AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 11th
day of December 1996 by and among AMERICAN UNITED GLOBAL, INC., a Delaware
corporation ("AUGI"), having its principal offices at 00 Xxxxxxxx Xxxxxxxxx, Xxx
Xxxxx, Xxx Xxxx 00000; BTS ACQUISITION CORP., a Delaware corporation
("Mergerco"), having its principal offices at 00000 XX 00xx Xxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxxxx 00000; BROADCAST TOWER SITES, INC., a Delaware corporation
("BTS"), having its principal offices at 0000 Xxxx Xxxx Xxxxxxx, Xxxxx 0000,
Xxxxxxxx, Xxxxxxxx 00000; and SIMANTOV MOSKONA ("Moskona") and XXXXXX XXXXXXX
("Xxxxxxx"). Moskona and Xxxxxxx are each hereinafter individually referred to
as a "Stockholder" and are hereinafter collectively referred to as the
"Stockholders". BTS is hereinafter sometimes referred to as the "Corporation".
W I T N E S S E T H:
WHEREAS, Moskona and Xxxxxxx are the record and beneficial owners of one
hundred percent (100%) of the issued and outstanding shares of the capital stock
of the Corporation, on a fully-diluted basis, after giving effect to: (a) the
exercise of all outstanding options and warrants to purchase capital stock of
the Corporation, (b) the conversion into common stock of all convertible notes,
convertible debentures, shares of convertible preferred stock of all series, or
other securities convertible into shares of capital stock of the Corporation,
and (c) the exercise of all other rights and privileges to receive or acquire
shares of common stock of the Corporation; and (d) there being no other capital
stock of the Corporation issued or outstanding other than the common stock of
the Corporation; and (e) there being no options, warrants, subscription rights,
rights of first refusal, convertible securities, or other rights to purchase or
receive shares of any of the securities referred to in (a), (b), (c), or (d)
preceding (collectively, the "Fully Diluted Equity"); and
WHEREAS, (a) Mergerco, a wholly-owned direct subsidiary of AUGI, has been
formed solely for the purpose of merging with BTS; the effect of which merger is
to enable Mergerco to acquire all of the shares of capital stock of the
Corporation as shall represent the Fully Diluted Equity of the Corporation as at
the effective date of the merger (hereinafter, referred to as the "Stock")
pursuant to the merger and for the consideration hereinafter provided for (the
"Merger"); and
WHEREAS, the Stockholders, the Board of Directors of the Corporation, the
Board of Directors of Mergerco, AUGI, as the sole stockholder of Mergerco, and
the Board of Directors of AUGI, have all authorized and approved the Merger and
the consummation of the other transactions contemplated by this Agreement, all
on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and agree
as follows:
1. THE MERGER.
1.1 The Merger; Change of Name of Surviving Corporation.
(a) At the time of the Closing on the Closing Date (as such
terms are hereinafter defined) and in accordance with the provisions of this
Agreement and the applicable provisions of the Delaware General Corporation Law
("Delaware Law"), BTS shall be merged with and into Mergerco, with Mergerco as
the surviving corporation of such merger (the "Merger"). The Merger shall be in
accordance with the terms and conditions of this Agreement and a certificate of
merger in substantially the form of Exhibit "A" annexed hereto (the "Certificate
of Merger"), with Mergerco as the surviving corporation of such Merger (Mergerco
being hereinafter sometimes referred to as the "Surviving Corporation").
Thereupon, the separate existence of each of BTS shall cease, and Mergerco, as
the Surviving Corporation of the Merger, shall continue its corporate existence
under Delaware Law.
(b) On the Closing Date, the Certificate of Incorporation of
the Surviving Corporation shall be amended in a manner satisfactory to AUGI,
pursuant to which the corporate name of the Surviving Corporation shall be
changed to TRANSCON TELECOMMUNICATION NETWORKS, INC., or such other corporate
name as shall be acceptable to the Stockholders and AUGI.
1.2 Effectiveness of the Merger. As soon as practicable upon or
after the satisfaction or waiver of the conditions precedent set forth in
Section 7 below, or waiver of such performance by the party or parties for whose
benefit such covenants or agreements are to be performed, Mergerco and BTS (if
required under Delaware Law) will execute the Certificate of Merger (subject to
such revisions as to form (but not substance) as may be required by the relevant
provisions of Delaware Law), and shall file or cause to be filed such
Certificate of Merger with the Secretary of State of Delaware; and the Merger
shall become effective as of the date of the filing of such Certificate of
Merger, which shall occur on the "Closing Date" (as hereinafter defined), and
the Closing shall be deemed to occur as of such Closing Date in accordance with
Section 10 hereof.
1.3 Effect of the Merger. Upon the effectiveness of the Merger: (a)
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of each of Mergerco and the Corporation (the
"Constituent Corporations"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to Delaware Law without further act or deed, and
(b) the Surviving Corporation shall be liable for all claims, liabilities and
obligations of the Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Delaware Law
without further act or deed.
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1.4 Surviving Corporation. Upon the effectiveness of the Merger, the
Certificate of Incorporation, By-Laws, directors and officers of the Surviving
Corporation shall be identical to those of Mergerco as in effect immediately
prior to the effectiveness of the Merger.
1.5 Status and Conversion of Securities. At the Closing Date and
upon the effectiveness of the Merger:
(a) Treasury Stock. Each share of capital stock of the
Corporation held by the Corporation as treasury stock immediately prior to the
effectiveness of the Merger shall be canceled and extinguished, and no payment
or issuance of any consideration shall be payable or shall be made in respect
thereof;
(b) Options and Warrants. As of the date of this Agreement
there are, and at the Closing Date there shall be, no options, warrants, rights,
or other agreements to acquire any securities of the Corporation, or any
securities directly or indirectly convertible into or exchangeable for or
exercisable to acquire the same, and no agreements to issue or acquire or
dispose of any of the foregoing.
(c) Treatment of Fully Diluted Equity. Each share of the Stock
of the Corporation outstanding immediately prior to the effectiveness of the
Merger, representing: (i) the Fully Diluted Equity of the Corporation; and (ii)
all other securities of the Corporation exercisable, convertible or exchangeable
for shares of Fully Diluted Equity, shall be canceled and extinguished and
converted into the right to receive a proportionate amount of the Merger
Consideration payable pursuant to Section 2 below. Such Merger Consideration
shall be paid and delivered to the holders of the outstanding Stock upon
surrender to the Surviving Corporation of the certificates representing such
shares of outstanding Stock (all of which shall be delivered free and clear of
any and all pledges, Liens (as such term is hereinafter defined), claims,
charges, options, calls, encumbrances, restrictions and assessments whatsoever,
except any restrictions which may be created by operation of state or federal
securities laws) at the time and place of the Closing as provided in Section 10
below.
1.6 Books and Records. On the Closing Date, the Corporation shall
deliver to Mergerco all of the stock books, records and minute books of the
Corporation, all financial and accounting books and records of the Corporation
and, except as may otherwise be agreed by the parties to this Agreement at the
Closing, all referral, client, customer and sales records of the Corporation.
1.7 Tax Free Reorganization. The parties to this Agreement intend
for the transactions whereby Mergerco, as the Surviving Corporation upon
consummation of the Merger, will remain a wholly-owned subsidiary of AUGI and
the owners of the Corporation's securities immediately prior to the consummation
of the Merger shall receive the Merger Consideration upon consummation of the
Merger, shall be treated as a tax free reorganization
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within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended.
2. Merger Consideration.
2.1 Merger Consideration. On consummation of the Merger, the
Stockholders, as the record owners of all outstanding Fully Diluted Equity of
the Corporation, shall receive their allocable percentages, as specified in
Section 3 of this Agreement, of an aggregate of the following (collectively, the
"Merger Consideration"):
(a) Five Hundred and Seven Thousand Two Hundred and Forty Six
(507,246) shares of Class A voting common stock, $0.01 par value per
share, of AUGI (the "AUGI Merger Stock");
(b) Seven Hundred and Eighty Thousand ($780,000) Dollars,
payable by wire transfer of immediately available United States
legal tender funds to bank accounts designated by the Stockholders
(the "Closing Cash Payment"); and
(c) Six Hundred Thousand ($600,000) Dollars, payable in the
form of three year promissory notes of AUGI (the "AUGI Notes");
provided, that the aggregate principal amount of such AUGI Notes to
be delivered on the Closing Date shall be subject to reduction in
the manner set forth in Section 2.3 below.
2.2 The AUGI Notes. The AUGI Notes to be issued on the Closing Date
shall contain the following terms and conditions:
(a) Interest. The AUGI Notes shall bear interest, payable
monthly at the prime rate of interest charged from time to time by
Citibank, NA (the "Prime Rate");
(b) Principal Installments. The AUGI Notes shall be payable as
to principal in three annual installments on each of the three
anniversary dates from the Closing Date, as follows: (A) Sixteen and
2/3 (16-2/3%) percent of principal on the first anniversary of the
Closing Date, (B) Thirty three and 1/3 (33-1/3%) percent of
principal on the second anniversary of the Closing Date, and (C)
Fifty (50%) percent of principal on the third anniversary of the
Closing Date;
(c) Additional Provisions. The AUGI Notes shall be unsecured
obligations of AUGI and shall be prepayable at any time at the
option of AUGI without penalty, and shall contain such terms and
conditions as are set forth on Exhibit "B" annexed hereto and made a
part hereof.
2.3 Adjustment to AUGI Notes.
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(a) In the event and to the extent that on the Closing Date
the sum of the cash, including certificates of deposit and other
marketable securities immediately convertible into cash ("Cash
Reserves") and collectible accounts receivable of BTS (collectively,
with the Cash Reserves, the "Liquid Assets") shall be less than
$1,200,000, the aggregate principal amount of the AUGI Notes shall
be reduced to the extent of 50% of the difference, if any, between
(i) $1,200,000, and (ii) 100% of the actual book value of the Liquid
Assets of the Surviving Corporation as at the Closing Date. No
increase in the AUGI Notes shall be made in the event that the
actual book value of the Liquid Assets of BTS shall exceed
$1,200,000 on the Closing Date.
(b) On the Closing Date, the Stockholders shall deliver to
AUGI a certificate executed by each of the Stockholders (the "Liquid
Assets Certificate") setting forth the Cash Reserves and aggregate
accounts receivable of BTS as of the last business day immediately
prior to the Closing Date. Such accounts receivable shall (i)
represent actual amounts due and owing to the Surviving Corporation
from unaffiliated third parties, without offset or counterclaim of
any kind, (ii) be net of all intercompany transactions, (iii) be net
of appropriate reserves for doubtful accounts, and (iv) otherwise be
calculated in accordance with generally accepted accounting
principles, consistently applied ("GAAP").
