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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): March 24, 1998
American United Global, Inc.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 0-19404 95-4359228
<S> <C> <C>
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
</TABLE>
<TABLE>
<CAPTION>
11130 NE 33rd Place, Suite 250
Bellevue, Washington 98004
<S> <C>
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (425) 803-5400
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(Former Name or Former Address, if Changed Since Last Report)
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CURRENT REPORT ON FORM 8-K
AMERICAN UNITED GLOBAL, INC.
March 24, 1998
Item 5. Other Events.
Investment Transactions with Conese Enterprises, Ltd.
American United Global, Inc., a Delaware corporation (the "Company"),
and Conese Enterprises, Ltd., a privately held investment company ("Conese
Enterprises"), entered into a Securities Purchase Agreement, dated as of March
24, 1998 (the "Securities Purchase Agreement"). Subject to the terms and
conditions of the Securities Purchase Agreement, Conese Enterprises and/or
certain of its associates (the "Enterprises Group") have agreed to make an
investment in the Company and certain of its subsidiaries (the "Investment
Transactions") and acquire the following securities:
(a) In consideration for an investment of not less than $4.0 million
and not more than $5.5 million in cash, the Enterprises Group has
agreed to purchase, for $10.00 per share, between 400,000 and
550,000 shares of the Company's Series B-3 voting convertible
preferred stock, par value $0.01 per share (the "Series B-3
Preferred Stock"). The Series B-3 Preferred Stock, when issued,
will have a $10 per share liquidation value and will be
convertible into between 2.0 million and 2.75 million shares of
the Company's common stock, par value $0.01 per share (the "Common
Stock"), at an estimated conversion price of $2.00 per share.
(b) the Enterprises Group shall receive 10-year warrants (the "Company
Warrants") to purchase an additional 3,000,000 shares of the
Company's Common Stock, exercisable at $2.50 per share during the
first 5 years and $3.00 per share during the second 5 years of the
term of the Company Warrants;
(c) in consideration for an investment of $250,000, the Enterprises
Group will purchase 200,000 shares of common stock of IDF
International, Inc. ("IDF"), a 48%-owned affiliate of the Company;
(d) the Enterprises Group shall receive 10-year warrants
("IDF Warrants") to purchase an additional 300,000 shares of
common stock of IDF at $1.25 per share; and
(e) the Enterprises Group shall receive 10-year warrants ("WPEC
Warrants") to purchase 150,000 shares of common stock of the
Company's Western Power & Equipment Corp. subsidiary ("WPEC"),
exercisable at $6.21 per share (the average of the closing market
prices of WPEC common stock as traded on The Nasdaq National
Market for the 10 trading days prior to the March 24, 1998 date of
the Securities Purchase Agreement).
The conversion price of the Series B-3 Preferred Stock and the exercise prices
of the Company Warrants are subject to certain adjustments to protect the
holders against dilution. Upon completion of the Investment Transactions (i)
Eugene P. Conese, Jr. will become the President and Chief Executive Officer of
the Company, (ii) Robert M. Rubin and five other members of the current
seven-member Board of Directors of the Company shall resign, and (iii) five
representatives of the Enterprises Group will be appointed by the remaining
members of the Board of Directors to fill the vacancies created by such
resignations and will represent a majority of the members of the Board. In
addition, designees of the Enterprises Group will represent a majority of the
members of the Board of Directors of IDF, and will have significant
representation on the WPEC board of directors. For a period of three years after
the closing of the Investment Transactions, each of Robert M. Rubin and certain
other existing stockholders of the Company and IDF shall vote all of their
shares of Common Stock of the Company and common stock of IDF in favor of the
election of designees of the Enterprise Group to constitute a majority of the
Boards of Directors of each of the Company and IDF.
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Conese Enterprises is a privately-owned investment company whose sole
stockholder, Eugene P. Conese, Sr., most recently served as the Chairman and
Chief Executive Officer of Greenwich Air Services, Inc. (Nasdaq National
Market--GASI) until its recent acquisition by General Electric Company. Founded
by Mr. Conese, Sr. in 1987, when he acquired a regional gas turbine engine and
air frame servicer for a capital investment of approximately $1.5 million, under
the management of Eugene P. Conese, Sr. and his son, Eugene P. Conese, Jr., GASI
quickly became the consolidator in its business and grew to become the largest
independent gas turbine engine overhaul, maintenance, and repair service company
in the world. After completing its initial public offering at $9.00 per share in
1993, GASI made two major strategic industry acquisitions in 1994 and 1996. In
February 1997, GASI contracted to acquire UNC Incorporated (NYSE--UNC). However,
in September 1997, prior to completion of the UNC acquisition, Mr. Conese, Sr.
was instrumental in engineering the sale of both GASI and UNC to General
Electric Company, with GASI stockholders receiving in the merger transaction in
excess of $550 million, or $31 per share ($62 per share, after giving effect to
a two-for-one stock dividend effected by GASI in 1996) in cash and General
Electric stock. Mr. Conese, Sr. is currently a member of the Board of Directors
of Trans World Airlines and of Renex Corp. (Nasdaq), where he is chairman of the
Compensation Committee. He is Chairman and principal stockholder of World Air
Lease, Inc. and is a consultant to the Engine Services division of General
Electric. Upon consummation of the Investment Transactions, Mr. Conese will
become Chairman of the Board of Directors of the Company. Eugene P. Conese,
Jr., who will become President and Chief Executive Officer of the Company upon
consummation of the Investment Transactions, was a director of GASI from 1987
until its sale to General Electric in September 1997. Mr. Conese, Jr. served as
President and Chief Operating Officer of GASI from 1990 to September 1997, and
was a Vice President of GASI from March 1989 to November 1990.
Under the leadership of Eugene P. Conese, Sr. and Eugene P. Conese,
Jr., the Company will seek to enhance stockholder value by expanding the
existing construction equipment sale, rental and servicing business of WPEC and
the telecommunications and construction engineering businesses of IDF through
both internal growth and selective industry acquisitions. The Company will also
seek to make strategic acquisitions of additional businesses deemed attractive
by the Board of Directors.
The Series B-3 Preferred Stock, when issued, will rank on a parity with
the Company's currently authorized Series A Preferred Stock and Series B-1
Preferred Stock and senior to the Company's Common Stock with respect to
dividends and distributions. Cumulative dividends will be payable quarterly at
the annual rate of 7%, with the first such payment date being September 30,
1998. At the option of the holder, the Series B-3 Preferred Stock shall be
convertible, in whole or in part on any one or more occasion into shares of
Common Stock of the Company, at a conversion price which shall be equal to the
lesser of (a) $2.00 per share, or (b) $1.00 in excess of the average of the
closing bid prices of the Common Stock of the Company on the NASD OTC Bulletin
Board, on Nasdaq, or on any other national securities exchange, for the 20
trading days immediately prior to the closing of the Investment Transactions, in
either case with each share of Series B-3 Preferred Stock being convertible into
five shares of the Common Stock of the Company. Such conversion price and the
applicable conversion ratio shall be subject to adjustment under certain
conditions.
The Series B-3 Preferred Stock shall not be subject to voluntary or
mandatory redemption. However, if the Company shall be required to pay damages,
fees, penalties, taxes, costs and/or expenses in an aggregate amount which shall
equal $2.0 million or more (in excess of all amounts actually paid or reimbursed
to the Company under any of the Company's liability or other insurance policies)
as a result of the occurrence of certain events (including litigation which may
be commenced against the Company or certain members of the Company's current
board of directors), then each holder of the Series B-3 Preferred Stock shall
have the right to require the Company to redeem such holder's shares of Series
B-3 Preferred Stock at $10.00 per share, or such holder may elect to convert
such Series B-3 Preferred Stock into Common Stock at a conversion price equal to
75% of the applicable conversion price then in effect.
Holders of the Series B-3 Preferred Stock will vote as a class on
certain matters, and the vote of holders of at least two-thirds of the Series
B-3 Preferred Stock is required to effect any changes to the rights, privileges
or designations of such Series B-3 Preferred Stock. In addition to class voting
rights, the holders of the Series B-3 Preferred Stock shall have the right to
vote, together with the Common Stock and the Series B-1 Preferred Stock (except
as otherwise required by Delaware law), on all other matters submitted to the
stockholders of the Company,
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with each outstanding share of Series B-3 Preferred Stock entitled to vote on an
"as converted" basis based on a minimum of five votes for each outstanding share
of Series B-3 Preferred Stock. In addition, if and for so long as the Company's
Common Stock is not traded on a national securities exchange or the Nasdaq Small
Cap Market, the Series B-3 Preferred Stock shall be entitled to ten votes per
share, as though each such share had been converted into 10 shares of the
Company's Common Stock immediately prior to the applicable record date.
The Company Warrants shall have a term of 10 years, shall entitle
members of the Enterprises Group to purchase up to 3.0 million shares of Company
Common Stock, and will be exercisable at an exercise price of $2.50 per share
for the initial five years and $3.00 per share for the second five years of
their term. The Company Warrants are exercisable immediately upon issuance to
the extent of 60% of the underlying shares ("Warrant Shares") of Common Stock
(1.8 million Warrant Shares), and as to the remaining 1.2 million Warrant Shares
commencing one year from the date of issuance of the Company Warrants. The
exercise price and the number of shares of Common Stock issuable upon exercise
of the Company Warrants are subject to anti-dilution rights, including the
issuance of Company securities at prices or price equivalents lower than the
prevailing exercise price under the Company Warrants following a change of
control of the board of directors and management of the Company.
