Exhibit 10.22
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 22nd
day of August 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; I-GLOBE ACQUISITION CORP., a Washington corporation
("Mergerco"), having its principal offices at 00 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxx,
Xxx Xxxx 00000; INTERGLOBE NETWORKS, INC., a Washington corporation (the
"Company"), having its principal offices at 0000 0xx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxxx 00000; and ARTOUR BAGANOV ("Baganov"), XXXXX XXXXXX ("Xxxxxx"), and
XXX XXXXXXX ("Marashi"). Baganov, Xxxxxx, and Xxxxxxx are each hereinafter
individually referred to as a "Principal Stockholder" and are collectively
hereinafter referred to as the "Principal Stockholders".
W I T N E S S E T H:
WHEREAS, Baganov, Xxxxxx, and Marashi are the record and beneficial
owners of one hundred percent (100%) of the issued and outstanding shares of the
common stock of the Company, on a fully-diluted basis, after giving effect to:
(a) the exercise of all outstanding options and warrants to purchase common
stock of the Company, (b) the conversion into common stock of all convertible
notes, convertible debentures, shares of convertible preferred stock of all
series, or other securities convertible into shares of common stock of the
Company, and (c) the exercise of all other rights and privileges to receive or
acquire shares of Common Stock of the Company; and (d) there being no other
capital stock of the Company issued or outstanding other than the common stock
of the Company; 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, Mergerco is a wholly-owned direct subsidiary of AUGI, having
been formed for the purpose of merging with and into the Company, and thereby
enabling AUGI to acquire all of the shares of capital stock of the Company as
shall represent the Fully Diluted Equity of the Company as at the effective date
of the Merger (hereinafter, referred to as the "Stock") pursuant to the Merger
hereinafter provided for; and
WHEREAS, the Principal Stockholders, the Board of Directors of the
Company, the Board of Directors 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. At the time of the Closing on the Closing Date (as
such terms are hereinafter defined) and in accordance with the provisions of
this Agreement and the applicable provisions of the Washington Business
Corporation Act ("Washington Law"), Mergerco shall be merged with and into the
Company (the "Merger") in accordance with the terms and conditions of this
Agreement and a certificate of merger in substantially the form of Exhibit "A"
annexed hereto (the "Certificate of Merger"), with the Company as the surviving
corporation of such Merger (the Company being hereinafter sometimes referred to
as the "Surviving Corporation"). Thereupon, the separate existence of Mergerco
shall cease, and the Company, as the Surviving Corporation, shall continue its
corporate existence under Washington Law under its current name, Interglobe
Networks, Inc.
1.2 Effectiveness of the Merger. As soon as practicable upon or
after the satisfaction or waiver of the conditions precedent set forth in
Sections 7, 8 and 9 below, Mergerco and the Company 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 Washington Law), and shall file or cause
to be filed such Certificate of Merger with the Secretary of State of
Washington; and the Merger shall become effective as of the date of the filing
of such Certificate of Merger, which shall occur on the "Closing Date" (as
hereinafter defined), and the Closing shall be deemed to occur as of such
Closing Date in accordance with Section 10 hereof.
1.3 Effect of the Merger. Upon the effectiveness of the Merger: (a)
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of each of Mergerco and the Company (the
"Constituent Corporations"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to Washington Law without further act or deed,
and (b) the Surviving Corporation shall be liable for all claims, liabilities
and obligations of the Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Washington Law
without further act or deed.
1.4 Surviving Corporation. Upon the effectiveness of the Merger, the
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 Company
held by the Company as treasury stock immediately prior to the effectiveness of
the Merger shall
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be canceled and extinguished, and no payment or issuance of any consideration
shall be payable or shall be made in respect thereof;
(b) Mergerco Stock. Each share of capital stock of Mergerco
outstanding immediately prior to the effectiveness of the Merger shall be
converted into and shall become one (1) share of common stock of the Surviving
Corporation; and
(c) 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 Company, 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.
(d) Treatment of Fully Diluted Equity. Each share of the Stock of
the Company outstanding immediately prior to the effectiveness of the Merger,
representing: (i) the Fully Diluted Equity of the Company; and (ii) all other
securities of the Company exercisable, convertible or exchangeable for shares of
Fully Diluted Equity, shall be canceled and extinguished and converted into the
right to receive a proportionate amount of the Merger Consideration payable
pursuant to Section 2 below. Such Merger Consideration shall be paid and
delivered to the holders of the outstanding Stock upon:
(A) surrender to the Surviving Corporation of the certificates
representing such shares of outstanding Stock (all of which
shall be delivered free and clear of any and all pledges,
Liens (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; and
(B) delivery to the Surviving Corporation and AUGI by the
subject holder of Stock of an appropriate letter confirming
(x) such holder's ownership of such holder's Stock free and
clear as aforesaid (which representation and warranty shall
survive the Closing), (y) such information regarding such
holder and such holder's background and financial status as
may reasonably be requested by AUGI, and (z) such holder's
investment intent with respect to the AUGI Securities being
received by such holder pursuant to Section 2 below.
1.6 Books and Records. On the Closing Date, the Company shall
deliver to AUGI all of the stock books, records and minute books of the Company,
all financial and accounting books and records of the Company and, except as may
otherwise be agreed by the
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parties to this Agreement at the Closing, all referral, client, customer and
sales records of the Company.
1.7 Tax Free Reorganization. The parties to this Agreement intend
for the transactions whereby the Company, upon consummation of the Merger, will
become a wholly-owned subsidiary of AUGI and the owners of the Company'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 within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended.
2. MERGER CONSIDERATION.
2.1 Merger Consideration. On consummation of the Merger, the record
owners of all outstanding Fully Diluted Equity of the Company shall receive
their allocable percentages, as specified in Section 3 of this Agreement, of an
aggregate of (a) Eight Hundred Thousand (800,000) shares of common stock, $0.01
par value per share, of AUGI (the "AUGI Common Stock"); and (b) Four Hundred
Thousand ($400,000) Dollars, payable by wire transfer of immediately available
funds to bank accounts designated by the Principal Stockholders.
3. ALLOCATION OF MERGER CONSIDERATION.
3.1 On consummation of the Merger, the Merger Consideration shall be
deliver ed to the owners of the Outstanding Fully Diluted Equity of the Company
as follows:
Artour Baganov - 698,182 shares of AUGI Stock
Xxxxx Xxxxxx - 32,000 shares of AUGI Stock
Xxx Xxxxxxx - 69,818 shares of AUGI Stock
The cash portion of the merger consideration shall be allocated among the
Principal Stockholders in accordance with their respective ratios by which the
above shares of AUGI Common Stock bear to 800,000 shares of AUGI Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS.