(c) The accuracy of the aggregate amount of Liquid Assets set
forth on the Liquid Assets Schedule shall be deemed an additional
covenant of the Stockholders. Accordingly, should a subsequent audit
or review of such Liquid Assets on the business day immediately
prior to the Closing Date reflect that the aggregate principal
amounts of the AUGI Notes delivered at Closing is subject to
reduction in accordance with the provisions of this Section 2.2,
such AUGI Notes shall be deemed null and void, ab initio upon the
same being replaced by new AUGI Notes in the appropriate aggregate
principal amounts. Such audit or review is to be completed not later
than two hundred and ten (210) days of the Closing Date. In the
absence of completion of such audit or review by such date, there
shall be no reduction in the amount of the AUGI Notes.
3. ALLOCATION OF MERGER CONSIDERATION.
3.1 AUGI Merger Stock. On consummation of the Merger, the 507,246
shares of AUGI Merger Stock shall be delivered to the owners of the outstanding
Fully Diluted Equity of the Corporation as follows:
Simantov Moskona - 277,971 shares of AUGI Stock
Xxxxxx Xxxxxxx - 229,275 shares of AUGI Stock.
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3.2 Closing Cash Payment. On consummation of the Merger, the
$780,000 of Closing Cash Payment shall be delivered to the owners of the
outstanding Fully Diluted Equity of the Corporation as follows:
Simantov Moskona - $427,440
Xxxxxx Xxxxxxx - $352,560
3.3 AUGI Notes. On consummation of the Merger, the AUGI Notes shall
be delivered to the owners of the outstanding Fully Diluted Equity of the
Corporation in the following percentage of the aggregate principal amount of
AUGI Notes to be delivered on the Closing Date:
Simantov Moskona - 54.8%
Xxxxxx Xxxxxxx - 45.2%
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
The Stockholders, jointly and severally, hereby represent and
warrant to Mergerco and AUGI as follows, it being understood and agreed that
neither AUGI nor Mergerco is or will be required to undertake any independent
investigation to determine the truth, accuracy and completeness of the
representations and warranties made by the Stockholders in this Agreement, and
it being further understood and agreed that the survival of each such
representation and warranty shall be as set forth in Section 12.2(d) of this
Agreement:
4.1 Ownership of the Stock.
(a) The number of shares of outstanding Stock, the record
owners thereof, and the record addresses and social security number or tax
identification number of each of the Stockholders, are as set forth on Schedule
4.1 annexed hereto. Each Stockholder is the legal and beneficial owner of such
Stockholder's shares of the Stock enumerated next to such Stockholder's name on
Schedule 4.1 hereto, free and clear of all pledges, Liens, claims, charges,
options, calls, encumbrances, restrictions and assessments whatsoever, except
any restrictions which may be created by operation of state or federal
securities laws (which restrictions are set forth on such Schedule 4.1). For
purposes of this Agreement, a "Lien" shall mean any mortgage, deed of trust,
trust, pledge, vendors' or other lien or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature of any of the foregoing, any claim,
security interest, assignment, or encumbrance of any kind, any negative lien and
the filing of or agreement to give any financing statement or similar notice of
security interest.
(b) Schedule 4.1 accurately sets forth the number of shares of
Stock owned of record and beneficially by each of the Stockholders, and all of
the Stock has been duly authorized and validly issued, and is fully paid and
non-assessable.
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4.2 Valid and Binding Agreement.
(a) The execution, delivery and performance by the
Stockholders and the Corporation of this Agreement, the AUGI Notes, the
Registration Rights Agreement, the Non-Competition and Non-Disclosure Agreement,
the Employment Agreements (as such terms are hereinafter defined), the
Subscription Agreement and the other instruments, agreements and written
undertakings of AUGI, Mergerco, the Corporation and the Stockholders, and each
of them, which are executed in connection therewith and to which it or they,
respectively are parties (collectively, the "Transaction Agreements") and the
consummation of the Merger and the other transactions contemplated hereby, have
been duly and validly authorized by the Board of Directors of the Corporation
and the Stockholders, and the Corporation has the full corporate right, power
and authority to execute and deliver this Agreement and the Transaction
Agreements to which the Corporation is a party, to perform its and their
respective obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. This Agreement constitutes, and
when executed and delivered, the Transaction Agreements to which each is a party
will constitute, respectively, the legal, valid and binding obligation of the
Corporation and of the Stockholders, enforceable against the Corporation and the
Stockholders in accordance with its and their respective terms, except to the
extent limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors rights generally, and except with respect to remedies, the
enforcement of which vests in the discretion of courts of equitable
jurisdiction.
(b) Each Stockholder has full legal right, power and authority
to execute and deliver this Agreement and the Transaction Agreements to which a
Stockholder is a party, and to consummate the transactions contemplated hereby
and thereby. This Agreement and, when executed and delivered by such
Stockholder, the Transaction Agreements to which such Stockholder is a party,
constitutes and will constitute the legal, valid and binding obligations of such
Stockholder, enforceable against such Stockholder in accordance with their
respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors rights generally, and except
with respect to remedies, the enforcement of which vests in the discretion of
courts of equitable jurisdiction.
4.3 Organization, Good Standing and Qualification; Ownership of
Assets of Business.
(a) The Corporation: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) has all necessary corporate power and authority to carry on its business
and to own, lease and operate its properties; and (iii) is not required, by the
nature of its properties or business, to be qualified to do business as a
foreign corporation in any other foreign jurisdiction in which the failure to be
so qualified would have a material adverse effect on the Corporation, its
properties or assets, its business, or its condition (financial or otherwise).
(b) The Corporation has no subsidiary corporations.
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(c) True and complete copies of the Certificate of
Incorporation and By-Laws of the Corporation (including all amendments thereto),
and a correct and complete list of the officers and directors of the
Corporation, are annexed hereto as Schedule 4.3.
(d) The Corporation owns all of the assets, including
Intellectual Property (as that term is hereinafter defined), if any, used in
connection with the operation of the business of the Corporation as presently
conducted; Spectrum Tech, Inc. ("Spectrum"), a Delaware corporation recently
formed by the Stockholders, does not own and has never owned any operating
assets or properties used in the business of the Corporation; and Spectrum is
and has since its inception been an inactive corporation which has conducted no
business.
4.4 Capital Structure; Stock Ownership.
(a) The authorized and outstanding shares of capital stock of
the Corporation, and the record owners of such shares of capital stock, and all
outstanding options, warrants and other securities convertible, exchangeable or
exercisable for shares of common stock of the Corporation, if any, are as set
forth on Schedule 4.4 annexed hereto. Other than as set forth on Schedule 4.4,
no other shares of capital stock of the Corporation are issued or outstanding.
(b) Except as set forth in Schedule 4.4 annexed hereto (all of
which agreements and commitments will be terminated and canceled as of the
Closing Date, without any payment by the Corporation, if there are any at the
date hereof), there are no outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or calls, demands or commitments: (i)
obligating the Corporation to issue, transfer or purchase any shares of its
capital stock, or (ii) obligating either of the Stockholders or any other
stockholder of the Corporation to transfer any shares of the Stock owned by such
stockholder. Other than in respect of the stock purchase rights described in
Schedule 4.4 (all of which shall be terminated and canceled as of the Closing
Date, without any payment by the Corporation, if there are any at the date
hereof), no shares of capital stock of the Corporation are reserved for issuance
pursuant to stock options, warrants, agreements or other rights to purchase
capital stock.
4.5 Investments. The Corporation does not own, directly or
indirectly, any stock or other equity securities of any corporation or entity,
or has any direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business, other than the businesses
conducted by the Corporation.
4.6 Financial Information.
(a) Annexed hereto as Schedule 4.6(a) are (i) the unaudited
financial statements of the Corporation as at December 31, 1994 and for the
fiscal year then ended, including balance sheet, statements of operations,
statements of stockholders' equity, and statements of cash flow, all as prepared
by the management of the Corporation (the "Unaudited Financial Statements"); and
(ii) the audited financial statements of the Corporation as at
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December 31, 1995 and September 30, 1996 and for the fiscal year and nine (9)
months then ended, including balance sheets, statements of operations,
statements of stockholders' equity, and statements of cash flow, as audited by
Xxxxxxx Radin & Co., P.C. (the "Audited Financial Statements"). Such Unaudited
Financial Statements and Audited Financial Statements are herein collectively
referred to as the "Financial Statements."
(b) The Financial Statements: (i) are true, complete and
correct in all respects and present fairly the financial position of the
Corporation as of the dates thereof and for the periods reflected therein, all
in conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis; (ii) make full and adequate provision,
in accordance with generally accepted accounting principles, for the various
assets and liabilities of the Corporation on a basis and the results of its
operations and transactions in its accounts, as of the dates and for the periods
referred to therein; (iii) reflect only assets and liabilities and results of
operations and transactions of the Corporation, and do not include or reflect
any assets, liabilities or transactions of any corporation or entity except the
Corporation; and (iv) were prepared from, and are consistent with, the books and
records of the Corporation, which accurately and consistently reflect all
transactions to which the Corporation was and is a party; provided, that the
Unaudited Financial Statements omit footnote disclosures required under GAAP and
are subject to fiscal year end audit adjustments which would not, individually
or in the aggregate, be material.
(c) Except as expressly set forth in the Financial Statements
and/or in the Schedules to this Agreement, or arising in the normal course of
the Corporation's business since October 1, 1996, there are as at the date
hereof, no liabilities or obligations (including, without limitation, any tax
liabilities or accruals) of the Corporation, whether absolute, accrued,
contingent or otherwise and whether due or to become due, that are, singly or in
the aggregate, material.
(d) Schedule 4.6(d) annexed hereto contains: (i) an aging
schedule of accounts receivable and accounts payable of the Corporation as at
September 30, 1996 (the "Stub Period Date"), (ii) a list of the outstanding
principal balance of and approximate accrued interest on all indebtedness (other
than accounts payable), loans and/or notes payable of the Corporation as of the
Stub Period Date; (iii) a list of any leasehold or other contractual obligations
of the Corporation to any of the Stockholders, any other stockholder of the
Corporation (if any), and/or any of their respective Affiliates on the date
hereof; (iv) a list of all obligations of the Corporation guaranteed by any of
the Stockholders, any other stockholder of the Corporation (if any), and/or any
of their respective Affiliates on the date hereof, and the terms of such
guarantees; (v) a list reflecting the nature and amount of all obligations owed
to the Corporation on the date hereof by any of the Stockholders, any other
stockholder of the Corporation (if any), and/or any of their respective
Affiliates; and (vi) a list reflecting the nature and amount of all obligations
owed by the Corporation on the date hereof to any of the Stockholders, any other
stockholder of the Corporation (if any), and/or any of their respective
Affiliates. Wherever used in this Agreement, the term "Affiliate" means, with
respect to any person or entity, any other
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person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
first person or entity.