Under the Securities Purchase Agreement, in addition to its commitment
to purchase between 400,000 and 550,000 shares of Series B-3 Preferred Stock of
the Company, upon consummation of the Investment Transactions, Conese
Enterprises will also purchase 200,000 shares of common stock of IDF, at a
purchase price of $1.25 per share, and will receive the IDF Warrants to purchase
an additional 300,000 shares of IDF common stock at an exercise price of $1.25
per share. 60% of the IDF Warrants will be immediately exercisable and the
remaining 40% will be exercisable one year from the date of issuance. The
Company owns approximately 48% of the voting securities of IDF. However, in the
event that IDF consummates a registered public offering of its shares of common
stock at an offering price of $5.00 per share or more, all of the IDF Warrants
shall expire upon consummation of such public offering, unless exercised in
whole or in part by the Enterprises Group, on a date which shall be not later
than the effective date of such public offering.
Conese Enterprises shall also receive upon consummation of the
Investment Transactions, ten-year WPEC Warrants to purchase 150,000 shares of
the common stock of WPEC. The WPEC Warrants shall be exercisable at $6.21 per
share, on a date which shall be the earliest of (a) the sale, liquidation or
distribution of the Company's equity interest in WPEC, (b) consummation of a
public offering of securities of WPEC, or (c) such date as the average of the
closing prices of WPEC common stock as traded on the Nasdaq National Market or
other recognized securities exchange, shall exceed $12.42 per share (200% of the
initial per share exercise price of the WPEC Warrants) for any 20 consecutive
trading days, or (d) one year from the date of consummation of the Investment
Transactions.
Pursuant to the terms of the Company Warrants, IDF Warrants and WPEC
Warrants to be issued to the Enterprises Group in the Investment Transactions,
the holders of the shares of common stock issued upon exercise of such warrants
will have certain "demand" registration rights and "piggyback" registration
rights with respect to the registration of such securities under the Securities
Act of 1933, as amended.
Under the Securities Purchase Agreement, consummation of the Investment
Transactions is subject to a number of conditions, including approval by the
Company's stockholders, maintenance by the Company of certain net cash reserves,
the liquidation or sale of the Company's software businesses, the disposition of
related liabilities upon terms satisfactory to Conese Enterprises, the relisting
of the Company's Common Stock and publicly-traded warrants on the Nasdaq Stock
Market or the listing of such securities on the American Stock Exchange, and
certain other conditions.
The Securities Purchase Agreement may be terminated prior to the
Closing Date (i) by mutual agreement of the all parties to the Securities
Purchase Agreement; or (ii) by either party in the event that the other party
shall have breached any of their representations and warranties or failed to
perform their respective obligations under the Securities Purchase Agreement, or
(iii) by either the Company or Conese Enterprises if the closing of the
Investment Transactions shall not have occurred by 5:00 p.m. (New York City
Time) on June 30, 1998.
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The information set forth above is qualified in its entirety by
reference to the Securities Purchase Agreement, dated as of March 26, 1998,
filed herewith as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
Exhibit No. Description
*99.1 Securities Purchase Agreement, dated as of March 24, 1998.
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* Filed electronically herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMERICAN UNITED GLOBAL, INC.
Date: April 23, 1998 By: /s/ David M. Barnes
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David M. Barnes
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
*99.1 Securities Purchase Agreement, dated as of March 24, 1998.
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* Filed electronically herewith.
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 24th day of March 1998, by and among CONESE ENTERPRISES, LTD., a Delaware
corporation ("Enterprises"), having its principal executive offices located at
Two Columbus Center, 55 Alhambra Plaza, Suite 600, Coral Gables, Florida 33134;
AMERICAN UNITED GLOBAL, INC., a Delaware corporation ("AUGI"), having its
principal executive offices located at 11130 NE 33rd Place, Suite 250, Bellevue,
WA 98004; IDF INTERNATIONAL, INC., a New York corporation ("IDF"), having its
principal executive offices located at c/o Hayden Wegman, Inc., 330 West 42nd
Street, New York, New York 10036; WESTERN POWER & EQUIPMENT CORP., a Delaware
corporation ("WPEC"), having its principal executive offices located at 4601 NE
77th Avenue, Suite 200, Vancouver, WA 98662; and the other individuals who are
party signatory hereto.
INTRODUCTION:
WHEREAS, Enterprises and certain of its Affiliates and associates have
indicated a desire to purchase certain securities of AUGI, IDF and WPEC, all
upon the terms and subject to the conditions set forth herein; and
WHEREAS, Messrs. Eugene P. Conese, Sr. ("EPC, Sr.") and Eugene P.
Conese, Jr. ("EPC, Jr."), the principal stockholders and executive officers of
Enterprises, are highly experienced in operating, growing and developing
corporate enterprises and in increasing shareholder value in such corporations;
and
WHEREAS, it is the intention of Enterprises to expand the business of
AUGI through acquisitions and enhance shareholder value; and
WHEREAS, the Boards of Directors of each of AUGI, IDF and WPEC are
willing to permit Enterprises, EPC, Sr., EPC., Jr. and such other persons or
entities as Enterprises may designate (collectively, the "Enterprises Group") to
purchase securities of their respective corporations, upon the terms and subject
to the conditions set forth herein, including, that members of the Enterprises
Group become actively involved in the ongoing direction and management of AUGI
and in advising existing management of each of IDF and WPEC in developing and
implementing their strategic goals and plans.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties set forth herein, the parties hereto intending to be bound
hereby, it is mutually agreed as follows:
1. Purchase and Sale of Securities. On the "Closing Date" (as herein
defined), the Enterprises Group shall purchase from each of AUGI, IDF
and WPEC, the securities set forth below, and each of AUGI, IDF and
WPEC shall sell to the Enterprises
<PAGE>
Group, such securities, all upon the terms and subject to the
conditions hereinafter set forth.
1.1 AUGI Securities.
(a) AUGI Series B-3 Preferred Stock. AUGI shall sell to
the Enterprises Group and the Enterprises Group shall
purchase from AUGI, an aggregate of 400,000 shares of
authorized and previously unissued shares of the
Series B-3 Preferred Stock, $.01 par value per share,
of AUGI (the "AUGI Series B-3 Preferred Stock"), for
a purchase price of $10.00 per share, or an aggregate
of $4,000,000 for all 400,000 shares of AUGI Series
B-3 Preferred Stock. In addition, the Enterprises
Group shall have the right and option (but not the
obligation), exercisable by written notice to AUGI
(to be given not later than five (5) days prior to
the mailing of the definitive proxy statement to the
AUGI stockholders in respect of the "Special AUGI
Stockholders Meeting" described herein) to purchase,
on or before the Closing Date, up to an additional
150,000 shares of the AUGI Series B-3 Preferred
Stock, to increase its aggregate investment in AUGI
Series B-3 Preferred Stock from $4,000,000 to
$5,500,000; provided, that (i) such additional
investment in AUGI Series B-3 Preferred Stock shall
be in minimum increments of 5,000 shares ($50,000),
and (ii) in no event shall the Enterprises Group be
permitted to purchase less than $4,000,000 of Series
B-3 Preferred Stock or more than $5,500,000 of Series
B-3 Preferred Stock, without the prior approval of
the Board of Directors and the stockholders of AUGI,
at such Special AUGI Stockholders' Meeting.
(b) AUGI Warrants. AUGI shall sell to the Enterprises
Group, for an aggregate of $3,000, and the
Enterprises Group shall purchase from AUGI,
detachable warrants to purchase an aggregate of
3,000,000 shares of AUGI Common Stock (the "AUGI
Warrants").
1.2 Rights and Privileges of AUGI Series B-3 Preferred Stock. The AUGI
Series B-3 Preferred Stock referred to in Section 1.1(a) above, when issued to
the Enterprises Group shall:
(a) entitle the holder(s) to vote, together with the
holders of AUGI Common Stock, at any regular or
special meeting of stockholders of AUGI or in
connection with any consents submitted to AUGI
stockholders, on all matters requiring stockholder
approval or ratification; provided, that each
outstanding share of Series B-3 Preferred Stock shall
be entitled, in the sole discretion of Enterprises,
to either (i) that number of votes as the holder
would have been entitled to if such share of Series
B-3 Preferred Stock had been
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converted into shares of AUGI Common Stock, at the
applicable conversion price and conversion ratio in
effect immediately prior to the date for determining
the record date of any such regular or special
meeting of AUGI stockholders or in respect of any
such stockholder consent, or (ii) if and to the
extent permitted by the applicable rules of The
Nasdaq Stock Market, Inc. ("Nasdaq") or the American
Stock Exchange, Inc. ("AMEX"), ten (10) votes, as
though each such share of Series B-3 Preferred Stock
had been converted into ten (10) shares of AUGI
Common Stock immediately prior to the date for
determining the record date of any such regular or
special meeting of AUGI stockholders or in respect of
any such stockholder consent;
(b) be convertible into shares of AUGI Common Stock at a
conversion price (the "Conversion Price") which shall
be equal to the lesser of (i) $2.00 per share, with
each share of Series B-3 Preferred Stock being
convertible into five (5) shares of AUGI Common
Stock, or (ii) $1.00 in excess of the average of the
closing bid prices of AUGI Common Stock, as traded on
the NASD Bulletin Board, on the over-the-counter
market "pink sheets," on Nasdaq or any other national
securities exchange, for the twenty (20) consecutive
trading days immediately prior to the Closing Date;
it being understood that such Conversion Price and
the applicable conversion ratio shall be subject to
adjustment under certain conditions;
(c) pay an annual 7% cumulative cash dividend out of
legally available funds, or $.70 per share of Series
B-3 Preferred Stock; and
(d) contain the other rights, designations and privileges
as are set forth in the Amended and Restated
Certificate of Designations of the Series B-3
Preferred Stock, annexed hereto as Exhibit "A" and
made a part hereof.