The Principal 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 Principal Stockholders in this
Agreement and that no due diligence investigation undertaken by AUGI or Mergerco
shall in any way be deemed to ascribe any knowledge to AUGI or Mergerco
different from, or in addition to, the following representations and warranties
made to AUGI and Mergerco, or to reduce, effect, or eliminate their complete
reliance upon such representations
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and warranties, 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 Principal Stockholders, are as set forth on
Schedule 4.1 annexed hereto. Each Principal Stockholder is the legal and
beneficial owner of such Principal Stockholder's shares of the Stock enumerated
next to such Principal 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. 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 Principal Stockholders, and all
of the Stock has been duly authorized and validly issued, and is fully paid and
non-assessable.
4.2 Valid and Binding Agreement.
(a) The execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby by
the Company have been duly and validly authorized by the Board of Directors of
the Company and the Principal Stockholders, and the Company has the full
corporate right, power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of the Company and of the Principal Stockholders, enforceable against
the Company and the Principal Stockholders in accordance with its terms.
(b) Each Principal Stockholder has full legal right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and, when executed and
delivered by such Principal Stockholder, the Registration Rights Agreement, the
Non-Competition and Non-Disclosure Agreement and the Employment Agreement of
such Principal Stockholder (as such terms are hereinafter defined), constitutes
and will constitute the legal, valid and binding obligations of such Principal
Stockholder, enforceable against such Principal Stockholder in accordance with
their respective terms.
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4.3 Organization, Good Standing and Qualification.
(a) The Company: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington; (ii)
has all necessary corporate power and authority to carry on its business and to
own, lease and operate its properties; and (iii) is not required, by the nature
of its properties or business, to be qualified to do business as a foreign
corporation in any other foreign jurisdiction in which the failure to be so
qualified would have a material adverse effect on the Company, its properties or
assets, its business, or its condition (financial or otherwise).
(b) The Company has no subsidiary corporations.
(c) True and complete copies of the Articles of Incorporation and
By-Laws of the Company (including all amendments thereto), and a correct and
complete list of the officers and directors of the Company, are annexed hereto
as Schedule 4.3.
4.4 Capital Structure; Stock Ownership.
(a) The authorized and outstanding shares of capital stock of the
Company, and the record owners of such shares of capital stock, and all
outstanding options, warrants and other securities convertible, exchangeable or
exercisable for shares of common stock of the Company, 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 Company 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 Company), 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 Company to issue, transfer or purchase any shares of its capital
stock, or (ii) obligating the Principal Stockholders or any other stockholder of
the Company to transfer any shares of the Stock owned by such stockholder. Other
than in respect of the stock purchase rights described in Schedule 4.4 (all of
which shall be terminated and canceled as of the Closing Date, without any
payment by the Company), if there are any at the date hereof, no shares of
capital stock of the Company are reserved for issuance pursuant to stock
options, warrants, agreements or other rights to purchase capital stock.
4.5 Investments. The Company does not own, directly or indirectly,
any stock or other equity securities of any corporation or entity, or have any
direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the business conducted
by the Company.
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4.6 Financial Information.
(a) Annexed hereto as Schedule 4.6(a) are the audited financial
statements of the Company as at December 31, 1995 and for the fiscal period from
December 9, 1994 (date of inception) through December 31, 1995, including
balance sheets, statements of operations, statements of stockholders' equity,
and statements of cash flow, as reported on by Xxxxxxx X. Xxxxxx & Company (the
"Audited Financial Statements"). Schedule 4.6(a) also includes the unaudited
financial statements of the Company as at June 30, 1996 and for the six months
then ended, including balance sheets and statements of operations for the fiscal
periods then ended (the "Unaudited Financial Statements"). Such Audited
Financial Statements and Unaudited 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 Company 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 Company 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 Company, and do not include or reflect any assets, liabilities or
transactions of any corporation or entity except the Company; and (iv) were
prepared from, and are consistent with, the books and records of the Company,
which accurately and consistently reflect all transactions to which the Company
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 Company's business since December 31, 1995 (the "Last Fiscal Year End"),
there are as at the date hereof, no liabilities or obligations (including,
without limitation, any tax liabilities or accruals) of the Company, 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 Company as at June
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 Company as of the Stub
Period Date; (iii) a list of any leasehold or other contractual obligations of
the Company to any of the Principal Stockholders, any other stockholder of the
Company (if any), and/or any of their respective Affiliates on the date hereof;
(iv) a list of all obligations of the Company guaranteed by any of the Principal
Stockholders, any other stockholder of the Company (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 Company
on the date
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hereof by any of the Principal Stockholders, any other stockholder of the
Company (if any), and/or any of their respective Affiliates; and (vi) a list
reflecting the nature and amount of all obligations owed by the Company on the
date hereof to any of the Principal Stockholders, any other stockholder of the
Company (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 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 been delivered to Mergerco), since the Last Fiscal Year End, the
business of the Company 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 Company from
that shown in the most recent Audited Financial Statements, or any material
transaction or commitment effected or entered into outside of the normal course
of the Company's business;
(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 Company;
(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 Company to any of its stockholders or any of their respective Affiliates
outside of the ordinary course of business, any forgiveness of any debt or
obligation owed to the Company by any of its stockholders or any of their
respective Affiliates, or any direct or indirect redemption, purchase or other
acquisition by the Company of any capital stock of the Company; or
(d) Any other event or condition arising from or out of or in
connection with the operation of the Company which has materially and adversely
affected, or may reasonably be expected to materially and adversely affect, the
Company, 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 Company 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
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income, franchise, sales, use, property, excise, and other taxes (including
interest and penalties and including estimated tax installments where required
to be filed and paid) due from or with respect to the Company as of the date
hereof have been fully paid, and appropriate accruals shall have been made on
the Company's books for taxes not yet due and payable; (iii) as of the date
hereof, all taxes and other assessments and levies which the Company 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 Company,
except claims for taxes not yet due and payable; and (v) no tax Liens have been
filed on the Company's assets. At and after the date hereof, the Company will
have no liability for any foreign, federal, state, or local income tax with
respect to any taxable period ending on or before the date hereof, 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
Company and each Principal Stockholder, threatened, with respect to any foreign,
federal, state, or local tax returns of the Company, and no waivers of statutes
of limitations have been given or requested with respect to any tax years or tax
filings of the Company. No presently pending assessments of tax deficiencies
have been made against the Company 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 Company. The Company has not received notice of any
claim by any authority in a jurisdiction in which the Company does business and
does not file tax returns that the Company or its income, receipts or net worth
may be subject to tax in that jurisdiction. The Company is not a party to any
tax-sharing or allocation agreement, nor does the Company owe any amount under
any tax-sharing or allocation agreement. The Company 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 Company has and owns good and
marketable title to all of its personal property, free and clear of all Liens
whatsoever, except for: (a) Liens securing the Company'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 Company, pursuant to
security agreements listed in Schedule 4.9; and (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, each of the Liens described in
(a), (b), and (c) 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 Company does not exceed $100,000,
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
Company's business as presently conducted.