4.7 No Material Changes. Except as and to the extent described in
Schedule 4.7 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement which
has heretofore or herewith been delivered to AUGI), since the 1995 Fiscal Year
End, the business of the Corporation has continued to be operated only in the
ordinary course, and there has not been:
(a) Any material adverse change in the condition (financial or
otherwise), operations, business, properties, or prospects of the Corporation
from that shown in the most recent Reviewed Financial Statements, or any
material transaction or commitment effected or entered into outside of the
normal course of the Corporation's business other than in connection with the
Merger;
(b) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, condition (financial or otherwise), or prospects of the
Corporation;
(c) Any declaration, setting aside or payment of any dividend
or other distribution with respect to the Stock, any other payment of any kind
by the Corporation to any of its Stockholders or any of their respective
Affiliates outside of the ordinary course of business, any forgiveness of any
debt or obligation owed to the Corporation by any of its stockholders or any of
their respective Affiliates, or any direct or indirect redemption, purchase or
other acquisition by the Corporation of any capital stock of the Corporation; or
(d) Any other event or condition arising from or out of or in
connection with the operation of the Corporation which has materially and
adversely affected, or may reasonably be expected to materially and adversely
affect, the Corporation, its assets or properties, its business, condition
(financial or otherwise), or prospects.
4.8 Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule 4.8
annexed hereto: (i) on the date hereof, all foreign, federal, state, and local
tax returns and tax reports required to be filed by the Corporation on or before
the date of this Agreement have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, except for such prior failures to file in timely fashion
as have been subsequently followed by complete and proper filing and payment of
all amounts due in respect thereof, including interest and penalties, if any;
(ii) all foreign, federal, state, and local income, franchise, sales, use,
property, excise, and other taxes (including interest and penalties and
including estimated tax installments where required to be filed and paid) due
from or with respect to the Corporation as of the date hereof have been fully
paid, and appropriate accruals shall have been made on the Corporation's books
for taxes not yet due and payable; (iii) as of
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the date hereof, all taxes and other assessments and levies which the
Corporation is required by law to withhold or to collect on or before the date
hereof have been duly withheld and collected, and have been paid over to the
proper governmental authorities to the extent due and payable on or before the
date hereof; (iv) there are no outstanding or pending claims, deficiencies or
assessments for taxes, interest or penalties with respect to any taxable period
of the Corporation, except claims for taxes not yet due and payable; and (v) no
tax Liens have been filed on the Corporation's assets. At and after the Closing
Date, the Corporation will have no liability for any foreign, federal, state, or
local income tax with respect to any taxable period ending on or before the
Closing Date, except as and to the extent disclosed in Schedule 4.8, if any.
(b) There are no audits pending or, to the knowledge of the
Corporation and each Stockholder, threatened, with respect to any foreign,
federal, state, or local tax returns of the Corporation, and no waivers of
statutes of limitations have been given or requested with respect to any tax
years or tax filings of the Corporation. No presently pending assessments of tax
deficiencies have been made against the Corporation or with respect to its
income, receipts or net worth, and no extensions of time are in effect for the
assessment of deficiencies against the Corporation. The Corporation has not
received notice of any claim by any authority in a jurisdiction in which the
Corporation does business and does not file tax returns that the Corporation or
its income, receipts or net worth may be subject to tax in that jurisdiction.
The Corporation is not a party to any tax-sharing or allocation agreement, nor
does the Corporation owe any amount under any tax-sharing or allocation
agreement. The Corporation has no liability for unpaid taxes because it once was
a member of an "affiliated group" within the meaning of Section 1502 of the
Code.
4.9 Personal Property; Liens. The Corporation has and owns good and
marketable title to all of its personal property, including without limitation,
all computer software, database and other intellectual property, free and clear
of all Liens whatsoever, except for: (a) Liens securing the Corporation's
indebtedness for money borrowed, if any, as reflected in the Financial
Statements, pursuant to the security agreements listed in Schedule 4.9 annexed
hereto; (b) Liens securing the deferred purchase price of machinery, equipment,
vehicles and/or other fixed assets, if any, as reflected in the Financial
Statements or as incurred after the date thereof in the ordinary course of
business of the Corporation, pursuant to security agreements listed in Schedule
4.9; (c) materialmen's, workmen's and other similar statutory liens arising in
the ordinary course of business, none of which are material singly or in the
aggregate, (d) Liens for taxes not yet due and payable, and (e) other Liens
which individually or in the aggregate are immaterial in amount and character
(each of the Liens described in clauses (a) through (e) of this sentence being
hereinafter referred to as "Permitted Liens"). The aggregate book value of all
items of machinery, equipment, vehicles, and other fixed assets owned or leased
by the Corporation does not exceed $200,000, and all of such fixed assets are in
good operating condition and repair (reasonable wear and tear excepted) and are
adequate for their use in the Corporation's business as presently conducted.
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4.10 Real Property.
(a) The Corporation neither owns nor has any interest of any
kind (whether ownership, lease or otherwise) in any real property except to the
extent of the Corporation's leasehold interests under the leases for its
businesses premises, if any, true and complete copies of which leases (including
all amendments thereto) are annexed hereto as Schedule 4.10 (the "Leases").
(b) The Corporation and, to the Corporation's and the
Stockholders knowledge, the landlords thereunder are presently in compliance in
all material respects with all of their respective obligations under the Leases,
and the premises leased thereunder are in good condition (reasonable wear and
tear excepted) and are adequate for the operation of the Corporation's current
business.
(c) The Corporation are in actual possession of the properties
demised under the Leases. The Leases are free and clear of any Lien or any
sublease or right of occupancy granted by the Corporation, except as set forth
on Schedule 4.10 hereto, if at all.
(d) The Corporation has the right of ingress and egress
through a public road or street, to and from the properties demised under the
Leases.
(e) The properties demised under the Leases and the
improvements thereon constitute all of the real property and leases currently
used exclusively or materially for the business of the Corporation and are
adequate and sufficient for the current operations of the Corporation and its
business.
(f) To the knowledge of the Corporation and the Stockholders,
there is no pending proceeding for the taking or condemnation of all or any
portion of the properties demised under the Leases or pending taking or
condemnation proceeding which would result in a termination of any Lease of real
property, and none of the same is threatened.
(g) There are no material items of maintenance that have been
materially deferred with respect to any of the improvements on the real property
demised under the Leases.
(h) The Corporation has received no uncured notice from
applicable governmental authorities of any outstanding violations of any
building or zoning laws, codes or regulations, or governmental or judicial
orders issued pursuant thereto, with respect to the real property and the
improvements thereon demised under the Leases, and there are no such violations.
4.11 Accounts Receivable. All accounts receivable shown on the
balance sheet as of the Stub Period Date included in the Financial Statements
(the "Balance Sheet"), and all accounts receivable thereafter created or
acquired by the Corporation prior to the Closing Date, have arisen or will arise
in the ordinary course of the Corporation's businesses. Except as set
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forth on Schedule 4.11 annexed hereto, to the Stockholders' knowledge (but
without guaranteeing the collectiblity of any accounts receivable), all of such
accounts receivable (a) are and will be subject to no counterclaims, set-offs,
allowances or discounts of any kind, except to the extent of the allowance for
doubtful accounts as of the Stub Period Date reflected in the Balance Sheet, and
(b) have been, are and will be valid and collectible in the ordinary course of
business within two hundred and ten (210) days after the Closing Date (subject
to the aforesaid allowance for doubtful accounts), without necessity of
instituting any legal proceedings for collection.
4.12 Inventories. All supplies and other inventories shown on the
Balance Sheet, and all inventories thereafter acquired by the Corporation prior
to the Closing Date, have been and will be valued at the lower of cost or
market, and consisted and will consist of items which are of a quality and
quantity which are useable in the ordinary course of the Corporation's business
for customary commercial purposes, and are substantially at the Corporation's
normal working levels of the same in the current conduct of its businesses in
the ordinary course.
4.13 Insurance Policies. Schedule 4.13 annexed hereto contains a
true and correct schedule of all insurance coverages held by the Corporation
concerning its businesses and properties (including but not limited to
professional liability insurance). All such policies are in full force and
effect and the Corporation is not in default thereunder in any material respect.
To the knowledge of the Stockholders, such policies provide adequate insurance
coverage for the Corporation, its properties and businesses, as presently
conducted.
4.14 Permits and Licenses; Consents. The Corporation possesses and
is in material compliance with every "Permit" (as hereinafter defined) of any
Governmental Authority (as such term is hereinafter defined) having jurisdiction
over the Corporation, or its businesses, properties, or assets, necessary in
order to operate its businesses in the manner presently conducted; all of the
Corporation's Permits are valid, current and in full force and effect; and none
of such Permits will be voided, revoked or terminated, or are voidable,
revocable or terminable, upon and by reason of the Merger and the change of
ownership of the Corporation pursuant to this Agreement. Schedule 4.14 hereto
lists all of the Permits of or in respect of any Governmental Authority or any
other Person (as such term is hereinafter defined) which are required for the
execution or delivery by the Corporation and the Stockholders of this Agreement
and the consummation of the transactions contemplated hereby. For purposes of
this Agreement: (i) the term "Governmental Authority shall mean any nation or
government, foreign or domestic, and any territory, possession, protectorate,
province, state, county, parish, regional authority, metropolitan authority,
city, town, village, other locality, or other political subdivision or agency,
regulatory body, or other authority, commission, tribunal, representative or
official thereof, and any Person (as such term is hereinafter defined)
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government; (ii) the term "Person" shall mean any
natural person, corporation, partnership, joint venture, trust or unincorporated
organization, joint stock company or other similar organization, Governmental
Authority or any other legal entity, whether acting in an individual, fiduciary
or other capacity; and (iii) the term "Permit" shall mean any license, permit,
franchise, clearance, waiver,
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certificate, registration, order, authorization, consent, approval,
administrative finding or directive of, or release by any Governmental
Authority, except for such, the failure to have, maintain or continue in force
(including by reason of the Merger), has not and is not expected to have, a
material adverse effect on the Corporation and its properties, assets or
businesses.
4.15 Contracts and Commitments.
(a) Schedule 4.15 annexed hereto lists all material contracts,
leases, commitments, technology agreements, software development agreements,
software licenses, indentures and other agreements to which the Corporation is a
party (collectively, "Material Contracts") including, without limitation, the
following: (i) any contract for the purchase of equipment, supplies, other
materials, or other inventory items other than purchase orders for supplies
entered into in the ordinary course of business; (ii) any contract related to
the purchase or lease of any capital asset involving aggregate payments of more
than $5,000 per annum that is not cancelable by the Corporation on less than
thirty (30) days notice; (iii) all technology agreements, software development
agreements and software licenses (except for pre-printed licenses for
commercially available and non-custom software applications) involving the
Corporation or any Affiliate, regardless of the duration thereof or the amount
of payments called for or required thereunder; (iv) any guarantee, make-whole
agreement, or similar agreement or undertaking to support, directly or
indirectly, the financial or other condition of any other person or entity; (v)
each contract for or relating to the employment of any officer, employee,
technician, agent, consultant, or advisor to or for the Corporation that is not
cancelable by the Corporation without penalty, premium or liability (for
severance or otherwise) on less than thirty (30) days' prior written notice;
(vi) license, royalty, franchise, distributorship, dealer, manufacturer's
representative, agency and advertising agreements; (vii) any contract with any
collective bargaining unit; (viii) any mortgage of real property; (ix) any
factoring agreement with respect to the accounts receivable of the Corporation;
(x) any pledge or other security agreement by the Corporation other than
guaranties entered into in the ordinary course of business which are not
material to the Corporation, (xi) any joint venture agreement or similar
arrangement; (xii) any non-competition agreement or similar arrangement; and
(xiii) any contract, lease, commitment, indenture, or other agreement to which
the Corporation is a party that may not be terminated without penalty, premium
or liability by the Corporation on not more than thirty (30) days' prior written
notice. The term "Material Contract" shall not include any contract or
agreement, the failure of which to maintain, perform or continue in effect
(including by reason of the Merger) has not and is not reasonably expected to
adversely affect the Corporation and its assets, properties, businesses or
financial condition.
