avenue, Suite 1130
Seattle, WA 98121
(c) If to UPS:
United Parcel Service of America, Inc.
55 Glenlake Parkway N.E.
Atlanta, GA 30328
Attn: Thomas W. Delbrook, Esq.
Legal and Regulatory
(d) If to SpaceLabs:
SpaceLabs Medical, Inc.
15220 NE 40th Street
Redmond, WA 98073 -9713
Attn: Vice President and Corporate Comptroller
(e) If to Mergerco, the Surviving Corporation
or AUGI:
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American United Global, Inc.
25 Highland Boulevard
Dix Hills, New York 11747
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 A. Weiss, Esq.
or to such other address as any party shall have specified by notice in writing
given to all other parties.
16. MISCELLANEOUS.
16.1 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.
16.2 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.
16.3 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 Washington applicable to contracts made and to be performed
wholly within such State. Except as otherwise provided in Section 12.2(c)
above, 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 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 American Arbitration Association then
obtaining. As part of his or her award, the arbitrator shall make a fair
allocation of the fee of the American Arbitration Association, 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.
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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
-----------------------------------
Robert M. Rubin, President
C-SOFT ACQUISITION CORP.
By: /s/ ROBERT M. RUBIN
-----------------------------------
Robert M. Rubin, President
CONNECTSOFT, INC.
By: /s/ MITCHELL LONDON
-----------------------------------
Mitchell London, President
THE PRINCIPAL STOCKHOLDERS:
UNITED PARCEL SERVICE OF
AMERICA, INC.
By: /s/
-----------------------------------
-----------------------------------
(authorized officer)
SPACELABS MEDICAL, INC.
By: /s/
-----------------------------------
-----------------------------------
(authorized officer)
/s/ MITCHELL LONDON
-----------------------------------
MITCHELL LONDON
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EXHIBITS
A - Certificate of Merger
B - Form of Certificate of Designations for
AUGI Preferred Stock
C - Form of Registration Rights Agreement
D - Form of Non-Competition Agreement
E - Form of Proxy
F - Form of eXodus Stockholders Agreement
G - Form of SpaceLabs Agreement
40
<PAGE>
AGREEMENT
This Agreement ("Agreement") is entered into this 28th day of June 1996,
among DANIEL CLARK ("Clark"), ERIC GEYSER ("Geyser"), IMATO KATSUTA ("Katsuta"),
AMERICAN UNITED GLOBAL, INC., a Delaware corporation ("AUGI"), having its
principal offices at 25 Highland Boulevard, Dix Hills, New York 17746 and C-SOFT
ACQUISITION CORP., a Washington corporation ("Mergerco"), having its principal
executive offices at 25 Highland Boulevard, Dix Hills, New York 17746 . Clark,
Geyser and Katsuta are hereinafter collectively referred to as the
"Stockholders."
W I T N E S S E T H:
WHEREAS, AUGI and Mergerco have entered into that certain Agreement and
Plan of Merger, dated June 28, 1996 (the "Merger Agreement") with CONNECTSOFT,
INC., a Washington corporation (the "Company"), having its principal offices at
11130 NE 33rd Place, Suite 250, Bellevue, Washington 98004-1488; and MITCHELL
LONDON ("London"), UNITED PARCEL SERVICE OF AMERICA, INC. ("UPS") and SPACELABS
MEDICAL, INC. ("SpaceLabs"); and
WHEREAS, as an inducement to cause AUGI and Mergerco to enter into the
Merger Agreement with the Company, London, UPS and SpaceLabs, the Stockholders
have agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto intending to be bound hereby, it is hereby
agreed as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each of the
Stockholders who has executed this Agreement does hereby severally and
individually (and not jointly and severally) represent and warrant to AUGI and
Mergerco, as follows:
(a) The number of shares of common stock of the Company (the "Stock")
owned beneficially by such Stockholder is as set forth on SCHEDULE A annexed
hereto. Such Stockholder is the legal and beneficial owner of his or her shares
of the 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 operations of state or federal securities
laws.
(b) The execution, delivery and performance of this Agreement, the
Merger Agreement and the consummation of the Merger and the other transactions
contemplated by the Merger Agreement has been duly and validly authorized by
such Stockholder in his or her capacity as a stockholder of the Company, and,
with respect to Clark and Geyser, in his capacity as a member of the Board of
Directors of the Company. Such Stockholder has full legal right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and, when executed and
delivered by such Stockholder,
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the Registration Rights Agreement and the Proxy (as such terms are hereinafter
defined), 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 that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court before which
enforcement is sought.
2. VOTING OF STOCK; EXECUTION OF PROXY. Each of the Stockholders executing
this Agreement does hereby covenant and agree (i) that all of his or her shares
of Stock of the Company shall be voted IN FAVOR of the Merger and the other
transactions contemplated by the Merger Agreement, and (ii) to execute and
deliver to AUGI, simultaneous with execution of this Agreement, a copy of the
Proxy Agreement in the form of EXHIBIT E to the Merger Agreement.
3. BINDING EFFECT. This Agreement shall be valid and binding upon each
Stockholder executing this Agreement even if all of the persons named as
Stockholders herein do not so execute such Agreement.
IN WITNESS WHEREOF, each of the undersigned have executed this Agreement,
the date and year first above written.
AMERICAN UNITED GLOBAL, INC.
By:
--------------------------
Robert M. Rubin, President
` C-SOFT ACQUISITION CORP.
By:
--------------------------
Robert M. Rubin, President
THE STOCKHOLDERS
-----------------------------
DANIEL CLARK
-----------------------------
ERIC GEYSER
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-----------------------------
IMATO KATSUTA
43