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4.10 Real Property.
(a) The Company neither owns nor has any interest of any kind
(whether ownership, lease or otherwise) in any real property except to the
extent of the Company's leasehold interests under the leases for its business
premises, true and complete copies of which leases (including all amendments
thereto) are annexed hereto as Schedule 4.10 (the "Leases").
(b) The Company and 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
Company's current and presently contemplated business.
(c) The Company is in actual possession of the properties demised
under the Leases and has good and marketable title to the leasehold estates
conveyed under the Leases, free and clear of any Lien or any sublease or right
of occupancy, except as set forth on Schedule 4.10 hereto, if at all.
(d) The Company 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 Company and are adequate and
sufficient for the current and currently anticipated operations of the Company
and its business.
(f) 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, to the knowledge of the Company and the Principal
Shareholders, 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 Company 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 Company prior to the Closing Date, (a) have arisen or will arise
in the ordinary course of the Company's business, (b) are and will
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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 (c) have been, are and will be
bona fide receivables due to the Company, valid and collectible in the ordinary
course of business within three (3) months after the Closing Date (subject to
the aforesaid allowance for doubtful accounts), without necessity of instituting
any legal proceedings for collection.
4.12 Inventories. All supplies and other inventories shown on the
Balance Sheet, and all inventories thereafter acquired by the Company prior to
the Closing Date, have been and will be valued at the lower of cost or market,
and consisted and will consist of items which are of a quality and quantity
which are useable in the ordinary course of the Company's business for customary
commercial purposes, and are substantially at the Company's normal working
levels of the same in the current conduct of its business 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 Company
concerning its business and properties (including but not limited to
professional liability insurance). All such policies are in full force and
effect and the Company is not in default thereunder. Such policies provide
adequate insurance coverage for the Company, its properties and its business and
are sufficient for compliance with all requirements of law.
4.14 Permits and Licenses; Consents. The Company possesses and is in
material compliance with every license, permit, franchise, clearance, waiver,
certificate, registration, order, authorization, consent, approval,
administrative finding or directive of, or release by (each of the foregoing, a
"Permit") any Governmental Authority (as such term is hereinafter defined)
having jurisdiction over the Company, or its business, properties, or assets,
necessary in order to operate its business in the manner presently conducted and
currently planned to be conducted except for any such Permits the failure to
hold does not and is not reasonably expected to have a material adverse effect
on the Company, its business, properties, or assets; all of the Company'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
Company 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 Company and the Principal Stockholders of this Agreement and the
consummation of the transactions contemplated hereby. For purposes of this
Agreement, 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. For purposes of this Agreement, the term "Person"
shall mean any natural person, corporation, partnership, joint venture, trust or
unincorporated organization, joint stock company or other similar
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organization, Governmental Authority or any other legal entity, whether acting
in an individual, fiduciary or other capacity.
4.15 Contracts and Commitments.
(a) Schedule 4.15 annexed hereto lists all material contracts,
leases, commitments, technology agreements, software development agreements,
software licenses, indentures and other agreements to which the Company is a
party (collectively, "Material Contracts") 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; (iii) all technology agreements, software development
agreements and software licenses involving the Company or any Affiliate,
regardless of the duration thereof or the amount of payments called for or
required thereunder; (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 Company that is not cancelable by the Company 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 Company; (x) any pledge or other security agreement
by the Company other than guaranties entered into in the ordinary course of
business which are not material to the Company, (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 Company is a party that may not be terminated without
penalty, premium or liability by the Company on not more than thirty (30) days'
prior written notice.
(b) Except as set forth in Schedule 4.15: (i) all Material
Contracts are in full force and effect; (ii) the Company and, to the best
knowledge of the Company and each of the Principal 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 and by reason of
the Merger and the change of ownership of the Company pursuant to this
Agreement.
(c) No purchase commitment by the Company is in excess of the
normal, ordinary and usual requirements of the business of the Company.
12
(d) There is no outstanding power of attorney granted by the
Company to any person, firm or corporation for any purpose whatsoever.
4.16 Customers and Suppliers. Neither any of the Principal
Stockholders nor the Company is aware 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 Company which will materially
adversely affect the Company 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
Company 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 Company is not
now, and never has 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
Company during the 1995 calendar year or to be paid by the Company during the
1996 calendar year to employees or consultants who presently receive aggregate
compensation or remuneration at an annual rate in excess of $25,000.
(b) No union is now certified or, to the best of the knowledge of
the Company and each of the Principal Stockholders, claims to be certified as a
collective bargaining agent to represent any employees of the Company, and there
are no labor disputes existing or, to the best of the knowledge of the Company
and each of the Principal Stockholders, threatened, involving strikes,
slowdowns, work stoppages, job actions or lockouts of any employees of the
Company.
(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
Company. The Company has not received any written notice of any actual or
alleged violation of any law, regulation, order or contract term affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee health, safety, welfare, or wages and hours.