(b) Except as set forth in Schedule 4.15: (i) all Material
Contracts are in full force and effect; (ii) the Corporation and, to the
knowledge of the Corporation and each of the Stockholders, the other parties
thereto, each are in compliance with all of their respective obligations under
the Material Contracts in all material respects, and are not in breach or
default thereunder, nor has there occurred any condition or event which, after
notice or lapse of time or both, would constitute a default thereunder; and
(iii) none of the Material Contracts will be voided, revoked or terminated, or
voidable, revocable or terminable, in whole or in part, upon
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and by reason of the Merger and the change of ownership of the Corporation
pursuant to this Agreement.
(c) No purchase commitment by the Corporation is in excess of
the normal, ordinary and usual requirements of the business of the Corporation.
(d) There is no outstanding power of attorney granted by the
Corporation to any person, firm or corporation for any purpose whatsoever,
except which may be included as part of the terms of a security agreement or
other Material Contract entered into by the Corporation in connection with a
financing or otherwise in the ordinary course of its businesses.
4.16 Customers and Suppliers. Neither any of the Stockholders nor
the Corporation has actual knowledge of any existing, announced or anticipated
changes in the policies of, or the relationships with, or the business of, any
material clients, customers, or suppliers of the Corporation which will
materially adversely affect the Corporation or its condition, financial or
otherwise, business, or prospects.
4.17 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 4.17 annexed hereto, the
Corporation is not a party to any agreement with respect to the employment or
compensation of any non-hourly and/or non-union employee(s). The Corporation is
not now, nor has it ever been, a party to or subject to any collective
bargaining agreement or other labor agreement. Schedule 4.17 sets forth the
amount of all compensation or remuneration (including any discretionary bonuses)
paid by the Corporation during the 1995 calendar year or to be paid by the
Corporation during the 1996 calendar year to employees or consultants who
presently receive aggregate compensation or remuneration at an annual rate in
excess of $35,000.
(b) No union is now certified or, to the best of the knowledge
of the Corporation and each of the Stockholders, claims to be certified as a
collective bargaining agent to represent any employees of the Corporation, and
there are no labor disputes existing or, to the best of the knowledge of the
Corporation and each of the Stockholders, threatened, involving strikes,
slowdowns, work stoppages, job actions or lockouts of any employees of the
Corporation.
(c) There are no unfair labor practice charges or petitions
for election pending or being litigated before the National Labor Relations
Board or any other federal or state labor commission relating to any employees
of the Corporation. Except as set forth on Schedule 4.17, the Corporation has
not received any written notice of any actual or alleged violation of any law,
regulation, order or contract term affecting the collective bargaining rights of
employees, equal opportunity in employment, or employee health, safety, welfare,
or wages and hours.
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(d) The Corporation has not, at any time, been and is not now
required to make contributions to, be a party to or covered by (or had any of
its employees covered by), and has not withdrawn from (partially or otherwise),
and has not had and does not have any obligations to or in respect of any
"multiemployer plan" (as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")).
(e) Except as disclosed in Schedule 4.17, the Corporation do
not maintain, or have any liabilities or obligations of any kind with respect
to, any bonus, commission, deferred compensation, excess benefits, pension,
thrift, savings, employee ownership, salary continuation, severance, profit
sharing, retirement, supplemental retirement, or other such benefit plan, and
does not have any potential or contingent liability in respect of any actions or
transactions relating to any such plan other than to make contributions thereto
if, as, and when due in respect of periods subsequent to the date hereof.
Without limitation of the foregoing, (i) the Corporation has made all required
contributions to or in respect of any and all such benefit plans, (ii) no
"accumulated funding deficiency" (as defined in Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code")) has been incurred in respect of
any of such benefit plans, and the present value of all vested accrued benefits
thereunder does not, on the date hereof, exceed the assets of any such plan
allocable to the vested accrued benefits thereunder, (iii) there has been no
"prohibited transaction" (as defined in Section 4975 of the Code) with respect
to any such plan, and no transaction which could give rise to any tax or penalty
under Section 4975 of the Code or Section 502 of ERISA, and (iv) there has been
no "reportable event" (within the meaning of Section 4043(b) of ERISA) with
respect to any such plan. All of such plans which constitute, are intended to
constitute, or have been treated by the Corporation as "employee pension benefit
plans" or other plans within Section 3 of ERISA have been determined by the
Internal Revenue Service to be "qualified" under Section 401(a) of the Code, and
have been administered and are in compliance with ERISA and the Code; and the
Stockholders has no knowledge of any state of facts, conditions or occurrences
such as would impair the "qualified" status of any of such plans.
(f) Except for the group insurance programs listed in Schedule
4.17, the Corporation does not maintain any medical, health, life, dental,
short- or long-term disability, hospitalization, accident, death benefits, or
other employee benefit insurance programs, or sick leave or vacation or holiday
or leave policies, or any welfare plans (within the meaning of Section 3(1) of
ERISA) for the benefit of any current or former employees, and, except as
required by law, the Corporation has no liability, fixed or contingent, for
health or medical benefits to any former employee.
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4.18 No Breach of Statute, Decree or Other Instrument.
(a) Except as set forth in Schedule 4.18 annexed hereto and as
otherwise would not have a material adverse effect on the existing businesses,
assets, financial condition or prospects of the Corporation: (i) neither the
execution and delivery of this Agreement by the Corporation and/or the
Stockholders, nor the performance of, or compliance with, the terms and
provisions of this Agreement on the part of the Corporation and/or the
Stockholders, will violate or conflict with any term of the Certificate of
Incorporation or By-Laws of the Corporation or, to the knowledge of the
Corporation and the Stockholders, any statute, law, rule or regulation of any
governmental authority affecting the existing businesses of the Corporation, or
will cause or permit the material modification of the effect of, the imposition
of any Lien in respect of, or the acceleration of any obligations or terms or
the termination of any rights or imposition of any burdens under, or conflict
with, result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of any judgment, order, award, injunction or decree, or
any of the material terms, conditions or provisions of any contract, lease,
agreement, indenture or other instrument to which the Corporation or any of the
Stockholders is a party or by which the Corporation or any of the Stockholders
is bound; and (ii) no consent, authorization or approval of or filing with any
governmental authority or agency, or any third party, will be required on the
part of the Corporation or the Stockholders as conditions precedent to the
consummation of the transactions contemplated hereby, or result in the
cancellation of any Permits presently held by the Corporation which are required
for the operation of its businesses as conducted on the date hereof.
(b) In connection with and as respects the Merger, the
Corporation and each Stockholder of the Corporation have waived any and all
rights which it or any such Stockholder may have (by way of right of first
refusal, right of first offer, or otherwise) to purchase any of the Stock by
reason of the proposed disposition thereof by any Stockholder pursuant to the
Merger.
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4.19 Compliance with Laws.
(a) Except as set forth in Schedule 4.19 to this Agreement,
the Corporation has been, and is now in compliance (except to the extent,
disclosed on Schedule 4.19, that incidental and non-material non-compliance has
not had and can not reasonably be expected to have a material adverse effect on
the Corporation, its properties or assets, its businesses, its condition
(financial or otherwise), or its prospects) with each of the following which is
applicable to or binding upon or affecting the Corporation or its property,
assets, or business, or to which the Corporation, or its property, assets, or
business are subject: every statute, ordinance, code or other law, treaty, rule,
regulation, order, technical or other standard, requirement or procedure
existing, enacted, adopted, administered, enforced, or promulgated, by any
Governmental Authority (each of the foregoing, a "Law"), and every Permit, and
every order, judgment, writ, injunction, award, decree, demand, assessment or
determination of any arbitrator and of every Governmental Authority (each of the
foregoing, an "Order"; each Law, Permit, and Order being sometimes hereinafter
referred to as a "Requirement of Law"). Neither the Corporation nor its
properties, assets, or business are subject to or directly affected by any
Requirement of Law of any Governmental Authority, other than those similarly
affecting similar enterprises engaged in a material way in the same business
activities.
(b) The Corporation has not, at any time, to the knowledge of
the Stockholders: (i) acquired, handled, utilized, stored, generated, processed,
transported, or disposed of any hazardous or toxic substances, whether in
violation of any foreign, federal, state, or local environmental or occupational
health and safety laws or regulations or otherwise, (ii) otherwise committed any
material violation of any foreign, federal, state, or local environmental or
occupational health and safety laws or regulations (including, without
limitation, the provisions of the Environmental Protection Act and other
applicable environmental statutes and regulations) or any violation of the
Occupational Safety and Health Act, or (iii) been in violation of any material
requirements of its insurance carriers from time to time.
(c) Neither the Corporation nor any of its directors, officers
or employees has received any written notice of default or violation, nor, to
the best of the knowledge of the Corporation and each of the Stockholders, is
the Corporation or any of its directors, officers or employees in default or
violation, with respect to any judgment, order, writ, injunction, decree, demand
or assessment issued by any court or any federal, state, local, municipal, or
other governmental agency, board, commission, bureau, instrumentality or
department, domestic or foreign, relating to any aspect of the Corporation's
business, affairs, properties, or assets. Neither the Corporation nor any of its
directors, officers or employees, has received written notice of, been charged
with, or, to its or their knowledge, is under investigation with respect to, any
violation of any provision of any federal, state, local, municipal, or other law
or administrative rule or regulation, domestic or foreign, relating to any
aspect of the Corporation's business, affairs, properties or assets, which
violation would have a material adverse effect on the Corporation, its
properties or assets, its businesses, its condition (financial or otherwise), or
its prospects.
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(d) Schedule 4.19 sets forth the date(s) of the last known
audits or inspections (if any) of the Corporation conducted by or on behalf of
the Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other Governmental Authority.