1.3 Terms of the AUGI Warrants. The AUGI Warrants referred to in
Section 1.1(b) above, when issued to the Enterprises Group:
(a) shall (i) be assignable in whole or in part to any
Affiliate or other designee of Enterprises (not to
exceed ten persons), (ii) be detachable from the
Series B-3 Preferred Stock and (iii) expire, to the
extent not exercised, on a date which shall be ten
(10) years from the date of issuance;
(b) shall be exercisable immediately upon issuance, to
the extent of 60% of such AUGI Warrants (1,800,000
shares of AUGI Common Stock) and commencing one (1)
year from the date of issuance, as to the
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remaining 40% of such AUGI Warrants (1,200,000 shares
of AUGI Common Stock);
(c shall be exercisable, at an exercise price equal to
$2.50 for the initial five (5) years of the term of
the AUGI Warrants, and $3.00 per share for the
remaining five (5) year term of the AUGI Warrants;
such exercise price to be subject to certain
anti-dilution adjustments as provided in such AUGI
Warrants; and
(d) shall contain the terms and conditions as are more
fully set forth in the AUGI Warrants to be executed
and delivered by AUGI to the Enterprises Group on the
Closing Date, substantially in the form and content
of the AUGI Warrants annexed hereto as Exhibit "B-1"
and made a part hereof.
1.4 IDF Common Stock and IDF Warrants. IDF shall sell to the
Enterprises Group and the Enterprises Group shall purchase from IDF a minimum of
200,000 shares of authorized and previously unissued shares of the Common Stock,
$.01 par value per share, of IDF (the "IDF Common Stock"), for a purchase price
of $1.25 per share, or an aggregate of $250,000 for all 200,000 shares of IDF
Common Stock. In addition, IDF shall sell to the Enterprises Group, for an
aggregate of $300.00, and the Enterprises Group shall purchase from IDF,
warrants to purchase an aggregate of 300,000 shares of IDF Common Stock (the
"IDF Warrants"). Such IDF Warrants, when issued to the Enterprises Group:
(a) shall (i) be assignable in whole or in part to any
Affiliate or other designee of Enterprises (not to
exceed ten persons), (ii) be detachable from the IDF
Common Stock and (iii) expire, to the extent not
exercised, on a date which shall be ten (10) years
from the date of issuance; provided, however, that in
the event that IDF shall at any time prior to the
stated expiration date of such IDF Warrants,
consummate a registered public offering of shares of
IDF Common Stock at an offering price per share of
$5.00 or more, all of the IDF Warrants shall expire
upon consummation of such public offering, unless
exercised in whole or in part by the Enterprises
Group, on a date which shall be prior to consummation
of such public offering;
(b) shall be exercisable immediately upon issuance, to
the extent of 60% of such IDF Warrants (180,000
shares of IDF Common Stock) and commencing one (1)
year from the date of issuance, as to the remaining
40% of such IDF Warrants (120,000 shares of IDF
Common Stock);
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(c) shall be exercisable, at an exercise price equal to
$1.25 per share, such exercise price to be subject to
certain anti-dilution adjustments as provided in such
IDF Warrants; and
(d) shall contain the terms and conditions as are more
fully set forth in the IDF Warrants to be executed
and delivered by IDF to the Enterprises Group on the
Closing Date, substantially in the form and content
of the IDF Warrants annexed hereto as Exhibit "B-2"
and made a part hereof.
1.5 WPEC Warrants. WPEC shall sell to the Enterprises Group, for an
aggregate of $150, and the Enterprises Group shall purchase from WPEC,
detachable warrants (the "WPEC Warrants") to purchase an aggregate of 150,000
shares of authorized and previously unissued shares of the Common Stock, $.01
par value per share, of WPEC (the "WPEC Common Stock"). The WPEC Warrants, when
issued to the Enterprises Group:
(a shall (i) be assignable in whole or in part to any
Affiliate or other designee of Enterprises (not to
exceed ten persons), and (ii) expire, to the extent
not exercised, on a date which shall be ten (10)
years from the date of issuance;
(b) be exercisable on a date which shall be the earliest
to occur of: (i) the liquidation of all or
substantially all of AUGI's equity interest in WPEC,
whether through merger, tender offer, sale of
substantially all of the WPEC assets or WPEC
securities owned by AUGI to any unaffiliated third
party, or a dividend or distribution of all of WPEC
securities owned by AUGI to its stockholders, (ii)
consummation of a public offering of securities of
WPEC (other than in respect of registering securities
under a WPEC stock option plan), (iii) the average of
the closing prices of WPEC Common Stock, as traded on
the Nasdaq National Market or other national
securities exchange, shall exceed 200% of the
exercise price of the WPEC Warrants for any 20
consecutive trading days, or (iv) one (1) year from
the date of issuance;
(c) be exercisable, at an exercise price equal to the
average of the closing prices of WPEC Common Stock,
as traded on the Nasdaq National Market for the ten
(10) consecutive trading days immediately prior to
date of this Agreement; such exercise price to be
subject to certain anti-dilution adjustments as
provided in such WPEC Warrants; and
(d contain the terms and conditions as are more fully
set forth in the WPEC Warrants to be executed and
delivered by WPEC to the Enterprises Group on the
Closing Date, substantially in the form and
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content of WPEC Warrants annexed hereto as Exhibit
"B-3" and made a part hereof.
1.6 Deliveries at the Closing. On the Closing Date:
(a) AUGI shall deliver to the Enterprises Group,
registered in the names of such persons who shall be
designated by EPC, Sr. or EPC, Jr., by written notice
to AUGI (given not later than five (5) days prior to
the date of mailing of the definitive proxy statement
to the AUGI stockholders in connection with the
Special AUGI Stockholders' Meeting), certificates
evidencing, all and not less than all of (i) the
400,000 to 550,000 shares of AUGI Series B-3
Preferred Stock, and (ii) the AUGI Warrants.
(b IDF shall deliver to the Enterprises Group,
registered in the names of such persons who shall be
designated by EPC, Sr. or EPC, Jr., by written notice
to IDF and AUGI (given not later than five (5) days
prior to the date of mailing of the definitive proxy
statement to the AUGI stockholders in connection with
the Special AUGI Stockholders' Meeting), certificates
evidencing, all and not less than all of the (i)
200,000 shares of IDF Common Stock, and (ii) the IDF
Warrants purchased by the Enterprise Group pursuant
to this Agreement.
(c) WPEC shall deliver to the Enterprises Group,
registered in the names of such persons who shall be
designated by EPC, Sr. or EPC, Jr. , by written
notice to WPEC and AUGI (given not later than five
(5) days prior to the date of mailing of the
definitive proxy statement to the AUGI stockholders
in connection with the Special AUGI Stockholders'
Meeting), the WPEC Warrants.
(d) The Enterprises Group shall deliver, by bank cashiers
checks or by wire transfer of immediately available
funds to accounts designated by each of AUGI, IDF and
WPEC, as applicable (i) to AUGI, the sum of (A) not
less than $4,000,000 and not more than $5,500,000,
representing the purchase price for the AUGI Series
B-3 Preferred Stock, and (B) $3,000, representing the
purchase price for the AUGI Warrants; (ii) to IDF,
the sum of $250,000, representing the purchase price
(at $1.25 per share) for the 200,000 shares of IDF
Common Stock, and $300, representing the purchase
price for the IDF Warrants to be purchased by the
Enterprise Group hereunder, and (iii) to WPEC, the
sum of $150, representing the purchase price for the
WPEC Warrants.
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2. Additional Covenants and Agreements of the Parties.
2.1 Certain Transactions. Except as otherwise expressly set forth on
Schedule 2.1 annexed hereto, between the date of this Agreement and the Closing
Date, unless otherwise expressly contemplated by this Agreement or approved in
writing in advance by Enterprises, neither AUGI, IDF nor WPEC shall:
(a) issue any shares of common stock, preferred stock,
notes, debentures, warrants, options or other rights
or instruments (whether or not convertible or
exercisable for shares of common stock) entitling the
holder to purchase or otherwise acquire securities of
either AUGI, IDF or WPEC, or enter into any
agreements, commitments or understandings in respect
of any present or future issuances of any such
securities;
(b amend or modify (including, without limitation,
accelerating the vesting of) the existing terms of
any outstanding securities of either AUGI, IDF or
WPEC, including, without limitation, any outstanding
common stock, preferred stock, warrants or stock
options;
(c) issue or grant any additional stock options, stock
purchase or stock subscription rights;
(d) other than the purchase of inventories in the
ordinary course of business, enter into any
agreement, lease, license or otherwise incur any
obligation which requires the current or deferred
payment of $100,000 or more; incur any indebtedness
for money borrowed; sell, transfer or assign any
material assets or properties (other than the sale of
inventory in the ordinary course of business); sell
any securities (whether publicly or privately);
merge, consolidate or otherwise combine with any
other person, firm or corporation; or enter into any
agreement or commitment in respect of any of the
foregoing;
(e) enter into any employment, consulting, management or
related agreement providing compensation or other
remuneration with any employee, officer, director or
consultant; increase or extend the rate of
compensation or remuneration currently payable to any
existing employee, officer or director, or any
affiliate of any such person; or amend or modify the
terms of any existing employment, consulting or other
agreement or arrangement with any such person;
(f) other than inventories and equipment acquired in the
ordinary course of business (exclusive of equipment
for the Computer Software Businesses hereinafter
defined), acquire any assets or properties,
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including any computer software or other technology,
or securities of any other person, firm or
corporation;
(g) enter into any agreement or other arrangement with an
investment banker, investment advisor, financial
consultant or similar person, or engage the services
of any business or financial appraisal consultant;
(h) except with respect to transactions relating to the
sale or disposition of the assets and liabilities
associated with its Computer Software Businesses (as
described in Section 2.6 hereof), enter into any
agreement or arrangement not in the ordinary course
of business, or otherwise enter into any joint
venture or management agreement with any third party;
(i) except with respect to transactions relating to the
sale or disposition of the assets and liabilities
associated with its Computer Software Businesses (as
described in Section 2.6 hereof), prepay any
liabilities or otherwise compromise any indebtedness
or other obligations, whether under leases, licenses
or otherwise;
(j) purchase or redeem any outstanding securities,
whether for cash or in exchange for any property or
other assets; or
(k) enter into any transaction with any officer,
director, principal stockholder or other affiliate or
otherwise engage in any related party transaction
that would require disclosure in a proxy statement
filed under Rule 14 under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), or in a
prospectus filed under the Securities Act of 1933, as
amended (the "1933 Act").