(d) The Company 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 Company does not
maintain, or have any liabilities or obligations of any kind with respect to,
any bonus, commission, deferred compensation, excess benefits, pension, thrift,
savings, employee ownership, salary continuation, severance, profit sharing,
retirement, supplemental retirement,
13
or other such benefit plan, and does not have any potential or contingent
liability in respect of any actions or transactions relating to any such plan
other than to make contributions thereto if, as, and when due in respect of
periods subsequent to the date hereof. Without limitation of the foregoing, (i)
the Company has made all required contributions to or in respect of any and all
such benefit plans, (ii) no "accumulated funding deficiency" (as defined in
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code")) has
been incurred in respect of any of such benefit plans, and the present value of
all vested accrued benefits thereunder does not, on the date hereof, exceed the
assets of any such plan allocable to the vested accrued benefits thereunder,
(iii) there has been no "prohibited transaction" (as defined in Section 4975 of
the Code) with respect to any such plan, and no transaction which could give
rise to any tax or penalty under Section 4975 of the Code or Section 502 of
ERISA, and (iv) there has been no "reportable event" (within the meaning of
Section 4043(b) of ERISA) with respect to any such plan. All of such plans which
constitute, are intended to constitute, or have been treated by the Company as
"employee pension benefit plans" or other plans within Section 3 of ERISA have
been determined by the Internal Revenue Service to be "qualified" under Section
401(a) of the Code, and have been administered and are in compliance with ERISA
and the Code; and the Principal Stockholders 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 Company does not maintain any medical, health, life, dental, short- or
long-term disability, hospitalization, accident, death benefits, or other
employee benefit insurance programs, or sick leave or vacation or holiday or
leave policies, or any welfare plans (within the meaning of Section 3(1) of
ERISA) for the benefit of any current of former employees, and, except as
required by law, the Company has no liability, fixed or contingent, for health
or medical benefits to any former employee.
4.18 No Breach of Statute, Decree or Other Instrument.
(a) Except as set forth in Schedule 4.18 annexed hereto: (i)
neither the execution and delivery of this Agreement by the Company and/or the
Principal Stockholders, nor the performance of, or compliance with, the terms
and provisions of this Agreement on the part of the Company and/or the Principal
Stockholders, will violate or conflict with any term of the Certificate of
Incorporation or By-Laws of the Company or any statute, law, rule or regulation
of any governmental authority affecting the Company, its properties or assets,
or its business, condition (financial or otherwise), or prospects, 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, decree,
contract, lease, agreement, indenture or other instrument to which the Company
or any of the Principal Stockholders is a party or by which the Company or any
of the Principal Stockholders is bound; (ii) no consent, authorization or
approval of or filing with any governmental authority or agency, or any third
party, will be required on the part of the Company or the Principal Stockholders
in connection
14
with the consummation of the transactions contemplated hereby; and (iii) the
Company will not be required, whether by law, regulation, or administrative
practice, to reapply for or refile to obtain any of the licenses, permits or
other authorizations presently held by the Company and required for the
operation of its business as conducted on the date hereof.
(b) In connection with and as respects the Merger, the Company
and each Principal Stockholder of the Company has waived any and all rights
which it or any such Principal 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 Principal Stockholder pursuant
to the Merger.
4.19 Compliance with Laws.
(a) Except as set forth in Schedule 4.19 to this Agreement, the
Company 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 Company,
properties or assets, its business, its condition (financial or otherwise), or
its prospects) with each of the following which is applicable to or binding upon
or affecting the Company or its property, assets, or business, or to which the
Company, 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 (as such
term is hereinafter defined), including, without limitation, any of the
foregoing enacted, adopted or promulgated prior to the Closing Date but not yet
effective (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 Company 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; the Company's
operations and Permits are not subject to any unduly burdensome restrictions and
will not be subjected to any unduly burdensome restrictions as of the
consummation of the transactions contemplated under this Agreement.
(b) The Company has not, at any time, (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 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 requirements of its insurance carriers from time to time.
15
(c) Neither the Company 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 Company and each of the Principal Stockholders, is
the Company 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 Company's
business, affairs, properties, or assets. Neither the Company nor any of its
directors, officers or employees, has received written notice of, been charged
with, or is under investigation with respect to, any violation of any provision
of any federal, state, local, municipal, or other law or administrative rule or
regulation, domestic or foreign, relating to any aspect of the Company's
business, affairs, properties or assets, which violation would have a material
adverse effect on the Company, properties or assets, its business, its condition
(financial or otherwise), or its prospects.
(d) Schedule 4.19 sets forth the date(s) of the last known audits
or inspections (if any) of the Company conducted by or on behalf of the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other Governmental Authority.
4.20 Litigation. Except as disclosed in Schedule 4.20 annexed
hereto, there are no private or governmental orders, claims, actions, suits,
arbitrations, administrative or other proceedings (including, without
limitation, any claim alleging the invalidity, infringement or interference of
any patent, patent application, or rights thereunder owned or licensed by the
Company) or investigations (as to which investigations, the Company or any of
the Principal Stockholders is aware of the same) pending or, to the knowledge of
the Company or any of the Principal Stockholders, threatened, against the
Company or relating to its business or properties, at law or in equity or before
or by any court or any Governmental Authority. Neither the Company or any of the
Company's officers, directors, or employees in their respective capacities as
such is a named party subject to any continuing court or administrative order,
writ, injunction or decree applicable to any of them or to the Company's
business or properties which (i) is not similar in effect to restrictions
applicable to other participants in the industry or other businesses similarly
situated, or (ii) has or would have a material adverse effect on the Company,
its business, or its properties. Except as disclosed in Schedule 4.20 annexed
hereto, neither the Company or any of the Principal Stockholders is aware of any
state of facts, events, conditions or occurrences which might properly
constitute grounds for or the basis of any meritorious suit, action,
arbitration, proceeding or investigation against or with respect to the Company.
No action, suit or proceeding by or before any court or any governmental body or
authority, against the Company or any of the Principal Stockholders or
pertaining to the transactions contemplated by this Agreement or their
consummation, have been instituted or, to the best of their knowledge,
threatened, which action, suit or proceeding would, if determined adversely,
have a material adverse effect on the Company, its business or any material
portion of its assets, or impair the ability of any of the stockholders of the
Company to deliver in the Merger all of their respective shares of Stock free
and clear of all pledges, Liens, claims, charges, options, calls,
16
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws).
4.21 Patents, Licenses and Trademarks. Schedule 4.21 annexed hereto
correctly sets forth a list and brief description of the nature and ownership
of: (a) all patents, patent applications, copyright registrations and
applications, registered trade names, service marks, and trademark registrations
and applications, both domestic and foreign, which are presently owned, filed or
held by the Company and/or any of its directors, officers, stockholders or
employees and which in any way relate to or are used in the business of the
Company; (b) all licenses, both domestic and foreign, which are owned or
controlled by the Company and/or any of its directors, officers, stockholders or
employees and which in any way relate to or are used in the business of the
Company; and (c) all franchises, licenses and/or similar arrangements granted to
the Company by others and/or to others by the Company. None of the patents,
patent applications, copyright registrations or applications, registered trade
names, trademark registrations or applications, service marks, franchises,
licenses or other arrangements set forth or required to be set forth in Schedule
4.21 (all of the foregoing being sometimes hereinafter referred to as
"Intellectual Property") is subject to any pending challenge known to any of the
Principal 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). The Intellectual Property owned by the Company
constitutes all of the same necessary for the operation of the business of the
Company as currently conducted and contemplated, and the Company 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 Company is owned by, leased from or leased to any of the
stockholders of the Company, any of their respective Affiliates, members of
their families or any partnership, corporation or trust for their benefit, or
any other officer, director or employee of the Company or any Affiliate of the
Company.