4.20 Litigation. Except as disclosed in Schedule 4.20 annexed
hereto, there are no private or governmental orders, claims, actions, suits,
arbitrations, investigations, administrative or other proceedings (including,
without limitation, any claim alleging the invalidity, infringement or
interference of any patent, patent application, software, technology or other
intellectual property rights owned or licensed by the Corporation) or
investigations (collectively, the "Actions") pending or, to the knowledge of the
Corporation or any of the Stockholders, are any Actions threatened, against the
Corporation or relating to its businesses or properties, at law or in equity or
before or by any court or any Governmental Authority. Except as disclosed in
Schedule 4.20 annexed hereto, neither the Corporation nor any of the
Stockholders is aware of any state of facts, events, conditions or occurrences
which might properly constitute grounds for or the basis of any meritorious
Action against or with respect to the Corporation, which would, if determined
adversely, have a material adverse effect on the Corporation, its businesses or
any material portion of its assets, or impair the ability of any of the
Stockholders to deliver in the Merger all of their respective shares of Stock
free and clear of all pledges, Liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws).
4.21 Intellectual Property. Schedule 4.21 annexed hereto correctly
sets forth a list and brief description of the nature and ownership of: (a) all
patents, patent applications, copyright registrations and applications,
registered trade names, service marks, trademark registrations and applications,
both domestic and foreign, which are presently owned, filed or held by the
Corporation and/or any of its directors, officers, stockholders or employees and
which in any way relate to or are used in the business of the Corporation; (b)
all licenses, computer software licenses, and software access or joint
development agreements, both domestic and foreign, which are owned or controlled
by the Corporation and/or any of its directors, officers, stockholders or
employees and which in any way relate to or are used in the business of the
Corporation; and (c) all franchises, licenses and/or similar arrangements
granted to the Corporation by others and/or to others by the Corporation
(collectively, the "Intellectual Property"). None of the Intellectual Property
set forth or required to be set forth in Schedule 4.21 is subject to any pending
challenge known to any of the Stockholders, infringes on or misappropriates the
rights of any others, or is subject to loss or expiration in the near future (or
the threat of such loss or expiration). Except as set forth on Schedule 4.21,
the Corporation owns good and marketable title to the same free and clear of any
Liens.
4.22 Transactions with Affiliates. No material asset employed in the
business of the Corporation is owned by, leased from or leased to any of the
stockholders of the Corporation, any of their respective Affiliates, members of
their families or any partnership,
19
corporation or trust for their benefit, or any other officer, director or
employee of the Corporation or any Affiliate of the Corporation.
4.23 Bank Accounts. Annexed hereto as Schedule 4.23 is a correct and
complete list of all bank accounts and safe deposit boxes maintained by or on
behalf of the Corporation, with indication of all persons having signatory,
access or other authority with respect thereto.
4.24 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement (or taken
as a whole), as, to the extent, and subject to the qualifications and
limitations, set forth in such corresponding Section(s).
4.25 Disclosure to Stockholders. The Stockholders acknowledge
receipt of the statements and reports referred to in Schedule 5.9 to this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND AUGI.
Mergerco and AUGI hereby jointly and severally represent and warrant
to the Stockholders, as follows, it being understood and agreed that none of the
Stockholders is or will be required to undertake any independent investigation
to determine the truth, accuracy and completeness of the representations and
warranties made by AUGI or Mergerco in this Agreement:
5.1 Organization, Good Standing and Qualification. Each of Mergerco
and AUGI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, respectively, with all necessary power
and authority to execute and deliver this Agreement and the Transaction
Agreements, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. True and complete
copies of the Articles of Incorporation and By-Laws of Mergerco and of AUGI
(including all amendments thereto), and a correct and complete list of the
officers and directors of Mergerco and of AUGI, are annexed hereto as Schedule
5.1.
5.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Transaction Agreements and the
consummation of the Merger and the other transactions contemplated hereby and
thereby by Mergerco and AUGI have been duly and validly authorized by the Board
of Directors and sole stockholder of Mergerco, and by the Board of Directors of
AUGI; and Mergerco and AUGI have the full corporate right, power and authority
to execute and deliver this Agreement and the Transaction Agreements, to perform
their respective obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. No further corporate authorization
is necessary on the part of Mergerco or AUGI to consummate the transactions
contemplated hereby and thereby.
20
5.3 Valid and Binding Agreement. This Agreement and the other
Transaction Agreements constitutes the legal, valid and binding obligation of
Mergerco, enforceable against Mergerco in accordance with its and their terms,
and this Agreement and, when executed and delivered by AUGI, and the other
Transaction Agreements constitute, and will constitute, the legal, valid and
binding obligations of the Surviving Corporation and AUGI (as the case may be),
enforceable against the Surviving Corporation and AUGI in accordance with its
and their respective terms.
5.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement and the other Transaction Agreements by Mergerco or
AUGI, nor compliance with the terms and provisions of this Agreement or the
other Transaction Agreements on the part of Mergerco or AUGI, will: (a) violate
any statute or regulation of any Governmental Authority affecting Mergerco or
AUGI; (b) require the issuance of any authorization, license, consent or
approval of any Governmental Authority; or (c) conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree, note, indenture, loan agreement or other agreement or
instrument to which Mergerco or AUGI is a party, or by which Mergerco or AUGI is
bound, or constitute a default thereunder.
5.5 Capitalization of AUGI.
(a) AUGI is (i) authorized to issue 20,000,000 shares of
Common Stock, $.01 par value per share ("AUGI Common Stock"); (ii) 5,689,749
shares of AUGI Common Stock were issued and outstanding at January 31, 1996;
(iii) 750,000 shares of AUGI Common Stock are reserved for issuance pursuant to
AUGI's 1991 Employee Incentive Stock Option Plan, of which approximately 620,000
options were outstanding at July 31, 1995; (iv) 171,000 stock options were
reserved for certain key employees under AUGI's Stock Option Bonus Plan, of
which 114,000 options were outstanding at July 31, 1995; (v) 38,496 options were
reserved for certain employees under a 1991 Transfer Plan, of which options to
purchase 24,328 shares of AUGI Common Stock were outstanding at July 31, 1995;
(vi) 2,500,000 options are reserved for issuance (subject to AUGI stockholder
ratification) pursuant to a 1996 qualified and non-qualified stock option plan,
of which options to purchase a maximum of 1,680,000 shares of AUGI Common Stock
are currently outstanding and are held by the persons listed on Schedule 5.5
annexed; and (vii) warrants to purchase an aggregate of 920,000 shares of AUGI
Common Stock at $7.50 per share were issued and outstanding at July 31, 1995 and
warrants to purchase 50,000 shares of AUGI Common Stock at $6.00 per shares were
issued in October 1996. Subsequent to January 31, 1996, AUGI (i) has acquired
100% of the capital stock of ConnectSoft, Inc. ("ConnectSoft") pursuant to which
it issued 1,000,000 shares of its convertible preferred stock which is
convertible into a maximum of 3,000,000 shares of AUGI Common Stock; (ii) has
acquired 100% of Interglobe Network, Inc. pursuant to which AUGI paid $400,000
and issued 800,000 shares of AUGI Common Stock; and (iii) acquired Seattle
On-Line, Inc. pursuant to which it has issued warrants to purchase 333,333
shares of AUGI Common Stock. Except for the transactions contemplated by this
Agreement, AUGI has not entered into any other letters of intent or written
understandings with respect to any acquisition. All of the foregoing is
qualified, in its entirety by the disclosures contained in AUGI's Annual
21
Report on Form 10-K for its fiscal year ended July 31, 1996 (the "1996 Form
10-K"), a true copy of which has been furnished to the Stockholders.
(b) The AUGI Merger Stock is a portion of the AUGI Common
Stock, which is the stock of AUGI traded on the Nasdaq National Market. When
issued and delivered pursuant to this Agreement, all of the AUGI Merger Stock
will be validly issued, fully-paid and non-assessable, owned by AUGI free and
clear of all pledges, Liens, claims, charges, encumbrances, assessments,
pre-emptive rights and other restrictions and limitations whatsoever. All other
classes and series of equity securities of AUGI are identified in the 1996 Form
10-K and, except as set forth in Section 5.5(a) above and in the 1996 Form 10-K,
there are no outstanding options, calls, warrants, stock, debentures or rights
of subscription exercisable or convertible into shares of AUGI Common Stock.
5.6 Investment. AUGI owns the outstanding capital stock of Mergerco
for its own account, for investment purposes only, and not with a view to the
resale or distribution thereof.
5.7 Business of Mergerco. Mergerco has been formed solely for the
purposes of consummating the transactions contemplated by this Merger Agreement,
has not conducted and will not conduct any independent business operations until
the Closing Date of the Merger.
5.8 Absence of Litigation. No action, suit or proceeding by or
before any court or any governmental body or authority, against Mergerco or AUGI
or pertaining to the transactions contemplated by this Agreement or their
consummation, have been instituted or, to their knowledge, threatened, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on AUGI, its business or any material portion of its assets, or
impair the ability of Mergerco or AUGI to deliver in the Merger the Merger
Consideration free and clear of all pledges, Liens, claims, charges, options,
calls, encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or federal securities
laws). Except as disclosed in Schedule 5.8 hereto, AUGI is not aware of any
state of facts, events, conditions or occurrences which would properly
constitute grounds for the basis of any meritorious suit, action, arbitration,
investigation against or with respect to AUGI or any of its subsidiaries, which
would, if determined adversely to AUGI or any of its subsidiaries, have a
material adverse effect upon the business, financial condition or prospects of
AUGI and its subsidiaries when taken as a consolidated whole, or impair the
ability of Mergerco or AUGI to deliver in the Merger the Merger Consideration
free and clear of all pledges, Liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws).
5.9 Securities Filings and Disclosures. AUGI has furnished to the
Stockholders the statements and reports listed on Schedule 5.9 to this Agreement
(which statements and reports constitute all statements and reports filed by
AUGI with the SEC since January 1, 1994), together with all exhibits and
schedules thereto, which statements and reports
22
(i) complied, as of their respective dates, as to form and substance in all
material respects with the requirements pertaining to the filing thereof under
the Securities Act of 1933, as amended, and/or the Securities Exchange Act of
1934, as amended, whichever is applicable, and (ii) as of their respective dates
did not contain any material misstatement of fact or state or omit to state any
material fact whose omission, in light of the circumstances under which such
statement was made or omitted, would result in the statements made therein being
materially misleading. AUGI shall supplement Schedule 5.9 through the Closing
Date. The financial statements of AUGI and its consolidated subsidiaries as set
forth in the securities filings listed on Schedule 5.9 fairly present the
financial condition and results of operations of AUGI and its consolidated
subsidiaries as at the dates and for the periods reflected therein. Since
November 13, 1996, the date of AUGI's filing of its 1996 Form 10-K, there has
been no material adverse change in the business, financial condition or
prospects of AUGI and its subsidiaries, when taken as a consolidated whole.
5.10 Registration. The shares of AUGI Merger Stock constituting the
Merger Consideration have been issued pursuant to an available exemption from
the registration requirements under the Securities Act of 1933, as amended, and
the securities laws of the State of Delaware; provided, that such issuance was
made in the good faith belief that such exemption from registration is available
in reliance upon investment, suitability, financial capacity, and investment
sophistication representations made by the Stockholders to AUGI in Subscription
Agreements furnished by each of them to AUGI in connection with the consummation
of the transactions contemplated hereby.