2.2 Affirmative Actions. Except as otherwise expressly set forth on
Schedule 2.2 annexed hereto, between the date of this Agreement and the Closing
Date, unless otherwise approved in advance in writing by Enterprises, each of
AUGI, IDF and WPEC shall:
(a) with respect to AUGI, use its best efforts to either
regain its prior listing or obtain a new listing of
AUGI's Common Stock on Nasdaq or obtain listing of
such Common Stock on the AMEX; provided, that prior
to closing it is understood that such best efforts
shall not require a recapitalization;
(b) furnish to the Enterprises Group, true and complete
copies of all registration statements and other
periodic reports filed with the Securities and
Exchange Commission ("SEC"), whether under the
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1933 Act or the 1934 Act, and make all such filings
with the SEC on a timely basis;
(c) identify and conduct discussions with potential
purchasers of the assets and liabilities associated
with the FreeAgent, NTERPRISE and other related
software technologies and other assets of the
ConnectSoft Communications Corporation and Exodus
Technologies, Inc. subsidiaries of AUGI
(collectively, the "Computer Software Businesses");
(d promptly issue a press release and Form 8-K
describing this Agreement and the transactions
contemplated hereby in form and substance
satisfactory to the Enterprises Group and its
counsel;
(e) provide the Enterprises Group with weekly statements
of cash receipts and disbursements in respect of the
Computer Software Businesses; and
(f) invite EPC, Sr., EPC, Jr. or other persons designated
by them to participate in all meetings or discussions
with investment bankers, industry analysts, business
appraisers, representatives of Nasdaq or any other
national securities exchanges.
2.3 Resignation, Employment and Consulting Agreements. On or before the
Closing Date: (a) Robert M. Rubin ("Rubin") shall resign as an executive officer
and member of the Board of Directors of AUGI, IDF and all of their direct and
indirect subsidiary corporations, other than WPEC, and (b) the existing (i)
employment agreement, dated June 3, 1996, between Rubin and AUGI, and (ii) the
existing consulting agreement, dated August 25, 1997, between Rubin and IDF,
together with all amendments or modifications to any or all of the foregoing,
shall terminate as of the date of such resignations. Enterprises hereby
acknowledges that Rubin shall serve as a consultant to the Boards of Directors
of each of AUGI and IDF, pursuant to the terms and conditions of the consulting
agreements annexed hereto as Exhibit "C-1" and Exhibit "C-2", respectively. From
and after the Closing Date, Enterprises shall not take any action which would
cause AUGI or IDF not to honor the terms of such consulting agreements.
2.4 Treatment of AUGI Publicly Traded Warrants. On the Closing Date
(but not prior thereto without the prior written consent of the Enterprises
Group), the "Enterprises Group Designees" (as hereinafter defined) on the Board
of Directors of AUGI shall vote in favor of extending the expiration date of the
978,600 outstanding publicly held warrants to purchase shares of AUGI Common
Stock at $7.50 per share (the "AUGI Public Warrants") from July 31, 1998 to July
31, 1999.
2.5 Treatment of Certain Outstanding AUGI Stock Options. With respect
to qualified and non-qualified stock options to purchase shares of AUGI Common
Stock
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(the "AUGI Stock Options") issued to Messrs. Robert M. Rubin, C. Dean
McLain, David M. Barnes and Howard Katz (collectively, the "AUGI Management
Group") it is hereby agreed that: (a) to the extent that any such AUGI Stock
Options shall not have vested as at the Closing Date, the same shall be
cancelled as at the Closing Date; provided, that if and for so long as AUGI or
any subsidiary of AUGI shall continue to employ any member of the AUGI
Management Group on a full-time basis following the Closing Date or retain the
services of Rubin pursuant to the Consulting Agreement with AUGI, the unvested
AUGI Stock Options shall remain in full force and effect unless otherwise
modified by mutual agreement of AUGI and such employee; (b) in accordance with
the existing AUGI stock options plans, a member of the AUGI Management Group
shall have ninety (90) days from the date his services as an employee or
consultant to AUGI shall terminate to exercise any vested AUGI Stock Options,
after which the same shall expire; (c). to the extent that any of such AUGI
Stock Options are non-qualified stock options, AUGI agrees to amend such
agreements at the Closing Date to provide the holder with "cashless" exercise
rights upon such terms and conditions as shall be reasonably acceptable to
Enterprises, and which shall include cashless exercise rights similar to those
contained in Section 3.2 of the AUGI Warrant Agreement annexed hereto as Exhibit
B-1, and (d) to the extent that AUGI shall (in its sole discretion) elect to
register the AUGI Warrants or any stock options on Form S-8 (or other applicable
form of registration) for the benefit of any member of the AUGI Management Group
or any other person who is not a member of the AUGI Management Group, it shall
offer to include the shares of Common Stock issuable under vested stock options
held by all members of the AUGI Management Group in such registration statement,
subject to receipt of customary indemnities from such selling securityholder.
AUGI represents and warrants to the Enterprises Group that the aggregate number
of AUGI Stock Options which have vested for the AUGI Management Group do not
exceed the following number of shares issuable under such vested AUGI Stock
Options: (i) Robert M. Rubin - 560,000 shares; (ii) C. Dean McLain - 243,500
shares; (iii) David M. Barnes - 116,667 shares; and (iv) Howard Katz - 233,333
shares. Schedule 2.5 annexed hereto lists the aggregate number of AUGI Stock
Options which have been granted to the above named individuals and which have
not vested.
2.6 The Computer Software Businesses.
(a) Annexed hereto as Schedule 2.6(a) and made a part
hereof, is a schedule setting forth the detail of all
current monthly expenses and other obligations of the
Computer Software Businesses.
(b) Schedule 2.6(b) annexed hereto and made a part hereof
sets forth an itemization of the liabilities and
obligations either directly incurred or guaranteed by
AUGI in respect of its Computer Software Businesses,
including those under existing real estate and
equipment leases as well as with respect to other
fixed and contingent obligations, including the
anticipated costs of termination of personnel and
shut-down of operations (the "Computer Software
Businesses Liability Schedule").
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(c) The management and the Board of Directors of AUGI:
(i) shall keep Enterprises and its representatives
fully informed on a timely basis in respect of all
offers and related decisions concerning the sale of
the Computer Software Businesses, as well as proposed
compromises with creditors of the Computer Software
Businesses; and (ii) shall provide Enterprises and
its legal counsel, promptly upon receipt thereof,
with copies of all letters of intent, drafts of
agreements and related documents and correspondence
in respect of all proposed transactions involving the
sale of any of the Computer Software Businesses, as
well as proposed arrangements with creditors of such
Computer Software Businesses; provided, that the
ultimate decision to sell all or any portion of the
Computer Software Businesses, and the terms and
conditions of any such sale(s), shall be in the sole
discretion of the Board of Directors of AUGI.
(d) Each of AUGI and Enterprises do hereby covenant and
agree that, if and to the extent that AUGI shall
receive firm written offers from one or more bona
fide prospective purchasers, AUGI shall sell the
Computer Software Business upon the best possible
terms and conditions designed to yield the highest
return and minimize, to the greatest degree possible,
the financial exposure to AUGI.
(e) The AUGI Board of Directors, in its sole discretion,
may cause the sale of the Computer Software
Businesses on terms and conditions as, in its
judgment, is in the best interest of AUGI. Should
Enterprises, for any reason, not be satisfied with
the final terms and conditions of any proposed or
actual transaction relating to the sale of all or any
of the Computer Software Businesses, Enterprises
shall have the right to terminate this Agreement upon
ten (10) days prior written notice to AUGI; in which
event, neither Enterprises nor any of its officers,
directors, stockholders, agents or associates shall
have any further liability or obligations to AUGI,
WPEC, IDF or any officer, directors, stockholder or
other affiliate thereof. In the event that this
Agreement shall be terminated pursuant to this
Section 2.6(e), Enterprises shall be entitled to be
reimbursed for its costs pursuant to Section 8.3(a)
hereof.
(f) The parties hereto acknowledge that if AUGI were
required to pay in full all or any substantial
portion of the liabilities set forth on the Computer
Software Businesses Liabilities Schedule, AUGI would
not be able to meet the minimum $6.0 million of
"Available Cash Resources" condition to closing set
forth in Section 5.1(b) of this Agreement; it being
understood that satisfaction of such condition is
dependent upon AUGI and its Board of Directors
compromising
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such liabilities and/or effecting one or more sales
of the Computer Software Businesses between the date
of this Agreement and the Closing Date.
2.7 Compromise and Resolution of Certain Obligations of Robert M.
Rubin. Rubin is currently indebted to AUGI in the amount of $1.2 million under a
promissory note which is due July 31, 1998. Subject only to obtaining
stockholder approval at the Special AUGI Stockholders Meeting referred to in
Section 4.1 hereof of the sale of its manufacturing operations to Hutchinson
Corporation, on the Closing Date, AUGI shall terminate such obligation owed by
Rubin in consideration for Rubin's assignment to AUGI of all payments which he
shall be entitled to receive from Hutchinson Corporation (aggregating $1.2
million) under the non-competition and consulting agreements entered into
between Rubin and Hutchinson Corporation and its affiliates; provided, however,
that Rubin's obligations under the above referenced $1.2 million note shall be
terminated/released by AUGI only in the event and to the extent that AUGI shall
receive payments from Hutchinson Corporation or its affiliates. In addition,
prior to the Closing, AUGI shall receive written confirmation from Hutchinson
Corporation and its affiliates, to the effect that all payments under such
non-competition and consulting agreements shall be remitted directly to AUGI.