4.23 Bank Accounts. Annexed hereto as Schedule 4.23 is a correct and
complete list of all bank accounts and safe deposit boxes maintained by or on
behalf of the Company, with indication of all persons having signatory, access
or other authority with respect thereto.
4.24 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement (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 Principal Stockholders
acknowledge receipt of the statements and reports referred to in Schedule 5.9 to
this Agreement.
17
5. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND AUGI.
Mergerco and AUGI hereby jointly and severally represent and warrant
to the Principal Stockholders, as follows, it being understood and agreed that
none of the Principal 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
and that no due diligence investigation undertaken by the Principal Stockholders
shall in any way be deemed to ascribe any knowledge to any of the Principal
Stockholders different from, or in addition to, the following representations
and warranties made to the Principal Stockholders, or to reduce, effect, or
eliminate their complete reliance upon such representations and warranties, 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:
5.1 Organization, Good Standing and Qualification. Each of Mergerco
and AUGI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Washington and Delaware, respectively, with all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby. 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 consummation of the Merger and the other
transactions contemplated hereby by Mergerco and AUGI have been duly and validly
authorized by the Board of Directors and sole stockholder of Mergerco, and by
the Board of Directors of AUGI; and Mergerco and AUGI have the full corporate
right, power and authority to execute and deliver this Agreement, to perform
their respective obligations hereunder, and to consummate the transactions
contemplated hereby. No further corporate authorization is necessary on the part
of Mergerco or AUGI to consummate the transactions contemplated hereby.
5.3 Valid and Binding Agreement. This Agreement constitutes the
legal, valid and binding obligation of Mergerco, enforceable against Mergerco in
accordance with its terms, and this Agreement and, when executed and delivered
by AUGI, the Registration Rights Agreement, 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 their respective terms.
5.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by Mergerco or AUGI, nor compliance with the terms
and provisions of this Agreement on the part of Mergerco or AUGI, will: (a)
violate any statute or regulation of any Governmental Authority 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,
18
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
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 employs under a 1991 Transfer Plan, of which options to purchase 24,328
shares of AUGI Common Stock were outstanding at July 31, 1995; (vi) 1,000,000
options are reserved for issuance (subject to AUGI stockholder ratification)
pursuant to a 1996 qualified and non-qualified stock option plan, of which
options to purchase 650,000 shares of AUGI Common Stock were granted in April
1996; 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.
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 of
its convertible preferred stock which is convertible into a maximum of 3,000,000
shares of AUGI Common Stock; and (ii) has entered into a letter of intent to
acquire Datacom Communications, Inc., a true copy of which letter of intent has
been furnished to the Principal Stockholders. Except as aforesaid, and as
disclosed in the preliminary proxy statement of AUGI filed with the Securities
and Exchange Commission on August 22, 1996 (the "AUGI 1996 Proxy Statement"), a
true copy of which has been furnished to the Principal Stockholders, there are
no options, warrants, preferred stock, or other securities convertible or
exchangeable for or into AUGI shares of Common Stock. Subsequent to the August
22, 1996, AUGI was notified by the stockholders of Datacom Communications, Inc.
that merger discussions were terminated. Except as disclosed in the AUGI 1996
Proxy Statement and a possible transaction with Seattle Online, Inc., AUGI has
not entered into any letters of intent or understandings with respect to any
acquisition.
5.6 Investment. AUGI will be acquiring ownership of the outstanding
capital stock of the Surviving Corporation for its own account, for investment
purposes only, and not with a view to the resale or distribution thereof.
5.7 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
19
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, would have a material adverse effect upon the business,
financial condition or prospects of AUGI and its subsidiaries when taken as a
consolidated whole.
5.9 Securities Filings and Disclosures. AUGI has furnished to the
Principal Stockholders the statements and reports listed on Schedule 5.9 to this
Agreement, together with all exhibits and schedules thereto, which statements
and reports (i) complied, as of their respective dates, as to form and substance
in all material respects with the requirements pertaining to the filing thereof
under the Securities Act of 1933, as amended, and/or the Securities Exchange Act
of 1934, as amended, whichever is applicable, and (ii) as of their respective
dates did not contain any material misstatement of fact or state or omit to
state any material fact whose omission, in light of the circumstances under
which such statement was made or omitted, would result in the statements made
therein being materially misleading. AUGI shall supplement Schedule 5.9 through
the Closing Date. The financial statements of AUGI and its consolidated
subsidiaries as set forth in the securities filings listed on Schedule 5,9
fairly present the financial condition and results of operations of AUGI and its
consolidated subsidiaries as at the dates and for the periods reflected therein.
Since the date of AUGI's filing of its Form 10-Q for the quarter ended April 30,
1996, 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 No Registration. The shares of AUGI Common Stock constituting
the Merger Consideration have been issued pursuant to an available exemption
from registration under the Securities Act of 1933, as amended, and the
securities laws of the State of Washington, 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 Principal 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 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).
20
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 Company or the Principal Stockholders:
Interglobe Networks, Incorporated
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Artour Baganov, President
with a copy sent concurrently to:
Xxxxx Xxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx, 0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx, 00000
Attn: Xxxxxx Xxxxxxxxx, Esq.
(b) If to Mergerco, the Surviving Corporation or AUGI:
American United Global, Inc.
00 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, President
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. and
Xxxxxx Xxxxxxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
given to all other parties.
21
7. ADDITIONAL AGREEMENTS OF THE PARTIES.
7.1 Accuracy of Representations and Warranties to Mergerco or AUGI.
All representations and warranties made by the Principal Stockholders in this
Agreement, in any Schedule(s) hereto, and/or in any written statement delivered
to Mergerco or AUGI under, pursuant to, or in connection with, this Agreement
are true and correct on and as of the date hereof.
7.2 Performance by the Company and the Principal Stockholders. The
Company and the Principal Stockholders 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 date hereof.