5.11 No Breach of Statute, Decree or Other Instrument. Except as set
forth in Schedule 5.11 annexed hereto and as otherwise would not have a material
adverse effect on the existing businesses, assets, financial condition or
prospects of AUGI and its subsidiaries, taken as a consolidated whole: (i)
neither the execution and delivery of this Agreement by Mergerco and AUGI nor
the performance of, or compliance with, the terms and provisions of this
Agreement on the part of AUGI and Mergerco, will violate or conflict with any
term of the Certificate of Incorporation or By-Laws of AUGI or Mergerco, or, to
the knowledge of AUGI and Mergerco, any statute, law, rule or regulation of any
Governmental Authority affecting the existing businesses of AUGI, or will cause
or permit the material modification of the effect of, the imposition of any Lien
in respect of, or the acceleration of any obligations or terms or the
termination of any rights or imposition of any burdens under, or conflict with,
result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of any judgment, order, award, injunction or decree, or
any of the material terms, conditions or provisions of any contract, lease,
agreement, indenture or other instrument to which AUGI or any of its
subsidiaries is a party or by which AUGI or any of its subsidiaries is bound;
and (ii) no consent, authorization or approval of or filing with any
Governmental Authority or agency, or any third party, will be required on the
part of AUGI or its subsidiaries as conditions precedent to the consummation of
the transactions contemplated hereby, or result in the cancellation of any
Permits presently held by AUGI or its subsidiaries which are required for the
operation of their businesses as conducted on the date hereof.
23
5.12 No Material Changes. Except as and to the extent described in
Schedule 5.12 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement which
has heretofore been delivered to the Stockholders), since July 31, 1996, the
consolidated businesses of AUGI has continued to be operated only in the
ordinary course, and there has not been:
(a) Any material adverse change in the condition (financial or
otherwise), operations, business, properties, or prospects of AUGI and its
subsidiaries, when taken as a consolidated whole, from that shown in AUGI's
financial statements as at July 31, 1996 and for the fiscal year then ended (the
"1996 AUGI Financials"), or any material transaction or commitment effected or
entered into outside of the normal course of AUGI's businesses;
(b) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, condition (financial or otherwise), or prospects of AUGI;
(c) Any declaration, setting aside or payment of any dividend
or other distribution with respect to the AUGI Common Stock, any other payment
of any kind by AUGI or any of its subsidiaries outside of the ordinary course of
business, any forgiveness of any debt or obligation owed to AUGI by any of its
stockholders or any of their respective Affiliates, or any direct or indirect
redemption, purchase or other acquisition by AUGI of any of its capital stock;
or
(d) Any other event or condition arising from or out of or in
connection with the operation of AUGI which has materially and adversely
affected, or may reasonably be expected to materially and adversely affect, AUGI
and its subsidiaries, their consolidated assets or properties, businesses,
condition (financial or otherwise), or prospects, when taken as a consolidated
whole.
5.13 Compliance with Laws.
(a) Except as set forth in Schedule 5.13 to this Agreement,
AUGI has been, and is now in compliance (except to the extent, disclosed on
Schedule 5.13, that incidental and non-material non-compliance has not had and
can not reasonably be expected to have a material adverse effect on AUGI, its
properties or assets, businesses, condition (financial or otherwise), or its
prospects) with all Requirements of Law affecting AUGI, its assets, businesses,
financial condition or prospects, when taken as a consolidated whole. Neither
AUGI or nor its properties, assets, or business are subject to or directly
affected by any Requirement of Law of any Governmental Authority, other than
those similarly affecting similar enterprises engaged in a material way in the
same business activities.
(b) to the best of its knowledge, AUGI has not: (i) acquired,
handled, utilized, stored, generated, processed, transported, or disposed of any
hazardous or toxic
24
substances, whether in violation of any foreign, federal, state, or local
environmental or occupational health and safety laws or regulations or
otherwise, (ii) otherwise committed any material violation of any foreign,
federal, state, or local environmental or occupational health and safety laws or
regulations (including, without limitation, the provisions of the Environmental
Protection Act and other applicable environmental statutes and regulations) or
any violation of the Occupational Safety and Health Act, or (iii) been in
violation of any material requirements of its insurance carriers from time to
time.
(c) Neither AUGI nor any of its directors, officers or
employees has received any written notice of default or violation, nor, to the
best of AUGI's knowledge, is AUGI or any of its directors, officers or employees
in default or violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal, state, local,
municipal, or other governmental agency, board, commission, bureau,
instrumentality or department, domestic or foreign, relating to any aspect of
AUGI's business, affairs, properties, or assets. Neither AUGI nor any of its
directors, officers or employees, has received written notice of, been charged
with, or, to its or their knowledge, is under investigation with respect to, any
violation of any provision of any federal, state, local, municipal, or other law
or administrative rule or regulation, domestic or foreign, relating to any
aspect of AUGI's business, affairs, properties or assets, which violation would
have a material adverse effect on AUGI, its properties or assets, businesses,
its condition (financial or otherwise), or prospects, when taken as a
consolidated whole.
5.14 Litigation. Except as disclosed in Schedule 5.14 annexed
hereto, there are no Actions pending or, to the knowledge of AUGI, are any
Actions threatened, against AUGI or relating to its businesses or properties, at
law or in equity or before or by any court or any Governmental Authority, which
if adversely determined, may have a material adverse effect on the businesses,
properties, financial condition or prospects of AUGI and its subsidiaries, when
taken as a consolidated whole. Except as disclosed in Schedule 5.14 annexed
hereto, AUGI is not aware of any state of facts, events, conditions or
occurrences which might properly constitute grounds for or the basis of any
meritorious Action against or with respect to AUGI, which would, if determined
adversely, have a material adverse effect on AUGI, its businesses or any
material portion of its consolidated assets, or impair the ability of AUGI to
deliver in the Merger all of the Merger Consideration free and clear of all
pledges, Liens, claims, charges, options, calls, encumbrances, restrictions and
assessments whatsoever (except any restrictions which may be created by
operation of state or federal securities laws).
5.15 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement, as, to
the extent, and subject to the qualifications and limitations, set forth in such
corresponding Section(s).
25
6. NOTICES.
6.1 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
(a) If to the Corporation or the Stockholders:
Broadcast Tower Sites, Inc.
0000 Xxxx Xxxx Xxxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Simantov Moskona, President
with a copy sent concurrently to:
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
facsimile no. (000) 000-0000
(b) If to Mergerco, the Surviving Corporation
or AUGI:
American United Global, Inc.
00000 XX 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
with a copy sent concurrently to:
Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
given to all other parties.
26
7. CONDITIONS PRECEDENT TO CLOSING; ADDITIONAL AGREEMENTS
OF THE PARTIES.
7.1 AUGI's Conditions Precedent. The obligation of AUGI to close
this transaction is hereby conditioned upon the fulfillment, at or prior to the
Closing, of the following conditions unless waived in writing.
(a) Accuracy of Representations and Warranties to Mergerco or
AUGI. All representations and warranties made by the Stockholders in this
Agreement, in any Schedule(s) hereto, and/or in any Transaction Agreement
delivered to Mergerco or AUGI under, pursuant to, or in connection with, this
Agreement will be true and correct in all material respects on and as of the
date hereof and will be true and correct in all material respects on the Closing
Date, unless such warranty is specifically stated to be as of an earlier date,
in which case it shall be true and correct as of such earlier date, and
Stockholders shall deliver a certificate to such effect.
(b) Performance by the Corporation and the Stockholders. The
Corporation and the Stockholders shall have performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement and any
Transaction Agreement to be performed, satisfied or complied with by them on or
before the Closing Date hereof.
(c) Execution and Delivery of Certificate of Merger. The
Corporation and Mergerco and, to the extent necessary or appropriate, their
respective officers and directors, shall have executed and delivered the
Certificate of Merger in the form of Exhibit A to this Agreement for filing with
the appropriate governmental authority immediately upon execution and delivery
of this Agreement.
(d) Execution and Delivery of Subscription Agreements. Each of
the Stockholders shall have executed and delivered to AUGI a Subscription
Agreement in the form of Exhibit C to this Agreement.
(e) Execution and Delivery of Registration Rights Agreements.
Each of the Stockholders shall have executed and delivered to AUGI a
Registration Rights Agreement in the form of Exhibit D to this Agreement.
(f) Execution and Delivery of Non-Competition Agreements. Each
of the Stockholders shall have executed and delivered to AUGI a Non-Competition
Agreement in the form of Exhibit E to this Agreement.
(g) [Intentionally Deleted].
(h) Execution and Delivery of Employment Agreements with
Stockholders. The Stockholders and the Surviving Corporation shall have executed
and
27
delivered to AUGI their respective employment agreements in the forms of
Exhibits F and G hereto.
(i) Settlement of Affiliated Obligations. The Stockholders
shall have caused all debts, liabilities and other monetary obligations (if
any), including, without limitation, any accrued cash compensation payable,
which shall be owed by the Corporation to any of the Stockholders or owed to the
Corporation by any of the Stockholders of the Corporation and/or any of their
respective Affiliates to be fully paid and satisfied as at the Closing Date,
such that no such debts, liabilities or obligations shall remain outstanding.
(j) Conduct of Business; Payments of Compensation, Dividends
and Distributions. From and after October 14, 1996 (the date of execution of a
letter of intent among the parties hereto) through and including the Closing
Date and except as set forth on any Schedule to this Agreement:
(i) other than as disclosed in writing to Mergerco, no
assets of BTS shall have been dividended or distributed to the
Stockholders prior to the Closing Date, except to the extent necessary to
pay the Stockholders' customary salaries and bonuses (collectively,
"Compensation") for 1996 (not to exceed $200,000 for each of Moskona and
Xxxxxxx) and taxes on income of BTS earned through the Closing Date. To
the extent not paid in full by the Closing Date, Moskona and Xxxxxxx shall
be entitled to receive unpaid Compensation up to $400,000 in the aggregate
by December 31, 1996; and
(ii) neither of the Stockholders nor the Corporation
shall have engaged in any of the following without, in each instance, the
prior written consent of AUGI:
(1) amended its Articles of Incorporation or
By-Laws;
(2) issued any shares of the Company's capital
stock, other than to a Stockholder;
(3) issued or created any warrants, obligations,
subscriptions, options, convertible securities or other
commitments under which any additional shares of the Company's
capital stock might be directly or indirectly issued;
(4) amended, canceled or modified any existing
Material Contract or entered into any new agreement,
commitment or transaction, whether or not material, except in
the ordinary course of business;
28
(5) except as set forth in Section 7.1(j) paid,
granted or authorized any salary increases or bonuses or enter
into any employment, consulting or management agreements;
(6) except in the ordinary course of business,
modified any agreement to which the Company is a party or by
which it may be bound, or modify any payment terms with any
creditor;
(7) made any change in the Company's management
personnel;
(8) except pursuant to commitments in effect on
the date hereof (to the extent disclosed in this Agreement or
in any Schedule hereto), made any capital expenditure(s) or
commitment(s), whether by means of purchase, lease or
otherwise, or any operating lease commitment(s), in excess of
$5,000 in the aggregate;
(9) sold, assigned or disposed of any capital
asset(s) with a net book value in excess of $5,000 as to any
one item;
(10) changed its method of collection of accounts
or notes receivable, accelerated or slowed its payment of
accounts payable, or prepaid any of its obligations or
liabilities, other than prepayments to take advantage of trade
discounts not otherwise inconsistent with or in excess of
historical prepayment practices;
(11) except as set forth in Section 7.1(j),
declare, pay, set aside or made any dividend(s) or other
distribution(s) of cash or other property, or redeem any
outstanding shares of the Company's capital stock;
(12) [intentionally deleted];
(13) voluntarily subjected any of the assets or
properties of the Company to any further liens or
encumbrances;
(14) forgiven any liability or indebtedness owed
to the Company by any of its stockholders or any of their
respective Affiliates; or
(15) agreed to do, or take any action in
furtherance of, any of the foregoing.