Annexed hereto as Schedule 2.7(a) and made a part hereof is the form of such
assignment by Rubin and consent of Hutchinson Corporation or its affiliates (the
"Assignment and Consent") to be delivered to AUGI on or before the Closing Date.
2.8 Certain Conflicts of Interest and Waiver. Each of the parties
hereto do hereby acknowledge and agree that GTH has at various times served as
legal counsel, and continues to serve as legal counsel, to each of AUGI, IDF,
WPEC, Rubin, Enterprises, EPC, Sr. and EPC, Jr. Accordingly, each of such
parties has heretofore provided GTH with a written conflict waiver in connection
with its representation of Enterprises and all members of the Enterprises Group
, including EPC, Sr. and EPC, Jr., in connection with the negotiation and
execution of this Agreement and consummation of the transactions contemplated
hereby. AUGI, Rubin, IDF and WPEC have advised the Enterprises Group and GTH
that they have retained the firm of Gersten Savage Kaplowitz & Fredericks, LLP,
to represent them in connection with the negotiation and execution of this
Agreement and consummation of the transactions contemplated hereby.
2.9 Indemnification.
(a) AUGI agrees that, except as may be limited by applicable
law, for seven (7) years from and after the Closing Date, the indemnification
obligations set forth in the AUGI Indemnification Agreement for Officers and
Directors in the form of Exhibit D annexed hereto (the "Indemnity Agreement"),
the Certificate of Incorporation and the By-Laws of AUGI, in each case in effect
as at the date of this Agreement, shall survive the Closing Date. Enterprises
agrees that neither it nor any members of the Enterprises Group shall vote their
shares of capital stock of AUGI to amend, repeal or otherwise modify such
Indemnity Agreement, Certificate of Incorporation or By-Laws in any manner that
would adversely affect the rights thereunder of the individuals who on or at
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any time prior to the Closing Date were entitled to indemnification thereunder
with respect to matters occurring prior to the Closing Date.
(b) AUGI shall obtain on or before Closing, and shall
thereafter maintain in effect from and after the Closing Date, a directors' and
officers' liability tail insurance policy covering the Company's current
officers and directors in their respective capacities as such officers and
directors with respect to matters occurring prior to the Closing Date, which
tail insurance policy shall contain such coverage limits, require payment of
such premiums, and be on such terms and conditions as shall be mutually
agreeable to Enterprises and AUGI. The parties shall, within ten (10) business
days from the date of this Agreement obtain quotes for, and mutually agree upon,
such insurance coverage.
2.10 Investment Intent. Enterprises hereby agrees that all of the
securities being purchased from AUGI, IDF and WPEC pursuant to this Agreement
are being purchased for investment and not with a view toward the distribution
or resale thereof. In such connection, Enterprises agrees (and shall cause any
of its transferees of such securities to agree) that the following legend may be
placed on any certificates evidencing such securities:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold, pledged, transferred,
hypothecated or assigned in the absence of any effective
registration statement under the Act, or an applicable
exemption from the registration requirements of the Act,
accompanied by an opinion of counsel acceptable to the Company
that registration under the Act is not required."
2.11 Due Authorization. This Agreement and all of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
of the respective Boards of Directors of each of AUGI, IDF and WPEC, and
Enterprises has received true copies of fully executed resolutions of such
Boards of Directors.
3. Boards of Directors of AUGI, IDF and WPEC.
3.1 AUGI.
(a) On the Closing Date, all members of the AUGI Board of
Directors, with the exception of C. Dean McLain
("McLain"), shall tender their resignations as
directors of AUGI and all of its consolidated
subsidiaries (other than IDF and WPEC). EPC, Sr.,
EPC, Jr. and four (4) additional persons designed by
Enterprises (collectively, with EPC, Sr. and EPC,
Jr., the "Enterprises AUGI Designees") shall be
designated to fill the vacancies created by the
resignations of the prior six (6) AUGI directors. The
entire AUGI Board of Directors to take
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office from and after the Closing Date, including all
six (6) of the Enterprises AUGI Designees and McLain
shall have been voted upon and approved by the
holders of a majority of the outstanding AUGI Common
Stock at the Special AUGI Stockholders Meeting
referred to in Section 4 below.
(b) From and after the Closing Date, in the event of the
death or inability of any of the six (6) Enterprises
AUGI Designees to continue to serve on the AUGI Board
of Directors, the vacancy so created shall be filled
by another person designated by Enterprises.
(c) For a period of three (3) years from the Closing
Date, each of the members of the Enterprises Group
agrees to vote all of the shares of AUGI Common Stock
and/or AUGI Series B-3 Preferred Stock owned of
record or beneficially by them in favor of the
election of McLain as a member of the Board of
Directors of AUGI. Similarly, for a period of three
(3) years from the Closing Date, Rubin and McLain
hereby agree to vote all shares of AUGI Common Stock
owned of record or beneficially by them in favor of
the election of the Enterprises AUGI Designees as
members of the Board of Directors of AUGI. In such
connection, as at the Closing Date, Rubin and McLain
shall deliver to each of Enterprises, EPC, Sr. and
EPC, Jr. an irrevocable proxy coupled with an
interest, in the form of Exhibit E annexed hereto.
3.2 IDF.
(a) On the Closing Date, all members of the IDF Board of
Directors, with the exception of Solon L. Kandel,
Lawrence Kaplan, and Sergio Luciani shall tender
their resignations as directors of IDF and all of its
consolidated subsidiaries (provided, that Lembit Kald
shall continue to serve as a director of
Hayden-Wegman, Inc.). EPC, Sr., EPC, Jr. and two (2)
additional persons designed by Enterprises
(collectively, with EPC, Sr. and EPC, Jr., the
"Enterprises IDF Designees") shall be designated to
fill the vacancies created by the resignations of the
IDF Directors. The four (4) Enterprises IDF Designees
shall similarly be elected as members of the Board of
Directors of all subsidiaries of IDF, including
TechStar Communications, Inc. and Hayden-Wegman, Inc.
(b) From and after the Closing Date, in the event of the
death or inability of any of the four (4) Enterprises
IDF Designees to continue to serve on the Board of
Directors of IDF or any of its subsidiaries, the
vacancy so created shall be filled by another person
designated by Enterprises.
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(c) For a period of three (3) years from the Closing
Date, each of the members of the Enterprises Group
agrees to vote all of the shares of IDF Common Stock
owned of record or beneficially by them, and shall
use their best efforts to cause AUGI to vote, for the
election of Lawrence Kaplan and (for so long as they
shall be employed on a full time basis with IDF and
its subsidiaries) Solon L. Kandel and Sergio Luciani
as members of the Board of Directors of IDF and each
of its subsidiaries, and (for so long as he shall be
employed on a full-time basis with such corporation),
Lembit Kald as a member of the Board of Directors of
Hayden-Wegman. Similarly, for a period of three (3)
years from the Closing Date, each of Rubin, Lawrence
Kaplan, Sergio Luciani, Solon L. Kandel and Lembit
Kald hereby agrees to vote all shares of IDF Common
Stock owned of record or beneficially by them in
favor of the election of the four (4) Enterprises IDF
Designees as members of the Board of Directors of IDF
and each of its subsidiaries. In such connection, as
at the Closing Date, each of Messrs. Rubin, Kaplan,
Luciani, Kandel and Kald shall deliver to each of
Enterprises, EPC, Sr. and EPC, Jr. an irrevocable
proxy coupled with an interest, in the form of
Exhibit E annexed hereto.
3.3 WPEC.
(a) On the Closing Date, EPC, Sr., EPC, Jr. and one
additional person designated by Enterprises
(collectively, with EPC, Sr. and EPC, Jr., the
"Enterprises WPEC Designees") shall be designated to
serve as members of the Board of Directors of WPEC In
the event of the death or inability of any
Enterprises WPEC Designee to serve on the WPEC Board
of Directors, the vacancy so created shall be filled
by Enterprises. The WPEC Board of Directors shall
continue to serve until the next annual meeting of
the stockholders of WPEC and until their successors
shall be elected and qualified.
4. Special AUGI Stockholders Meeting.
4.1 As soon as practicable following the date of this Agreement
(but in no event later than May 31, 1998, or such later date
as may be mutually agreed to by Enterprises and AUGI (the
"Special AUGI Stockholders Meeting Date"), AUGI shall hold a
special meeting of its stockholders (the "Special AUGI
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Stockholders Meeting") for the purpose of (a) approving,
adopting and ratifying this Agreement and all of the
transactions contemplated hereby, (b) approving and ratifying
certain of the resolutions which were not passed by reason of
a lack of a quorum at the February 24, 1998 Annual
Stockholders Meeting, and (c) approving and ratifying certain
of the transactions approved by the Board of Directors of AUGI
which took place in 1996 and 1997 and through the Closing
Date, all as shall be specified by Enterprises prior to the
filing of the preliminary proxy statement in respect of such
Special AUGI Stockholders Meeting.
4.2 As soon as practicable following the date of this Agreement,
but in no event later than April 15, 1998, AUGI and its legal
representatives shall, in conjunction with Enterprises and its
legal representatives, prepare and file with the Securities
and Exchange Commission ("SEC") a preliminary proxy statement
describing this Agreement and the transactions contemplated
hereby (the "Proxy Statement"). The form and content of such
Proxy Statement and all amendments thereto shall be mutually
acceptable in all respects to Enterprises, AUGI and their
respective legal representatives. Each of Enterprises and AUGI
mutually agree to use their collective best efforts to cause
the Special AUGI Stockholders Meeting to be held on or before
May 31, 1998.
