UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 13, 2005
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AGU Entertainment Corp.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
005-79752 84-1557072
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(Commission File Number) (IRS Employer Identification No.)
3200 West Oakland Park Blvd., Lauderdale Lakes, Florida 33311
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(Address of Principal Executive Offices) (Zip Code)
(954) 714-8100
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Forward-Looking Statements
This document may include a number of "forward-looking statements" as
that term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements reflect management's current views with respect to future events and
financial performance and include statements regarding management's intent,
belief or current expectations, which are based upon assumptions about future
conditions that may prove to be inaccurate. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance, involve risk and uncertainties, and that as a result, actual
results may differ materially from those contemplated by such forward-looking
statements. Such risks include, among other things, the volatile and competitive
markets in which we operate, our limited operating history, our limited
financial resources, our ability to manage our growth and the lack of an
established trading market for our securities. When considering forward-looking
statements, readers are urged to carefully review and consider the various
disclosures, including risk factors and their cautionary statements, made by us
in this document and in our reports filed with the Securities and Exchange
Commission.
Item 1.01 Entry into a Material Definitive Agreement.
Mitchell Letter Agreement
On May 13, 2005, AGU Entertainment Corp. (the "Company") entered into
a letter agreement, dated as of April 29, 2005 (the "Mitchell Letter
Agreement"), with Mitchell Entertainment Company ("Mitchell"). Mitchell is a
principal security holder of the Company, owning debt convertible into
approximately 14.6% of the Company's outstanding common stock.
On April 29, 2005, Mitchell advanced an additional $100,000 to the
Company, which , pursuant to the terms of the Mitchell Letter Agreement, is
secured by the Mortgage Deed and Security Agreement, effective as of December
20, 2004, by and between the Company and Mitchell. Pursuant to the terms of the
Mitchell Letter Agreement, the Company agreed that the $100,000 advance by
Mitchell to the Company on April 29, 2005, the $145,000 advance by Mitchell to
the Company on April 14, 2005, the interest installments under the Mitchell Note
(as defined below) due April 1, 2005 and May 1, 2005, the legal fees incurred by
Mitchell in connection with the $145,000 advance, together with the interest due
on all of the foregoing would bear interest at the default rate of 18% provided
in the 10% Secured Convertible Note issued to Mitchell on December 22, 2004 (the
"Mitchell Note"), and be due and payable on August 1, 2005. The prompt and full
payment of each of the above obligations has been guaranteed by David Levy,
President of the Company, and his wife, Donna Levy.
Pursuant to the terms of the Mitchell Letter Agreement, the Company
also agreed to issue warrants to purchase an additional 100,000 shares of the
Company's common stock at an exercise price of $1.50 per share under the same
terms and conditions as the common stock purchase warrant previously issued to
Mitchell. The warrants to be issued pursuant to the Mitchell Letter Agreement
and agreed upon at the time of the $145,000 advance will be evidenced by a new
common stock purchase warrant for an aggregate warrant to purchase 150,000
shares of the Company's common stock.
In addition, the terms of the Mitchell Letter Agreement extended the
filing and effectiveness deadlines of a registration statement related to the
Mitchell Note and warrants under the Registration Rights Agreement, effective as
of December 20, 2004, by and between the Company and Mitchell (the "Registration
Rights Agreement"). The filing deadline has been extended to June 30, 2005 and
the effectiveness deadline has been extended to November 30, 2005.
See the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 29, 2004 for additional
information regarding the Mitchell Note and common stock purchase warrant
previously issued to Mitchell and the Registration Rights Agreement. See the
Company's Current Report on Form 8-K/A filed with the Securities and Exchange
Commission on April 28, 2005 for additional information regarding the terms of
the $145,000 advance.
Solomon Letter Agreement
On May 18, 2005, AGU Entertainment Corp. (the "Company") entered into
a letter agreement, dated May 18, 2005, (the "Solomon Letter Agreement"), with
Michael Jay Solomon pursuant to which Mr. Solomon resigned, effective May 18,
2005, as Chairman of the Company's board of directors. Mr. Solomon owns
approximately 3.6% of the Company's outstanding common stock.
Pursuant to the terms of the Solomon Letter Agreement, (i) within 90
days of the date of the Solomon Letter Agreement, the Company agreed to
reimburse Mr. Solomon for any out-of-pocket business expenses that were incurred
by him in accordance with Company's past practices in connection with his
services to the Company since January 1, 2005, and to pay Mr. Solomon $50,000,
(ii) Mr. Solomon agreed to waive any right for past due compensation owed to him
for any services he performed as an officer of the Company for the period of
January 1, 2003 through May 18, 2005, and (iii) the Company agreed to issue
111,566 shares of its common stock to Mr. Solomon.
Pursuant to the terms of the Solomon Letter Agreement, the Company
agreed to release Mr. Solomon from all of his actions that would not constitute
a breach of his fiduciary duty taken on behalf of the Company and its
subsidiaries, and Mr. Solomon agreed to release the Company from any and all
actions arising out of his relationship with the Company, except for the
obligations under the Solomon Letter Agreement. The Company also agreed to
indemnify Mr. Solomon against all actions that he has taken as a director or
officer of the Company or any of its subsidiaries to the extent permitted under
Delaware law.
Pursuant to the terms of the Solomon Letter Agreement, Mr. Solomon
indicated his intent, with five business days from the date of the Solomon
Letter Agreement, to make a definitive $12.0 million (consisting of $2.0 million
in cash plus the assumption of $10.0 of indebtedness secured by the Lauderdale
Property) offer to purchase the Company's real property located at 3200 West
Oakland Park Boulevard in Lauderdale Lakes, Florida (the "Lauderdale Property").
Mr. Solomon will have 30 days from the date of such definitive offer to conduct
due diligence and purchase the Lauderdale Property. During the 30-day due
diligence period, the Company has the right to take additional offers on the
Lauderdale Property. In the event Mr. Solomon decides to terminate any contract
related to the purchase of the Lauderdale Property during or at the end of the
due diligence period, he will not have any further liability to the Company
under such contract. The Company has not made any definitive decision with
respect to a potential sale of the Lauderdale Property, or any of its other
assets.
The foregoing brief summary of the agreements is not intended to be
complete and is qualified in its entirety by reference to the agreements.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off- Balance Sheet Arrangement of a Registrant.
See the disclosure in Item 1.01 above under Mitchell Letter
Agreement.
Item 3.02 Unregistered Sales of Equity Securities.
The Company agreed to issue 111,566 shares of restricted common stock
in connection with the matter described above. See the disclosure in Item 1.01
above. The Company maintains that the issuance of these securities is exempt
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance
upon Regulation D promulgated thereunder as a transaction by an issuer not
involving a public offering.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
See the disclosure in Item 1.01 above.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
10.1 Mitchell Letter Agreement, dated as of April 29, 2005.
10.2 Solomon Letter Agreement effective May 18, 2005.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 20, 2005 AGU ENTERTAINMENT CORP.
By: /s/ John W. Poling
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Name: John W. Poling
Title:Chief Financial Officer