29
7.2 The Stockholders' and Corporation's Conditions. The obligations
of the Stockholders and the Corporation to close this transaction is hereby
conditioned upon the fulfillment, at or prior to the Closing, of the following
condition unless waived in writing.
(a) Accuracy of Representations and Warranties to the
Corporation and the Stockholders. All representations and warranties made by
Mergerco and/or AUGI in this Agreement, in any Schedule(s) hereto, and/or in any
Transaction Agreement delivered to the Corporation or the Stockholders under,
pursuant to, or in connection with, this Agreement are true and correct in all
material respects on and as of the date hereof and will be true and correct in
all material respects on the Closing Date, unless such warranty is specifically
stated to be as of an earlier date, in which case it shall be true and correct
as of such earlier date, and AUGI shall deliver a certificate to such effect.
(b) Performance by Mergerco and AUGI. Mergerco and AUGI shall
have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by them on or before the Closing Date.
(c) Delivery of Merger Consideration. AUGI shall have
delivered to each of the Stockholders upon the consummation of the Merger,
certificates evidencing the AUGI Merger Stock, the Closing Cash Payment and the
AUGI Notes.
(d) Execution and Delivery of Registration Rights Agreement.
AUGI shall have executed and delivered to each of the Stockholders upon the
consummation of the Merger, a respective Registration Rights Agreements in the
form of Exhibit D to this Agreement.
(e) Execution and Delivery of Employment Agreement. Mergerco
shall have executed and delivered the Employment Agreements in the form of
Exhibit F and G hereto.
7.3 The Parties' Conditions Precedent. The respective Obligations of
the parties to close this transaction is conditioned upon the fulfillment, at or
prior to closing, of the following conditions unless waived in writing:
(a) Resolutions; Incumbency; Certified Bylaws and Certificate
of Incorporation; Good Standing Certificate. On the Closing Date, each of the
corporate parties shall have delivered to each of the other parties hereto the
following: (i) copies of resolutions of such corporate parties' Board of
Directors and, to the extent reasonably requested, stockholders of the corporate
entity, in form reasonably satisfactory to counsel for the other parties to this
Agreement, authorizing such corporate party's execution, delivery and
performance of this Agreement and the Merger, and all actions to be taken by
such corporate party hereunder, certified by the Secretary of such corporate
party as of the date hereof to be in accurate and complete and in full force and
effect; (ii) certificates evidencing the incumbency
30
and signatures of relevant officers of such corporate party, certified by the
Secretary of such corporate party as of the date of this Agreement to be
complete and accurate; (iii) a copy of the bylaws and of the certificate of
incorporation of such corporate party, certified by the Secretary of such
corporate party to be complete and accurate and in full force and effect as of
the date hereof; and (iv) certificates, dated as of a date not more than five
(5) days prior to the Closing Date, by the Secretary of State of the state of
incorporation of such corporate party, evidencing the good standing of such
corporate party in such state.
(b) Opinion of Counsel. Each party to this Agreement has
received the opinion of counsel to each other party to this Agreement, dated as
of the Closing Date substantially in the form of Exhibit K hereto .
(c) Execution of Arcadia Merger Agreement. AUGI, Xxxxx X.
Xxxxxx and Arcadia Consulting Services Co., Inc. shall have executed and
delivered an agreement and plan of merger (the "Arcadia Merger Agreement"), in
the form of Exhibit H to this Agreement.
(d) Votes of the Stockholders. Subject to receipt of the
Merger Consideration, each of the Stockholders hereby covenants and agrees to
vote all of each such Stockholder's shares of capital stock of the Corporation
IN FAVOR of the Merger and all of the other transactions contemplated by this
Agreement and the Transaction Agreements.
7.4 Corporate Structure and Related Matters.
(a) Surviving Corporation a Subsidiary. Upon completion of the
Merger, the Surviving Corporation shall remain a wholly-owned subsidiary of
AUGI. The Certificate of Incorporation of the Surviving Corporation shall be in
form and substance annexed hereto as Exhibit I and made a part hereof.
(b) Officers and Directors.
(i) The Surviving Corporation. Xxxxxx X. Xxxxx shall be
Chairman of the Surviving Corporation. Xxxxxx (or such other person as shall be
acceptable to the Stockholders and AUGI) shall be the President and Chief
Executive Officer of the Surviving Corporation. Moskona shall be Vice President
and Chief Operating Officer of the Surviving Corporation and Xxxxxxx shall be
Vice President and Chief Financial Officer of the Surviving Corporation. The
Board of Directors of the Surviving Corporation shall initially consist of
Xxxxxx X. Xxxxx, Xxxxxx Xxxx, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx ("Xxxxxx") and
Moskona. AUGI shall, at all times, designate a majority of the Board of
Directors of the Surviving Corporation. For so long as the Stockholders and
Xxxxxx shall hold in the aggregate at least 125,000 shares of Common Stock of
AUGI: (i) Moskona and Xxxxxx shall have the right to be designated as two of the
Directors of the Surviving Corporation; and (ii) in the event of the death or
resignation of Moskona or Xxxxxx the survivor of the Stockholders and Xxxxxx
shall be entitled to select a replacement for the designee on the Surviving
Corporation's Board of Directors.
31
(ii) AUGI. As soon as is reasonably practicable without
undue expense to AUGI but, in any event, not later than thirty days following
consummation of the Merger, AUGI shall cause Xxxxxx to be elected to the Board
of Directors of AUGI. For so long as Xxxxxx X. Xxxxx shall continue to remain as
a principal stockholder and executive officer of AUGI, at the request of Xxxxxx,
he shall use his best efforts to cause AUGI to undertake to continue to
designate Xxxxxx as a Director of AUGI for so long as Xxxxxx shall own an
aggregate of not less than 75,000 shares of AUGI Common Stock.
(c) Management of the Surviving Corporation. The management of
the Surviving Corporation will be subject to the direction of its Board of
Directors; provided that commencing with the Closing Date and through and
including December 31, 2000 (the "Measuring Period"), the Surviving Corporation
shall not, and AUGI shall not permit the Surviving Corporation to, do any of the
following without the prior written consent of a majority of the Stockholders
and Xxxxxx: (i) sell any material assets or securities of the Surviving
Corporation (other than assets sold in the ordinary course of business), (ii)
incur indebtedness for borrowed money (other than in the ordinary course of
business in accordance with the Surviving Corporation's past practices), (iii)
effect any merger, sale, or acquisition of securities, assets, or business of
any third party, or (iv) otherwise materially change the nature of the Surviving
Corporation's business from the nature of the business conducted by the
Corporation immediately prior to the consummation of the Merger (except for the
natural growth of the business which is contemplated by the parties to this
Agreement).
(d) Tax Returns for Stub Period. The Stockholders hsall have
the right and duty to prepare BTS's tax returns for the period between the last
filing made prior to the date hereof and the Closing Date of the Merger.
7.5 Financing of the Surviving Corporation.
(a) AUGI Advances. Based upon annual budgets and forecasts
previously supplied to AUGI by the Surviving Corporation, as the same: (i) shall
be updated by the Surviving Corporation for the three consecutive twelve month
periods commencing January 1, 1997, January 1, 1998 and January 1, 1999; and
(ii) in such form and detail as shall be reasonably satisfactory to AUGI (the
"Budget"), AUGI shall make available to the Surviving Corporation from and after
the Closing Date, inter-company loans and advances of approximately $500,000
(the "Advances") to the extent requested in order to fund the working capital
requirements of the Surviving Corporation.
(b) Form of AUGI Financing. All such Advances shall be
reflected on the books of the Surviving Corporation as long-term (one year
renewable advances) loans or as the issuance of shares of the Surviving
Corporation's preferred stock having liquidation preferences equal to the
aggregate amount of the Advances; the form of such Advances to be as determined
in AUGI's sole discretion. All such Advances shall bear interest at the prime
rate charged from time to time by Citibank, NA (the "Prime Rate") and interest
on outstanding Advances shall be payable monthly. The timing of the Surviving
Corporation's ability to receive
32
any Advances shall be based upon the requirements established in the Surviving
Corporation Budget or as otherwise mutually agreed to by the Surviving
Corporation's management and the AUGI Board of Directors. Once the timing of
such Advances have either been established in the Surviving Corporation Budget,
or otherwise approved by the AUGI Board of Directors, the Surviving Corporation
will not need further authorization from AUGI for drawings of Advances from
AUGI; provided, that any requested drawings that are not based upon information
contained in an approved Budget of the Surviving Corporation will require AUGI
Board approval.
(c) Use of Proceeds of AUGI Financing. All AUGI Financing
shall be spent and allocated to working capital and such business, technology
and marketing efforts and other corporate purposes as the Boards of Directors of
AUGI and the Surviving Corporation shall, from time to time determine.
(d) Repayment of Advances. Upon the occurrence of (i) sale by
AUGI of all or substantially all of the securities or assets of the Surviving
Corporation, whether through stock sale, asset sale, merger, consolidation or
like combination (a "Sale of Control"), or (ii) the closing of an initial public
offering or private placement of the Surviving Corporation's debt or equity
securities (an "IPO"), all Advances will be subject to immediate repayment to
AUGI by the Surviving Corporation (including the redemption of any preferred
stock issued by the Surviving Corporation on account of Advances, in the
aggregate amount of the liquidation preference accorded to such shares).
(e) Off-Set of AUGI Advances Against AUGI Withdrawals. To the
extent that AUGI shall borrow, transfer, distribute, remove or withdraw
("Withdrawals") any cash or cash equivalents from the Corporation, no Advances
shall earn interest under Section 7.5(b), except such portion of Advances as
exceed the aggregate amount of such Withdrawals.