5. Conditions to Obligations of the Parties.
5.1 Conditions to Obligations of Enterprises. The obligations of
Enterprises and its affiliates to purchase the AUGI Series B-3
Preferred Stock, the AUGI Warrants, the IDF Common Stock, IDF
Warrants and/or the WPEC Warrants, or to otherwise consummate
the transactions contemplated by this Agreement are subject to
the satisfaction of all of the following conditions precedent,
any one of which may be waived in writing by Enterprises:
(a) Due Diligence Review. Enterprises and its affiliates
shall have completed a thorough due diligence review
and investigation of the assets, businesses,
financial condition, liabilities (fixed and
contingent), management and prospects of each of
AUGI, IDF, WPEC and their respective subsidiary
corporations, and, based thereon, shall determine (in
the exercise of its sole discretion) to consummate
the investments and related transactions contemplated
hereby (the "Due Diligence Review"). To assist
Enterprises and its representatives in the conduct of
such Due Diligence Review, each of AUGI, IDF and WPEC
shall (i) permit Enterprises representatives to meet
at all reasonable times with senior operating
management of such corporations to review strategic
business goals and discuss operating philosophies;
(ii) provide Enterprises representatives with full
and complete access to all financial statements,
worksheets, budgets,
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projections, and other financial information and
reports concerning the operating businesses of each
of AUGI, IDF and WPEC; and (iii) permit Greenberg
Traurig Hoffman Lipoff Rosen & Quentel ("GTH") to
furnish Enterprises and its representatives with all
agreements, reports, writings and other material in
such counsels possession which may reasonably be
expected to aid Enterprises in its Due Diligence
Review. Subject to the foregoing, it is anticipated
that Enterprises will complete its Due Diligence
Review prior to May 31, 1998.
(b) Minimum Liquid Resources. On the Closing Date, after
giving effect to (i) the anticipated reduction in
liabilities associated with its Computer Software
Businesses, resulting from the compromise of certain
liabilities, and/or the contemplated sale of all or
any portion of the Computer Software Businesses
between the date of this Agreement and the Closing
Date, and (ii) the receipt of a $2.0 million
anticipated tax refund, AUGI shall have on hand cash
and cash equivalents in the form of certificates of
deposit, short-term government or other immediately
liquid marketable securities (collectively,
"Available Cash Resources") of not less than $6.0
million.
(c) Sale of Software Businesses and Related Liabilities.
Prior to the Closing Date, Enterprises shall have
received assurances acceptable to it, to the effect
that (i) all of the fixed and contingent liabilities
of AUGI under real estate and equipment leases and
other obligations in respect of the Computer Software
Businesses as previously or presently conducted by
its Connectsoft, Inc., ConnectSoft Communciations
Corporation and/or Exodus Technologies, Inc.
subsidiaries (including those specified on Schedule
2.6(b) hereto) have been satisfactorily terminated or
compromised on or before Closing, and (ii) the terms
and conditions of the sale or contemplated sale of
the assets or securities of any of the companies
comprising the Computer Software Businesses shall be
satisfactory in all respects to Enterprises.
(d) Net Operating Loss Carryforward. Prior to the Closing
Date, Enterprises shall have received a written
opinion acceptable to Enterprises, in its sole
discretion, from Deloitte & Touche, LLP or any other
accounting firm acceptable to Enterprises, to the
effect that (i) as of March 31, 1998, the net
operating loss carryforward of AUGI will be no less
than $19 million, (ii) the accrual or receipt of all
or any portion of the anticipated $2.0 million tax
refund referred to in Section 5.1(b) above shall not
reduce or otherwise adversely impact AUGI's net
operating loss or other favorable tax attributes, and
(iii) taking into account the transactions
contemplated by this Agreement, the use of AUGI's net
operating loss carry forward referred to in (i) above
will not be subject to limitation under Sections 269,
382, 384, 1502, or any
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other provision under the Internal Revenue Code of
1986, as amended, or the Treasury Regulations
promulgated thereunder.
(e) AUGI Stockholder Approval. The Special AUGI
Stockholders Meeting shall have been duly conducted,
and the holders of the requisite majority of AUGI
shares of capital stock shall have approved (i) this
Agreement and the transactions contemplated hereby,
including the election of the Enterprises AUGI
Designees to the Board of Directors of AUGI, and (ii)
the other matters referred to in Section 4.1 above,
at such Special AUGI Stockholders Meeting.
(f) No Material Adverse Change. Between the date of this
Agreement and the Closing Date, there shall not have
occurred any condition or event (including, without
limitation, the commencement of litigation against
AUGI, IDF, WPEC, the Computer Software Businesses, or
any of their respective subsidiaries, officers or
directors) which, with the passage of time, the
giving of notice or otherwise, could reasonably be
expected to have a material adverse effect on the
business, financial condition, management,
liabilities or prospects of any of AUGI, IDF,
TechStar, Hayden-Wegman, the Computer Software
Businesses or WPEC, whether individually, or taken as
a consolidated whole.
(g) No Litigation. As at the Closing Date, there shall
not be pending any litigation against AUGI or the
Board of Directors of AUGI which seeks to enjoin this
Agreement or the transactions contemplated hereby,
nor shall AUGI, Enterprises or any member of the AUGI
Management Group have received notice that any such
litigation is threatened.
(h) Maintenance of Directors and Officers Liability
Insurance. All existing directors and officers
liability insurance maintained by AUGI prior to the
date hereof, shall remain in full force and effect as
at the Closing Date, and AUGI shall not have received
any notice of disclaimers or reservation of rights by
AUGI's insurance carrier.
(i) Compliance with Representations and Warranties. The
representations and warranties set forth in Section 6
of this Agreement shall be true and correct on the
Closing Date as through restated in full as at such
date. At the Closing, AUGI shall deliver to
Enterprises a certificate executed by the Chief
Executive Officer and Chief Financial Officer of
AUGI, to the effect that all such representations and
warranties have been complied with.
(j) Compliance with Covenants and Agreements. As at the
Closing Date, each of AUGI, IDF and WPEC and the
other party signatories to
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this Agreement shall have complied in full with their
respective covenants and agreements contained herein.
In addition, on or prior to the Closing, the
Enterprises Group shall have received satisfactory
irrevocable proxies from Messrs. Rubin, Laurence
Kaplan, Sergio Luciani, Solon L. Kandel and Lembit
Kald with respect to the matters referred in Section
3.1(c) and Section 3.2(c) above. At the Closing, AUGI
shall deliver to Enterprises a certificate executed
by the Chief Executive Officer and Chief Financial
Officer of AUGI, to the effect that all such
covenants and agreements have been complied with.
(k) Delivery of Securities, Exhibits and Other
Instruments and Agreements. At the Closing, the
Enterprises Group shall have received stock
certificates evidencing the appropriate number of
shares of AUGI Series B-3 Preferred Stock, and IDF
Common Stock. In addition, the Enterprises Group
shall have received the WPEC Warrants, the AUGI
Warrants and the IDF Warrants. Prior to the Closing
Date, the Amended and Restated Certificate of
Designations of the Series B-3 Preferred Stock shall
have been filed with the Secretary of State of the
State of Delaware. In addition, at Closing, AUGI
shall have received the Assignment and Consent, duly
executed by Rubin and Hutchinson Corporation and its
affiliate.
5.2 Conditions to Obligations of AUGI, IDF and WPEC. The obligations of
AUGI, IDF and WPEC to sell the AUGI securities, the IDF Common Stock
and/or the WPEC Warrants, or to otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction of all
of the following conditions precedent, any one of which may be waived
in writing by AUGI, on behalf of itself, IDF and WPEC:
(a) AUGI Stockholder Approval. The Special AUGI
Stockholders Meeting shall have been duly conducted,
and the holders of the requisite majority of AUGI
shares of capital stock shall have approved this
Agreement and the transactions contemplated hereby,
including the election of the Enterprises AUGI
Designees to the Board of Directors of AUGI, at such
Special AUGI Stockholders Meeting.
(b No Litigation. As at the Closing Date, there shall
not be pending any litigation against AUGI or the
Board of Directors of AUGI which seeks to enjoin this
Agreement or the transactions contemplated hereby,
nor shall AUGI, Enterprises or any member of the AUGI
Management Group have received notice that any such
litigation is threatened.
(c) Maintenance of Directors and Officers Liability
Insurance. All existing directors and officers
liability insurance maintained by AUGI
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prior to the date hereof, shall remain in full force
and effect as at and after the Closing Date.
(d) Compliance with Covenants and Agreements. As at the
Closing Date, the Enterprises Group shall have
complied in full with its covenants and agreements
contained herein, including payment of the purchase
prices for the AUGI Series B-3 Preferred Stock, the
AUGI Warrants, the IDF Common Stock, the IDF Warrants
and the WPEC Warrants being purchased by the
Enterprises Group pursuant to this Agreement. At the
Closing, Enterprises shall deliver to AUGI a
certificate executed by the Chief Operating Officer
of Enterprises to the effect that all such covenants
and agreements have been complied with.
(e) Payment for Securities, Other Agreements. At the
Closing, each of AUGI, IDF and WPEC shall have
received payment in full for the appropriate number
of shares of AUGI Series B-3 Preferred Stock, the IDF
Common Stock, the AUGI Warrants, the IDF Warrants and
the WPEC Warrants. In addition, at Closing, AUGI
shall have received the written ratification and
consent of the Enterprises AUGI Designees on the AUGI
Board of Directors to the cancellation of the $1.2
million Rubin Note in exchange for the Assignment and
Consent.