7.3 Accuracy of Representations and Warranties to the Company and
the Principal Stockholders. All representations and warranties made by the
Mergerco and/or AUGI in this Agreement, in any Schedule(s) hereto, and/or in any
written statement delivered to the Company or the Principal Stockholders under,
pursuant to, or in connection with, this Agreement are true and correct on and
as of the date hereof.
7.4 Performance by Mergerco and AUGI. Mergerco and AUGI 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 date hereof.
7.5 Certification. By executing and delivering this Agreement, the
Principal Stockholders are certifying to Mergerco and to AUGI that Sections 7.1
and 7.2 of this Agreement are true and correct, and Mergerco and AUGI are
certifying to the Principal Stockholders that Sections 7.3 and 7.4 of this
Agreement are true and correct.
7.6 Resolutions; Incumbency; Certified Bylaws and Certificates of
Incorporation; Good Standing Certificates. On the date hereof, each of the
corporate parties hereto has delivered to each of the other parties hereto the
following: (i) copies of resolutions of such corporate parties Board of
Directors and, to the extent reasonably requested, stockholders of the corporate
entity, in form reasonably satisfactory to counsel for the other parties to this
Agreement, authorizing such corporate party's execution, delivery and
performance of this Agreement and the Merger, and all actions to be taken by
such corporate party hereunder, certified by the Secretary of such corporate
party as of the date hereof to be in accurate and complete and in full force and
effect; (ii) certificates evidencing the incumbency and signatures of relevant
officers of such corporate party, certified by the Secretary of such corporate
party as of the date of this Agreement to be complete and accurate; (ii) 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 date hereof, by the
Secretary of State of the state of incorporation of such corporate party,
evidencing in long form the good standing of such corporate party in such state.
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7.7 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
date hereof, as to such matters incident to the transactions contemplated hereby
as may reasonably be requested by the other parties to this Agreement.
7.8 Execution and Delivery of Certificate of Merger. The Company and
Mergerco and, to the extent necessary or appropriate, their respective officers
and directors, 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.
7.9 Execution and Delivery of Registration Rights Agreement. AUGI
and each of the Principal Stockholders have executed and delivered into escrow
for delivery to each of the Principal Stockholders upon the consummation of the
Merger, their respective Registration Rights Agreements in the form of Exhibit C
to this Agreement.
7.10 Execution and Delivery of Subscription Agreements. Each of the
Principal Stockholders have executed and delivered to AUGI a Subscription
Agreement in the form of Exhibit B to this Agreement.
7.11 Execution and Delivery of Offeree Questionnaires. Each of the
Principal Stockholders have completed, executed and delivered to AUGI an Offeree
Questionnaire in the form of Exhibit E to this Agreement.
7.12 Execution and Delivery of Non-Competition and Non-Disclosure
Agreements. AUGI, the Company, and each of the Principal Stockholders have
executed and delivered into escrow for delivery to AUGI upon consummation of the
Merger, their respective Non-Competition and Non-Disclosure Agreements, in the
form of Exhibit D to this Agreement.
7.13 Execution and Delivery of Employment Agreements with Principal
Stockholders. The Principal Stockholders and the Company shall have executed and
delivered into escrow for delivery to AUGI upon consummation of the Merger their
respective employment agreements in the forms of Exhibits F, G, and H hereto.
7.14 Settlement of Affiliated Obligations. The Principal
Stockholders 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 Company to any of the Principal Stockholders or owed
to the Company by any of the Principal Stockholders of the Company and/or any of
their respective Affiliates to be fully paid and satisfied as at the Closing
Date, such than no such debts, liabilities or obligations shall remain
outstanding.
7.15. ConnectSoft Agreement. The Company, AUGI, and Mergerco have
executed and delivered into escrow an agreement with ConnectSoft, Inc.
("ConnectSoft"), in form and substance reasonably satisfactory to the parties
hereto (the "ConnectSoft Agreement"),
23
pursuant to which, substantially contemporaneously with the consummation of the
Merger, AUGI shall cause its affiliate, ConnectSoft, Inc. ("ConnectSoft"), to
provide to the Company, free of charge for two years following the Closing Date,
use of all hardware networking equipment, computers and software relating to
ConnectSoft's central telecommunications network center located in Seattle,
Washington (the "CNOC Center"), including all telecommunication, switching, and
related equipment used in the CNOC Center (the "CNOC Assets"). Following one
year after the Merger, Artour Baganov and AUGI shall mutually agree upon the use
or disposition of the CNOC Assets and what charge, if any, the Surviving
Corporation shall pay for the continued use of such equipment. The Surviving
Corporation shall be obligated to pay immediately following consummation of the
Merger all of the operating costs (in the nature of office rent, telephone
lines, utilities, and other ongoing operating charges) associated with such
Assets as the same may become due from and after the date of closing of the
Merger.
7.16 Votes of the Principal Stockholders; Proxy. By their execution
and delivery of this Agreement, each of the Principal Stockholders does hereby
irrevocably and unconditionally vote all of each such Principal Stockholder's
shares of capital stock of the Company IN FAVOR of the Merger and all of the
other transactions contemplated by this Agreement.
7.17 Corporate Structure and Related Matters.
(a) Surviving Corporation a Subsidiary. Upon completion of the
Merger, the Surviving Corporation will become a wholly-owned subsidiary of AUGI.
(b) Officers and Directors.
(i) The Surviving Corporation. Xxxxxx X. Xxxxx shall be
Chairman of the Surviving Corporation. Artour Baganov shall be President and
Chief Executive Officer of the Company. Xxxxx Xxxxxx shall be Vice President of
Sales of the Company. Xxx Xxxxxxx shall be Vice President of Engineering of the
Company. A full-time Chief Financial Officer of the Surviving Corporation
acceptable to AUGI will be recruited and shall be hired upon such terms and
conditions as shall be determined by AUGI and the Board of Directors of the
Surviving Corporation. The Board of Directors of the Surviving Corporation shall
initially consist of Xxxxxx X. Xxxxx, Xxxxxx Xxxx, X. Xxxx XxXxxx, Xxxxxx
Baganov, and Xxx Xxxxxxx. AUGI shall, at all times, designate a majority of the
Board of Directors of the Surviving Corporation, but Artour Baganov and Xxx
Xxxxxxx shall have the right to be designated as two of the Directors of the
Surviving Corporation for so long as they shall continue to be employed on a
full-time basis with the Company.