8. AMENDMENTS AND MODIFICATIONS.
8.1 Amendments and Modifications. No amendment or modification of
this Agreement or any Exhibit or Schedule hereto shall be valid unless made in
writing and signed by the party to be charged therewith.
9. NON-ASSIGNABILITY; BINDING EFFECT.
9.1 Non-Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto. Otherwise, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
10. CLOSING.
33
10.1 Place and Date of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Messrs. Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel, counsel to
Mergerco and AUGI, located at 000 Xxxx 00xx Xxxxxx - 35th floor, Xxx Xxxx, Xxx
Xxxx 00000, at 10:30 A.M. local time on a date which shall be not more than five
(5) business days following the date of this Agreement; provided, that parties
may participate in the closing by telephonic conference call if they so desire.
The effectiveness of the Merger shall occur on the Closing Date simultaneous
with the Closing.
10.2 Filing of Merger Certificate. On the Closing Date, Mergerco and
the Corporation shall file or cause to be filed the Certificate of Merger with
the Secretary of State of Delaware.
11. GOVERNING LAW; JURISDICTION.
11.1 Governing Law; Jurisdiction. This Agreement shall be construed
and interpreted and the rights granted herein governed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
wholly within such State. Except as otherwise provided in Section 12.2(c) below,
any claim, dispute or controversy arising under or in connection with this
Agreement or any actual or alleged breach hereof shall be settled exclusively by
arbitration to be held before one or more arbitrators in New York, New York, or
in any other locale or venue as legal jurisdiction may otherwise be had over the
party against whom the proceeding is commenced, in accordance with the
commercial arbitration procedures of Jams/End-Dispute resolution. The parties
hereto hereby agree to submit to the jurisdiction of such arbitrators in New
York, New York for such purpose, and waive all objections to venue, forum non
conveniens, and related objections in connection therewith. As part of his or
her award, the arbitrators shall make a fair allocation of the fees of
Jams/End-Dispute, the cost of any transcript, and the parties' reasonable
attorneys' fees, taking into account the merits and good faith of the parties'
claims and defenses. Judgment may be entered on the award of such arbitrator(s)
so rendered in any court of competent jurisdiction. Any process or other papers
hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
12. INDEMNIFICATION.
12.1 General.
(a) By the Corporation and the Stockholders. Without prejudice
to any rights of contribution as between the Stockholders, from and after the
Closing Date: each of the Stockholders shall jointly and severally defend,
indemnify and hold harmless the Surviving Corporation and AUGI and their
respective officers, directors, agents, representatives, and controlling persons
(all of the foregoing, the "AUGI Group") from, against and in respect of any and
all claims, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and reasonable
attorneys' fees (collectively, "Losses")
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that the AUGI Group may incur, sustain or suffer as a result of any breach of,
or failure by the Corporation or any such Stockholder(s) to perform, any of the
representations, warranties, covenants or agreements of the Corporation or such
Stockholder(s) contained in this Agreement or in any Exhibit or any Schedule(s)
furnished by or on behalf of the Corporation or such Stockholder(s) under this
Agreement.
(b) By the AUGI Group. From and after the Closing Date, AUGI
and Mergerco, jointly and severally, shall indemnify, defend and hold harmless
the Stockholders from, against and in respect of any and all Losses that such
person may incur, sustain or suffer as a result of any breach of, or failure by
Mergerco or AUGI to perform, any of the representations, warranties, covenants
or agreements of Mergerco or AUGI contained in this Agreement or in any Exhibit
or any Schedule(s) furnished by or on behalf of Mergerco or AUGI under this
Agreement.
12.2 Limitations on Certain Indemnities.
(a) The Basket. Notwithstanding any other provision of this
Agreement to the contrary, no Stockholder shall be liable to AUGI or Mergerco
with respect to Losses, unless and until the aggregate amount of all Losses
incurred by the Surviving Corporation or AUGI in the aggregate shall exceed the
sum of $100,000 (the "Basket"). The Stockholders shall thereafter be liable,
jointly and severally, for performance of its indemnification obligations under
this Agreement in respect of all Losses in excess of the Basket, provided that
the maximum aggregate liability of each Stockholder in respect of all Losses of
AUGI or Mergerco, on the one hand, and the maximum aggregate liability of AUGI
and Mergerco in respect of all Losses of the Stockholders, on the other hand,
shall not, in the absence of proven fraud by such indemnifying party in respect
of any particular Losses, in any event exceed the limitations set forth in
Section 12.2(b) below.
(b) Limitation on Amount of Indemnity. Except with respect to
any Losses involving proven fraud by the indemnifying party, no indemnifying
party hereunder found liable for any Losses by any indemnified party under this
Agreement shall be required to pay indemnification hereunder, against AUGI on
the one hand, or after application of the Basket against the aggregate amount of
claims against any or all of the Stockholders, on the other hand, in an amount
in excess of the aggregate value of the Merger Consideration received by such
Stockholders pursuant to this Agreement (with AUGI Merger Stock to be valued for
such purposes at a per share price equal to the Closing Per Share Market Value).
Each such Stockholder shall have the option to satisfy, in whole or in part, any
claims for indemnification hereunder by transferring and returning to AUGI any
or all of the Stockholder's AUGI Merger Stock, which, for purposes hereof, shall
(regardless of any intervening fluctuations in market price) be deemed to have a
value equal to the Closing Per Share Value, subject only to appropriate
adjustment to reflect any stock splits, stock dividends, recapitalizations or
other such events relating to the Common Stock of AUGI occurring after the date
hereof. Nothing herein contained, however, shall be deemed to preclude the
Surviving Corporation and/or AUGI from seeking and obtaining payment of
indemnification from the Stockholder(s) in question in any
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other manner, subject to such Stockholder's option to pay any claim (in whole or
in part) in the foregoing manner.
(c) Damages and Equitable Relief. Notwithstanding the
provisions of Section 12.2(b) above, nothing contained in this Agreement shall
be deemed to limit or restrict the right of any party hereto from seeking such
monetary damages and/or equitable remedies (including injunctive relief) as may
be available from any court of competent jurisdiction in the event of a breach
by any other party or parties of any material covenant on its or their part
contained in the AUGI Notes, the Registration Rights Agreement, the
Non-Competition and Non-Disclosure Agreement and/or the Employment Agreements.
(d) Time Limitation on Indemnity for Breach of
Representations, Warranties, Agreements, and Covenants. AUGI and Mergerco shall
be entitled to indemnification by a Stockholder, and each Stockholder shall be
entitled to indemnification by AUGI or Mergerco, pursuant to this Agreement for
Losses relating to: (i) breach of any representation or warranty or agreement or
covenant hereunder only in respect of claims for which notice of claim shall
have been given to the indemnifying party on or before December 31, 1998, or
(ii) with respect to Losses relating to a breach of any representations or
warranties under Section 4.8 above, the expiration of the final statute of
limitations for those tax returns covered by the warranties under Section 4.8
above.
(e) Prejudice of Rights to Defend. No party shall be entitled
to indemnification pursuant to this Agreement in the event that the subject
claim for indemnification relates to a third-party claim and the party seeking
such indemnification delayed giving notice thereof to the party from whom it
seeks such indemnification to such an extent as to cause material prejudice to
the defense of such third-party claim.
(f) Insurance Coverage. Notwithstanding any other term or
provision of this Section 12.2, absent only a finding by a court of competent
jurisdiction from which no appeal can or shall be taken that an indemnifying
party shall have committed statutory or common law fraud, no indemnifying party
shall be required to indemnify any indemnified party hereunder for Losses to the
extent that such Losses shall have been reimbursed by insurance proceeds, but
shall be required to provide such indemnity until the Loss has, in fact, been
reimbursed. In the event that insurance does not cover the full amount of such
Losses, the indemnifying party shall remain liable for the full amount of the
difference between the insurance payment as described above and the amount of
the Losses, subject to the limitations set forth above.
12.3 Claims for Indemnity. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party in writing within sixty (60) days of the
indemnified party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event within such shorter
period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party
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giving rise to such indemnity rights and shall estimate (to the extent
reasonably possible) the amount of potential liability arising therefrom. If the
indemnifying party shall be duly notified of such dispute, the parties shall
attempt to settle and compromise the same or may agree to submit the same to
arbitration or, if unable or unwilling to do any of the foregoing, such dispute
shall be settled by appropriate litigation, and any rights of indemnification
established by reason of such settlement, compromise, arbitration or litigation
shall promptly thereafter be paid and satisfied by those indemnifying parties
obligated to make indemnification hereunder.
12.4 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, through counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.
13. COSTS.
13.1 Finder's or Broker's Fees. Except as set forth herein, each of
Mergerco and AUGI (on the one hand) and the Corporation and the Stockholders (on
the other hand) represents and warrants that neither they nor any of their
respective Affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions.
13.2 Expenses. Mergerco and AUGI, on one hand, and the Corporation
or the Stockholders, on the other hand, shall each pay all of their own
respective costs and expenses incurred or to be incurred by them, respectively,
in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement, except that AUGI will be
responsible for the costs and expenses incurred in obtaining the audit opinion
on the Financial Statements and Mergerco will be responsible to pay the legal
fees and disbursements of counsel to the Stockholders incurred in negotiating
this Agreement and in closing and carrying out the transactions contemplated
hereby; provided, that such legal fees and disbursements so payable by Mergerco
shall not exceed an aggregate of $55,000.
14. FORM OF AGREEMENT.
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14.1 Effect of Headings. The Section headings used in this Agreement
and the titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of the
provisions hereof or of the information set forth in such Schedules.
14.2 Entire Agreement; Waivers. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof,
and supersedes all prior agreements or understandings as to such subject matter.
No party hereto has made any representation or warranty or given any covenant to
the other except as set forth in this Agreement and the other Transaction
Agreements and the Schedules and Exhibits hereto. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
14.3 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15. PARTIES.
15.1 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
AMERICAN UNITED GLOBAL, INC.
By: /s/ Xxxxxx X. Xxxxx, Pres
-----------------------------------
Xxxxxx X. Xxxxx, President
BTS ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx, Pres
-----------------------------------
Xxxxxx X. Xxxxx, President
BROADCAST TOWER SITES, INC.
By: /s/ Simantov Moskona
-----------------------------------
Simantov Moskona, President
THE STOCKHOLDERS:
/s/ Simantov Moskona /s/ Xxxxxx Xxxxxxx
-------------------------------- -------------------------------
SIMANTOV MOSKONA XXXXXX XXXXXXX
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Exhibits
A - Certificate of Merger of BTS into Mergerco
B - Form of AUGI Note
C - Form of Subscription Agreement
D - Form of Registration Rights Agreement
E - Form of Non-Competition Agreement
F - Form of Employment Agreement of
Simantov Moskona
G - Form of Employment Agreement of
Xxxxxx Xxxxxxx
H - Form of Arcadia Merger Agreement
I - Form of Certificate of Incorporation of Mergerco
J - Form of Opinions of Legal Counsel
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