6. Representations and Warranties of AUGI, IDF and WPEC.
Each of AUGI, IDF and WPEC (collectively, the "Corporations") do hereby
individually as to each of them (but not jointly or severally)
represent and warrant to Enterprises, as follows:
6.1 Authorization and Enforceability of Agreement. This Agreement, the
Exhibits hereto and the consummation of the transactions contemplated
hereby and thereby have all been duly authorized and approved by all
requisite corporate action of the respective Boards of Directors of
each of AUGI, IDF and WPEC (in each case, with Rubin abstaining from
the voting on such matters). This Agreement and each of the Exhibits
hereto to which any of the Corporations are parties signatory, when
executed, shall constitute valid and legally binding agreements and
obligations of the applicable Corporation signatory thereto,
enforceable against such Corporation in accordance with its or their
respective terms, except as enforceability may be limited by laws of
bankruptcy, reorganization and creditors' rights generally and except
as enforcement thereof may be limited as to certain equitable remedies.
6.2 SEC Reports. AUGI (a) has furnished to Enterprises true and
complete copies of AUGI's prospectus on Form S-1 declared effective
under the 1933 Act, Form 10-K Annual Report for its fiscal year ended
July 31, 1997 (the "1997 Form
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10-K"), Form 10-Q Quarterly Report for the quarters ended October
31, 1997 and January 31, 1998, all Form 8-K Current Reports filed with
the SEC since December 31, 1995, and the Proxy Statement for the 1996
Annual Meeting, all as filed with the SEC under the 1934 Act, and (b)
will timely file with the SEC and simultaneously furnish to Enterprises
all additional reports required to be filed under the Securities Act of
1933, as amended and/or the Securities Exchange Act of 1934, as amended
for periods from and after October 31, 1997 (collectively, the "SEC
Filings"). Except for such amendments which may be required to the
aforesaid Form S-1 registration statement to keep the same current for
any selling stockholder thereunder, all of such SEC Filings are true,
correct and complete in all material respects and do not contain any
misleading statement of a material fact or omit to state any fact
required to be stated therein in order to make the statements contained
therein not misleading in any material respect.
6.3 Capitalization. Schedule 6.3 annexed hereto sets forth an analysis
as of December 31, 1997 of (i) the authorized, issued and outstanding
shares of AUGI Common Stock, and principal record owners of such AUGI
Common Stock, (ii) the issued and outstanding shares of Series B-1
Preferred Stock, and the principal record owners thereof, (iii)
outstanding options and warrants to purchase shares of AUGI Common
Stock, and the principal record holders thereof, and (iv) the
authorized, issued and outstanding shares of IDF Common Stock,
convertible notes and options to purchase shares of IDF Common Stock,
and the principal holders of such securities. Since December 31, except
as set forth on Schedule 6.3, there are no additional authorized,
issued and outstanding shares of Common Stock, preferred stock,
convertible notes, warrants or options to purchase shares of capital
stock of AUGI, IDF and/or WPEC.
6.4 Litigation. Except as reflected on Schedule 6.4 annexed hereto,
there are no lawsuits, governmental investigations or administrative
proceedings or hearings or other litigation pending or, to the
knowledge of the Corporations, threatened, against any of the
Corporations, any direct or indirect subsidiary of any of the
Corporations, or any officer or director thereof.
6.5 Taxes. All tax returns, reports and statements, including
information returns, required by any federal, state or local
governmental authority to be filed by any of the Corporations or their
subsidiaries have been filed with the appropriate governmental
authority, and all federal, state and local income taxes, withholding
taxes, sales taxes, capital gains taxes, property taxes, use taxes, ad
valorem taxes and any other taxes and levies to which the Corporations
or its subsidiaries are subject (collectively, "Taxes") have been fully
and timely paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto, other than the imposition of any
Taxes which are being contested in good faith by any of the
Corporations and are disclosed on Schedule 6.5 hereto. Proper and
accurate amounts have been withheld by each of the Corporations and
their respective subsidiaries from its respective employees for all
periods in which full
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and complete compliance with all applicable federal, state, local and
foreign law and such withholdings have been timely paid to the
respective governmental authorities. Except as set forth on Schedule
6.5, no Tax returns of any of the Corporations or their respective
subsidiaries are being audited or have been noticed for audit, and no
extensions for filing of any Tax returns or for the payment of any Tax,
assessment or other change has been entered into with any taxing
authority.
6.6 ERISA. Schedule 6.6 annexed hereto lists and separately identifies
all title IV Plans, Plans, including Multiemployer Plans (as defined in
Section 4001(a)(3) of ERISA) to which any of the Corporations or their
respective subsidiaries are parties. Copies of all such Plans shall be
furnished to Enterprises and its representatives. Each Plan is in
compliance with the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Code (the "Code"), including the filing of reports required
under ERISA and the Code. None of the Corporations or their
subsidiaries have failed to make any contribution or pay any amount due
as required by either Section 412 of the Code or Section 302 of ERISA
or the terms of any such Plan. None of the Corporations or any of its
subsidiaries or any ERISA Affiliate (which, together with any of the
Corporations or any of their subsidiaries would be treated as a single
employer within the meaning of Sections 414(b), (c), (m) or (o) of
ERISA) has engaged in any prohibited transaction, as defined in Section
4975 of the Code, in connection with any Plan which would subject any
of the Corporations or its subsidiaries to a material tax on prohibited
transactions imposed by Section 4975 of the Code. Except as set forth
on Schedule 6.6: (i) no Title IV Plan has any unfunded pension
liability, (ii) no ERISA Event or event described in Section 4062(e) of
ERISA with respect to any Title IV Plan has occurred or is reasonably
expected to occur, (iii) there are no pending, or to the knowledge of
any of the Corporations, threatened claims, sanctions, actions or
lawsuits asserted or instituted against any Plan, (iv) none of the
Corporations or any of its subsidiaries or other ERISA Affiliate has
incurred or reasonably expects to incur any liability as a result of a
complete or partial withdrawal from a Multemployer Plan (as defined in
Section 4001(a)(3) of ERISA), and (v) within the past five years, no
Title IV Plan with unfunded pension liabilities has been transferred
outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any of the Corporations or its subsidiaries.
As used herein, the term "Title IV Plan" means an employee benefit
plan, as defined in Section 3(2) of ERISA, which is covered by Title IV
of ERISA, and which any of the Corporations, any subsidiary thereof or
any other ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by any of them. As used herein the term "unfunded pension
liability" means, the aggregate amount, at any time outstanding, of the
amount by which the present value of all accrued benefits under each
Title IV Plan exceed the fair market value of all assets of such Title
IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent
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<PAGE>
valuation date for each such Title IV Plan using the actuarial
assumptions for funding purposes in effect under such Title IV Plan. As
used herein, the term "ERISA Event" mean (a) any event described in
Section 4043(c) of ERISA with respect from a Title IV Plan, (b) the
withdrawal of any of the Corporations or an ERISA Affiliate from a
Title IV Plan, (c) the complete or partial withdrawal from any
Multiemployer Plan, (d) the filing of a notice to terminate any Title
IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA, (e) the institution of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Title IV Plan or
Multiemployer Plan, (f) the failure to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such
failure is cured within 30 days, or (g) any other event or condition
which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan, or for the
imposition of liability under Section 4069 or 4212(c) of ERISA.
6.7 Environmental Matters. Except as set forth in Schedule 6.7 annexed
hereto, as of the Closing Date, to the best knowledge of the
Corporations: (i) all real estate owned or leased by the Corporations
is free of contamination from any Hazardous Materials, except for such
contamination which would not result in any liabilities, obligations,
responsibilities, response, remedial and removal costs, studies,
capital costs, damages, punitive damages, treble damages, or related
other related costs and expenses, including professional and consulting
fees (collectively, "Environmental Liabilities") which could reasonably
be expected to exceed $100,000 in the aggregate, (ii) no Corporation or
any subsidiary has caused or suffered to occur any release of Hazardous
Materials on, at, in, under, above, to, from or about any of its real
estate, (iii) the Corporations and its subsidiaries are in compliance
with all Environmental Laws, except for any Environmental Liabilities
which could reasonably be excepted to exceed $100,000 in the aggregate,
(iv) the Corporations and its subsidiaries have obtained all permits
required by Environmental Laws, and all such permits are in full force
and in good standing, (v) none of the Corporations are involved in or
is aware of any facts, circumstances or conditions, including any
releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Corporations or its subsidiaries
which could reasonably be expected to exceed $100,000 in the aggregate,
(vi) there is no litigation, governmental investigation or any
administrative proceeding pending, or to the knowledge of the
Corporations, threatened, which arises under or relates to any
Environmental Laws or Hazardous Material and which seeks damages,
penalties, fines, costs or expenses against any of the Corporations or
its subsidiaries in excess of $100,000 in the aggregate, or which
alleges criminal misconduct, (vii) no notice has been received by any
of the Corporations or its subsidiaries identifying it or them as a
"potentially responsible party" or requesting information under CERCLA
(as herein defined) or analogous state statutes. As used herein, the
term "Environmental Laws" means all applicable federal, state, local
and foreign laws,
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<PAGE>
statutes, ordinances, codes, rules, standards and regulations, now or
hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands,
land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA"); the
Hazardous Materials Transportation Authorization Act of 1994; the
Federal Insecticide, Fungicide and Rodenticide Act; the Solid Waste
Disposal Act; the Toxic Substance Control Act; the Clean Air Act; the
Federal Water Pollution Control Act; the Occupational Safety and Health
Act; and the Safe Drinking Water Act, each as from time to time
amended, and any and all regulations promulgated thereunder, and all
analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification and approval statutes. As used
herein, the term "Hazardous Material" means any substance, material or
waste which is regulated by or forms the basis of Environmental
Liabilities under Environmental Laws.
6.8 Cancellation of Certain WPEC Stock Options. WPEC's Board of
Directors have rescinded an aggregate of 1,000,000 stock options
previously awarded to certain officers and directors of WPEC, including
Rubin and McLain, as such options were withdrawn from shareholder
consideration.