(ii) AUGI. As soon as is reasonably practicable without
undue expense to AUGI but, in any event, not later than ninety days following
consummation of the Merger, cause Artour Baganov shall 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 Artour
Baganov, AUGI shall undertake to continue to designate Artour
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Baganov as a Director of AUGI for a period equal to the greater of (A) four
years following the Closing Date, or (B) so long as the Principal Stockholders
shall in the aggregate hold a sufficient number of shares of AUGI Common Stock
to represent one of largest individual shareholders of AUGI.
(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 during the Measuring Period (as such term is
hereinafter defined), 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 Artour Baganov: (i) sell any material assets or securities of
the Company (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 Company'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 Company
immediately prior to the consummation of the Merger (except for the natural
growth of the business as a consequence of the financing by AUGI which is
contemplated by the parties to this Agreement).
7.18 Employee Incentive Programs. Upon consummation of the Merger,
AUGI's Board of Directors shall promptly take all necessary steps in order to
make other key employees of the Surviving Corporation (excluding the Principal
Stockholders) eligible to participate in AUGI's stock option and related
employee compensation plans available to employees of AUGI at similar management
levels, as the same may exist from time to time, upon such terms and conditions
as AUGI's Board of Directors may determine. Options for at least 200,000 shares
of AUGI Common Stock shall be available for future grant and issuance pursuant
to such plans at the outset of eligibility for participation by such key
employees of the Surviving Corporation. Such stock options shall provide, inter
alia, (a) terms of between three and five years, (b) exercise prices equal to
the closing price of AUGI Common Stock, as traded on NASDAQ National Market or
other national securities exchange on the date of grant, (C) annual vesting in
percentages ranging from 20% to 33-1/3% per annum, and (d) a requirement that
any vested options not exercised will terminate unless exercised within 90 days
following termination of employment of such employee for any reason.
7.19 Financing of the Company.
Subject to the provisions of this Section 7.19 and after the
consummation of the Merger, during the period of time from August 1, 1996
through July 31, 2000 (the "Measuring Period") AUGI shall make available to the
Surviving Corporation certain inter-company loans and advances (the "AUGI
Financing") to fund working capital requirements of the Company, in accordance
with the "Corporation's Budget" referred to in Section 7.19(c) below.
(a) Form of AUGI Financing. All AUGI Financing shall be in the
form of intercompany loans and advances (each such loan or advance, an
"Advance") from
25
AUGI to the Surviving Corporation reflected on the books of the Surviving
Corporation as either loans or as the issuance of shares of preferred stock of
the Surviving Corporation having liquidation preferences equal to the aggregate
amount of the Advances, the form of each such Advance to be determined by AUGI
in its sole discretion, and on such other terms and conditions as may be
determined by AUGI in its sole discretion, including, without limitation, the
following:
(i) each Advance shall bear interest (or, in the case of
preferred stock, cumulative dividends) at the rate of ten
percent (10%) per annum; and
(ii) each Advance shall be payable, as to principal (or,
in the case of preferred stock, redeemed), on a date which
shall be the earlier to occur of (A) completion of the first
public offering of the Surviving Corporation's securities
(either debt or equity), (B) the sale of all or
substantially all of the stock or assets of the Surviving
Corporation, and (C) the applicable maturity date (each
Advance shall have a term agreeable to AUGI of not less than
five (5) years).
(b) 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; provided,
that the expenditure of such funds shall be based upon the following.
(c) Annual Budgets and Forecasts. AUGI has determined to make
the Advances available to the Surviving Corporation on the basis of annual
budgets and forecasts previously supplied to AUGI by the Company and the
Principal Stockholders; provided, that (i) the annual budgets and forecasts
shall be updated by the Company and the Principal Stockholders for the
forty-eight (48) month period (based on AUGI's fiscal year ending July 31st)
commencing on August 1, 1996 and ending on July 31, 2000, (ii) such updated
annual budgets and forecasts for such period (the "Corporation's Budget"), which
shall be satisfactory to AUGI in form and detail and in substance, shall have
been received by AUGI prior to the date of this Agreement, and (iii) the timing
of any Advance to the Surviving Corporation shall be based upon satisfaction of
the requirements established in the Corporation's Budget unless otherwise
mutually agreed by the Surviving Corporation's Board of Directors and AUGI's
Board of Directors, it being understood and agreed that drawings of Advances
which are not in accordance with the terms and conditions of the Corporation's
Budget will not be made available by AUGI without the prior written approval of
AUGI's Board of Directors. In determining Pre- Tax Income (as such term is
hereinafter defined), no consideration shall be given to interest or dividends
accrued or payable with respect to any Advances made by AUGI; provided, that
such Pre-Tax Income shall be after deduction of all interest paid or accrued on
money borrowed by the Surviving Corporation from any unaffiliated third party.
As used herein, the term "Pre-Tax Income" shall mean the net income of the
Surviving Corporation after deduction of all expenses
26
paid or accrued for the appropriate period in accordance with GAAP (including
compensation paid to the Principal Stockholders under their respective
employment agreements with the Surviving Corporation), but before application of
all federal, state, and local income taxes, for the four fiscal years ending
July 31, 2000, and also as modified pursuant to the preceding sentence, all as
determined by the auditors engaged to audit the financial statements of the
Surviving Corporation and AUGI. AUGI acknowledges that neither the budgets, the
projections and information underlying the same, nor any other matter in
connection with such budgets and projections, shall constitute a representation
or warranty by the Principal Stockholders.
7.20 Release of Guarantees. On the Closing Date, AUGI shall either:
(a) cause the personal guarantees of the Stockholders to be released from the
furniture leases listed on Schedule 7.20 annexed hereto; or (b) if such
guarantees are not released by the lessor, indemnify, defend and hold the
Stockholders harmless from and
8. AMENDMENTS AND MODIFICATIONS.
8.1 Amendments and Modifications. No amendment or modification of
this Agreement or any Exhibit or Schedule hereto shall be valid unless made in
writing and signed by the party to be charged therewith.
9. NON-ASSIGNABILITY; BINDING EFFECT.
9.1 Non-Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto. Otherwise, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
10. CLOSING.
10.1 Place and Date of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Messrs. Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx, 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 ten
(10) business days following the date hereof; 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. Immediately upon the execution
and delivery of this Agreement, Mergerco and the Company shall file or cause to
be filed the Certificate of Merger with the Secretary of State of Washington.