7. Closing and Closing Date. The transactions contemplated by this
Agreement shall be consummated at a closing (the "Closing") to be held
at the offices of GTH, at 200 Park Avenue, 15th floor, New York, New
York 10166 on a date (the "Closing Date") which shall be not later than
fifteen (15) days following completion of the Special AUGI Stockholders
Meeting, or such other date as AUGI and Enterprises may mutually agree
upon; provided, that in no event shall the Closing Date be later than
June 30, 1998, without the prior written consent of both Enterprises
and AUGI.
8. Termination of Agreement and Termination Fees.
8.1 Termination. This Agreement may be terminated at any time on
or before the Closing Date -------------
(a) by mutual agreement of all parties hereto, or
(b) by Enterprises, in the event that (i) it shall not be
satisfied, in the exercise of its sole and absolute
discretion, prior to May 31, 1998 with the results of
its Due Diligence Review, (ii) any of the
Corporations shall have breached any of their
respective representations and warranties contained
in Section 6 hereof, (iii) any of the Corporations
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<PAGE>
shall have failed to fully perform on a timely basis
all covenants and agreements required to be performed
by them pursuant to this Agreement, or (iv) any of
the conditions specified in Section 5.1 hereof shall
have not been satisfied or waived in writing by
Enterprises as at the Closing Date, or
(c by AUGI (on behalf of itself, IDF and WPEC), in the
event that (i) Enterprises shall not have advised
AUGI that Enterprises has completed a satisfactory
Due Diligence Review prior to May 31, 1998, (ii)
Enterprises shall have failed to fully perform on a
timely basis all covenants and agreements required to
be performed by it pursuant to this Agreement, (iii)
any of the conditions specified in Section 5.2 hereof
shall have not been satisfied or waived in writing by
Enterprises as at the Closing Date, or (iv) AUGI
shall have received a bona fide written offer from a
financially qualified third person, firm or
corporation not affiliated or associated in any
capacity with AUGI, IDF, WPEC or any of its officers,
directors or principal stockholders (a "Third Party
Offeror") to acquire (whether by merger, tender
offer, purchase of assets or securities or similar
combination) all or substantially all of the assets,
properties or securities of AUGI, IDF or WPEC (an
"Acquisition Offer"), on terms which the board of
directors of AUGI determines, in good faith and the
exercise of its fiduciary duties, is more beneficial
to the stockholders of AUGI than consummating the
transactions contemplated by this Agreement;
provided, that prior to the "Outside Closing Date"
(as herein defined), under no circumstances or
conditions shall the Board of Directors of AUGI, IDF
or WPEC, or any member thereof, encourage or solicit
any such Acquisition Offer, meet or otherwise
negotiate with any prospective Third Party Offeror,
or otherwise authorize any investment banker,
financial consultant or other agent to engage in any
such activities; or
(d) By either Enterprises or AUGI (on behalf of all of
the Corporations) in the event that the Closing and
the Closing Date shall not have occurred by 5:00 p.m.
(New York City time) on June 30, 1998 (the "Outside
Closing Date").
8.2 Liability Upon Termination. Except as set forth in Section 8.3
below, in the event that this Agreement shall be terminated on or
prior to the Closing Date, no party hereto shall have any further
liability to the other; provided, however, no party to this
Agreement (nor any affiliate of such party) shall have the right
to terminate this Agreement and his or its obligations hereunder
by reason of such parties failure to perform his or its respective
covenants, agreements and obligations hereunder, or his or its
breach of their respective representations and warranties made in
this Agreement.
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<PAGE>
8.3 Termination Fee and Expenses.
(a) Expense Reimbursement. In the event that Enterprises
shall terminate this Agreement by reason of clauses
(i), (ii), (iii) or (iv) of Section 8.1(b) above: (i)
AUGI and Enterprises shall each be responsible to pay
50% of the fees of Deloitte & Touche or any other
accounting firm engaged to provide tax consulting
services in respect of the matters contemplated by
Section 5.1(d) above up to an aggregate amount not to
exceed $35,000 (the "Tax Consulting Fee"); and (ii)
AUGI shall pay to Enterprises an amount equal to
Enterprises' actual out-of-pocket costs and expenses,
including reasonable attorneys' fees, incurred in
connection with the transactions contemplated hereby
(excluding the Tax Consulting Fee payable in respect
of clause (i) of this Section 8.3(a)), up to a
maximum amount not to exceed $50,000 in the aggregate
(collectively, the "Enterprises Expense
Reimbursement").
(b) Termination Fee. In the event that AUGI shall
terminate this Agreement solely by reason of clause
(iv) of Section 8.1(c) above, then simultaneous with
consummation of the transaction contemplated by the
Acquisition Offer made by the Third Party Offeror (or
any modification or amendment thereto), AUGI shall
pay to Enterprises a cash termination or "break-up"
fee of $500,000.
(c) Payments. All payments to be made pursuant to this
Section 8.3 (including, without limitation,
reimbursement to Enterprise of 50% of the Tax
Consulting Fees, if applicable, and payment of the
Enterprises Expense Reimbursement) shall be paid by
the applicable party to the other party not later
than ten (10) days following termination of this
Agreement.
9. Miscellaneous
9.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise and consult with the other
Party prior to making the disclosure and permit the other Party to participate
in the preparation of such release).
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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9.3 Entire Agreement. This Agreement (including the Exhibits hereto and
other documents referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party ; provided, however, that Enterprises may (i) assign any or
all of its rights and interests hereunder to one or more of their Affiliates and
(ii) designate one or more of their Affiliates to perform its obligations
hereunder (in any or all of which cases Enterprises nonetheless shall remain
responsible for the performance of all of such obligations hereunder).
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) when delivered
personally, (ii) after five (5) business days if it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below, or (iii) after one business day if it is
sent by overnight courier via a reputable overnight courier service with
confirmation of receipt and addressed to the intended recipient as set forth
below:
If to AUGI:
Mr. Robert M. Rubin, Chief Executive Officer
American United Global, Inc.
6060 Kings Gate Circle
Del Ray Beach, FL
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<PAGE>
If to WPEC:
Mr. C. Dean McLain,. Chief Executive Officer
Western Power & Equipment Corp.
4601 NE 77th Avenue, Suite 200
Vancouver, WA 98662
If to IDF:
Mr. Solon L. Kandel,. Chief Executive Officer
IDF International, Inc.
c/o Hayden Wegman, Inc.
330 West 42nd Street
New York, New York 10036
Copy to:
Jay Kaplowitz, Esq.
Gersten Savage Kaplowitz & Fredericks, LLP
101 East 52nd Street, 9th floor
New York, New York 10022
If to Enterprises:
Eugene P. Conese, Jr.
Conese Enterprises, Ltd.
55 Alhambra Plaza, Suite 600
Coral Gables, FL 33134
Copy to:
Stephen A. Weiss, Esq.
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
200 Park Avenue
New York, New York 10166
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
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9.8 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the
domestic laws of the State of Delaware, without giving effect to any choice of
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware. Any legal action or proceeding with respect to
this Agreement may be brought in any court of the State of New York, or in any
court of the United States of America within the State of New York, and by
execution and delivery of this Agreement, each of the Corporations and
Enterprises hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts.
9.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties hereto. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.11 Expenses. Except as otherwise provided in Section 8.3 hereof, each
of the Corporations, on one hand, and Enterprises, on the other hand, will bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. In
addition, it is expressly acknowledged and agreed that (a) on the date of
execution of this Agreement, AUGI has paid to GTH the sum of $250,000 in
reduction of accrued and unpaid professional fees and disbursements owned to
such firm and incurred prior to the date of this Agreement (such payment not to
be construed, however, as AUGI's admission that the full amount of such accrued
fees and disbursements are, in fact, due and owing), and (b) on the Closing
Date, AUGI shall pay the professional fees and disbursements of its special
counsel Gersten Savage Kaplowitz & Fredericks, LLP ("GSK"), up to a maximum
amount not to exceed $85,000 in the aggregate; provided, that (i) GSK's fees
shall be based solely upon such firm's itemized customary hourly time changes,
(ii) its disbursements shall be accompanied by appropriate receipts and other
backup, and (iii) all of the foregoing shall be verified and itemized to the
reasonable satisfaction of Enterprises.
9.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties
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and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation.
9.13 Incorporation of Exhibits and Schedules. The Disclosure Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, the date and year first above written.
AMERICAN UNITED GLOBAL, INC.
by: /s/ Robert M. Rubin
-------------------------------
Robert M. Rubin, Chief Executive
Officer
IDF INTERNATIONAL, INC.
by: /s/ Solon D. Kandel
------------------------------
Solon D. Kandel, Chief Executive
Officer
WESTERN POWER & EQUIPMENT CORP.
By: /s/ C. Dean McLain
------------------------------
C. Dean McLain, Chief Executive
Officer
CONESE ENTERPRISES, LTD.
By: /s/ Eugene P. Conese
-----------------------------
Eugene P. Conese, Jr., Chief
Operating Officer
AGREED TO, Pursuant to Sections 2.3, 2.5
2.7, 3.1 and 3.2 above:
/s/ Robert M. Rubin
---------------------------------
ROBERT M. RUBIN
<PAGE>
AGREED TO pursuant to Section 2.5 and Section 3.1(c) above:
/s/ C. Dean McLain
-------------------------------------------
C. Dean McLain
AGREED TO pursuant to Section 3.2(c) above:
/s/ Lawrence Kaplan
-------------------------------------------
Lawrence Kaplan
/s/ Sergio Luciani
-------------------------------------------
Sergio Luciani
/s/ Solon D. Kandel
-------------------------------------------
Solon D. Kandel
/s/ Lembit Kald
-------------------------------------------
Lembit Kald
AGREED TO pursuant to Section 2.5 above:
/s/ Howard Katz
-------------------------------------------
Howard Katz
/s/ David M. Barnes
-------------------------------------------
David M. Barnes