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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 Washington 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 a single arbitrator in Seattle, Washington, or in
any other locale or venue as legal jurisdiction may otherwise be had over the
party against whom the proceeding is commenced, in accordance with the
commercial arbitration rules of the American Arbitration Association then
obtaining. The parties hereto hereby agree to submit to the jurisdiction of such
an arbitrator in Seattle, Washington for such purpose, and waive all objections
to venue, forum non conveniens, and related objections in connection therewith.
As part of his or her award, the arbitrator shall make a fair allocation of the
fee of the American Arbitration Association, the cost of any transcript, and the
parties' reasonable attorneys' fees, taking into account the merits and good
faith of the parties' claims and defenses. Judgment may be entered on the award
so rendered in any court having jurisdiction. Any process or other papers
hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
12. INDEMNIFICATION.
12.1 General.
(a) By the Company and the Principal Stockholders. Without
prejudice to any rights of contribution as between the Principal Stockholders,
from and after the Closing Date: each of the Principal 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") that the AUGI Group may incur, sustain or suffer as a result of any
breach of, or failure by the Company or any such Principal Stockholder(s) to
perform, any of the representations, warranties, covenants or agreements of the
Company or such Principal Stockholder(s) contained in this Agreement or in any
Exhibit or any Schedule(s) furnished by or on behalf of the Company or such
Principal 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 Principal 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
28
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 Principal Stockholder shall be liable to AUGI or
Mergerco with respect to Losses, and neither AUGI or Mergerco shall be liable to
any Principal Stockholder with respect to Losses, unless and until the aggregate
amount of all Losses incurred by the Surviving Corporation or AUGI in the
aggregate, on the one hand (in the case of indemnification by any Principal
Stockholder), or by any of the Principal Stockholders, on the other hand (in the
case of indemnification by AUGI or Mergerco), shall exceed the sum of $250,000
(the "Basket"). The applicable indemnifying party 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 Principal 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 Principal 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; provided, that nothing contained in this
Agreement shall be deemed to limit the rights and remedies of the Principal
Stockholders under applicable federal or state securities laws.
(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, after application
of the Basket against the aggregate amount of claims against any or all of the
Principal Stockholders, on the one hand, or against AUGI and Mergerco, on the
other hand, up to a maximum amount equal to twenty (20%) percent of the
aggregate value of the Merger Consideration received by such Principal
Stockholders pursuant to this Agreement (with AUGI Common Stock, or the common
stock of the Company for which such AUGI Common Stock was issued in the Merger,
to be valued for such purposes at a per share price equal to the closing price
of a share of AUGI Common Stock, as reported on The NASDAQ National Market, on
the Closing Date of the Merger (the "Per Share Value"); provided, that if any
such indemnifying party shall have been found by any court of competent
jurisdiction (which may include affirmation of the findings of the arbitrators
in any arbitration provided for herein) from which no appeal can or shall be
taken, to have committed fraud, the maximum indemnified amount under this
Agreement shall be 100% of the aggregate value of the Merger Consideration, as
calculated above. Each such Principal Stockholder shall have the option to
satisfy, in whole or in part, any claims for indemnification hereunder by
transferring and returning to AUGI any or all of the Principal Stockholder's
AUGI Common Stock, which, for purposes hereof, shall (regardless of any
intervening fluctuations in market price) be deemed to have a value equal to the
Per Share Value, subject only to appropriate adjustment to reflect any stock
splits, stock dividends, recapitalizations or other such events relating to the
Common Stock of AUGI occurring after the date hereof. Nothing herein
29
contained, however, shall be deemed to preclude the Surviving Corporation and/or
AUGI from seeking and obtaining payment of indemnification from the Principal
Stockholder(s) in question in any other manner, subject to such Principal
Stockholder's option to pay any claim (in whole or in part) in the foregoing
manner.
(c) Damages and Equitable Relief. Notwithstanding the
provisions of Section 12.2(b) above, nothing contained in this Agreement shall
be deemed to limit or restrict the right of any party 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 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 Principal Stockholder, and each Principal 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 August 31,
1997, or (ii) with respect to Losses relating to a breach of any representations
or warranties under Section 4.8 above, the expiration of the final statute of
limitations for those tax returns covered by the warranties under Section 4.8
above.
(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. 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
30
action to resist such claim. Such notice shall specify all facts known to the
indemnified party giving rise to such indemnity rights and shall estimate (to
the extent reasonably possible) the amount of potential liability arising
therefrom. If the indemnifying party shall be duly notified of such dispute, the
parties shall attempt to settle and compromise the same or may agree to submit
the same to arbitration or, if unable or unwilling to do any of the foregoing,
such dispute shall be settled by appropriate litigation, and any rights of
indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
12.4 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, though counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.
13. COSTS.
13.1 Finder's or Broker's Fees. Except as set forth herein, each of
Mergerco and AUGI (on the one hand) and the Company and the Principal
Stockholders (on the other hand) represents and warrants that neither they nor
any of their respective Affiliates have dealt with any broker or finder in
connection with any of the transactions contemplated by this Agreement, and no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
13.2 Expenses. Mergerco and AUGI, on one hand, and the Company or
the Principal 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. Anything elsewhere contained in this Agreement to
the contrary notwithstanding, no expenses of the transactions contemplated by
this Agreement shall be attributed to the Company, except for those expenses
which would have been incurred by the Company in the ordinary course of its
business in the absence of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the Surviving Corporation shall pay the fees
31
and disbursements of counsel to the Principal Stockholders in excess of $15,000;
provided that such obligation of the Surviving Corporation shall not exceed a
maximum of $10,000.
14. FORM OF AGREEMENT.
14.1 Effect of Headings. The Section headings used in this Agreement
and the titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of the
provisions hereof or of the information set forth in such Schedules.
14.2 Entire Agreement; Waivers. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof,
and supersedes all prior agreements or understandings as to such subject matter.
No party hereto has made any representation or warranty or given any covenant to
the other except as set forth in this Agreement and the Schedules and Exhibits
hereto. No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
14.3 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15. PARTIES.
15.1 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
The balance of this page intentionally left blank.
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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:_____________________________
Xxxxxx X. Xxxxx, President
I-GLOBE ACQUISITION CORP.
By:_____________________________
Xxxxxx X. Xxxxx, President
INTERGLOBE NETWORKS, INC.
By:_____________________________
Artour Baganov, President
THE PRINCIPAL STOCKHOLDERS:
--------------------------------
ARTOUR BAGANOV
--------------------------------
XXXXX XXXXXX
--------------------------------
XXX XXXXXXX
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